þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
DELAWARE | 94-0905160 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer þ | Smaller reporting company ¨ | |||
(Do not check if a smaller reporting company) |
Page Number | |||
Item 1. | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
Item 1. | |||
Item 1A. | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
Item 5. | |||
Item 6. | |||
Item 1. | CONSOLIDATED FINANCIAL STATEMENTS |
(Unaudited) | |||||||
May 26, 2013 | November 25, 2012 | ||||||
(Dollars in thousands) | |||||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 389,785 | $ | 406,134 | |||
Trade receivables, net of allowance for doubtful accounts of $21,117 and $20,738 | 342,863 | 500,672 | |||||
Inventories: | |||||||
Raw materials | 4,013 | 5,312 | |||||
Work-in-process | 6,580 | 9,558 | |||||
Finished goods | 528,900 | 503,990 | |||||
Total inventories | 539,493 | 518,860 | |||||
Deferred tax assets, net | 114,677 | 116,224 | |||||
Other current assets | 130,687 | 136,483 | |||||
Total current assets | 1,517,505 | 1,678,373 | |||||
Property, plant and equipment, net of accumulated depreciation of $782,200 and $782,766 | 445,887 | 458,807 | |||||
Goodwill | 239,797 | 239,971 | |||||
Other intangible assets, net | 53,991 | 59,909 | |||||
Non-current deferred tax assets, net | 607,177 | 612,916 | |||||
Other non-current assets | 116,415 | 120,101 | |||||
Total assets | $ | 2,980,772 | $ | 3,170,077 | |||
LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY (DEFICIT) | |||||||
Current Liabilities: | |||||||
Short-term debt | $ | 54,370 | $ | 59,759 | |||
Current maturities of capital leases | 987 | 1,760 | |||||
Accounts payable | 208,121 | 225,726 | |||||
Other accrued liabilities | 189,330 | 263,575 | |||||
Accrued salaries, wages and employee benefits | 176,291 | 223,850 | |||||
Accrued interest payable | 6,152 | 5,471 | |||||
Accrued income taxes | 50,672 | 16,739 | |||||
Total current liabilities | 685,923 | 796,880 | |||||
Long-term debt | 1,488,060 | 1,669,452 | |||||
Long-term capital leases | 4,382 | 262 | |||||
Postretirement medical benefits | 137,153 | 140,958 | |||||
Pension liability | 467,586 | 492,396 | |||||
Long-term employee related benefits | 67,057 | 62,529 | |||||
Long-term income tax liabilities | 30,812 | 40,356 | |||||
Other long-term liabilities | 59,623 | 60,869 | |||||
Total liabilities | 2,940,596 | 3,263,702 | |||||
Commitments and contingencies | |||||||
Temporary equity | 26,262 | 7,883 | |||||
Stockholders’ Equity (Deficit): | |||||||
Levi Strauss & Co. stockholders’ equity (deficit) | |||||||
Common stock — $.01 par value; 270,000,000 shares authorized; 37,397,437 shares and 37,392,343 shares issued and outstanding | 374 | 374 | |||||
Additional paid-in capital | 18,169 | 33,365 | |||||
Retained earnings | 403,713 | 273,975 | |||||
Accumulated other comprehensive loss | (412,561 | ) | (414,635 | ) | |||
Total Levi Strauss & Co. stockholders’ equity (deficit) | 9,695 | (106,921 | ) | ||||
Noncontrolling interest | 4,219 | 5,413 | |||||
Total stockholders’ equity (deficit) | 13,914 | (101,508 | ) | ||||
Total liabilities, temporary equity and stockholders’ equity (deficit) | $ | 2,980,772 | $ | 3,170,077 |
Three Months Ended | Six Months Ended | ||||||||||||||
May 26, 2013 | May 27, 2012 | May 26, 2013 | May 27, 2012 | ||||||||||||
(Dollars in thousands) (Unaudited) | |||||||||||||||
Net revenues | $ | 1,098,898 | $ | 1,047,157 | $ | 2,245,576 | $ | 2,212,118 | |||||||
Cost of goods sold | 550,187 | 566,471 | 1,104,987 | 1,182,638 | |||||||||||
Gross profit | 548,711 | 480,686 | 1,140,589 | 1,029,480 | |||||||||||
Selling, general and administrative expenses | 449,074 | 435,056 | 859,497 | 873,639 | |||||||||||
Operating income | 99,637 | 45,630 | 281,092 | 155,841 | |||||||||||
Interest expense | (32,883 | ) | (32,411 | ) | (65,040 | ) | (70,984 | ) | |||||||
Loss on early extinguishment of debt | (575 | ) | (8,206 | ) | (689 | ) | (8,206 | ) | |||||||
Other income (expense), net | (830 | ) | 10,697 | 5,236 | 11,869 | ||||||||||
Income before income taxes | 65,349 | 15,710 | 220,599 | 88,520 | |||||||||||
Income tax expense | 17,140 | 2,467 | 65,515 | 25,980 | |||||||||||
Net income | 48,209 | 13,243 | 155,084 | 62,540 | |||||||||||
Net (income) loss attributable to noncontrolling interest | (60 | ) | (10 | ) | 85 | (89 | ) | ||||||||
Net income attributable to Levi Strauss & Co. | $ | 48,149 | $ | 13,233 | $ | 155,169 | $ | 62,451 |
Three Months Ended | Six Months Ended | ||||||||||||||
May 26, 2013 | May 27, 2012 | May 26, 2013 | May 27, 2012 | ||||||||||||
(Dollars in thousands) (Unaudited) | |||||||||||||||
Net income | $ | 48,209 | $ | 13,243 | $ | 155,084 | $ | 62,540 | |||||||
Other comprehensive income (loss), net of related income taxes: | |||||||||||||||
Pension and postretirement benefits | 3,199 | 321 | 7,108 | 617 | |||||||||||
Net investment hedge gains | 6,039 | 15,320 | 2,401 | 15,845 | |||||||||||
Foreign currency translation losses | (5,076 | ) | (25,068 | ) | (8,173 | ) | (17,644 | ) | |||||||
Unrealized gain (loss) on marketable securities | 592 | (449 | ) | (370 | ) | 819 | |||||||||
Total other comprehensive income (loss) | 4,754 | (9,876 | ) | 966 | (363 | ) | |||||||||
Comprehensive income | 52,963 | 3,367 | 156,050 | 62,177 | |||||||||||
Comprehensive (loss) income attributable to noncontrolling interest | (387 | ) | 53 | (1,193 | ) | (201 | ) | ||||||||
Comprehensive income attributable to Levi Strauss & Co. | $ | 53,350 | $ | 3,314 | $ | 157,243 | $ | 62,378 |
Six Months Ended | |||||||
May 26, 2013 | May 27, 2012 | ||||||
(Dollars in thousands) (Unaudited) | |||||||
Cash Flows from Operating Activities: | |||||||
Net income | $ | 155,084 | $ | 62,540 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 57,263 | 62,777 | |||||
Asset impairments | 1,091 | 233 | |||||
Gain on disposal of property, plant and equipment | (144 | ) | (151 | ) | |||
Unrealized foreign exchange gains | (11,048 | ) | (19,463 | ) | |||
Realized loss (gain) on settlement of forward foreign exchange contracts not designated for hedge accounting | 6,197 | (2,530 | ) | ||||
Employee benefit plans’ amortization from accumulated other comprehensive loss | 11,717 | 858 | |||||
Employee benefit plans’ curtailment gain, net | (510 | ) | (995 | ) | |||
Noncash loss (gain) on extinguishment of debt | 689 | (3,643 | ) | ||||
Amortization of deferred debt issuance costs | 2,143 | 2,223 | |||||
Stock-based compensation | 3,246 | 2,542 | |||||
Allowance for doubtful accounts | 2,367 | 3,740 | |||||
Change in operating assets and liabilities: | |||||||
Trade receivables | 156,324 | 280,568 | |||||
Inventories | (20,949 | ) | 95,336 | ||||
Other current assets | 7,767 | 18,322 | |||||
Other non-current assets | (289 | ) | (4,557 | ) | |||
Accounts payable and other accrued liabilities | (84,347 | ) | (73,242 | ) | |||
Income tax liabilities | 30,196 | (3,483 | ) | ||||
Accrued salaries, wages and employee benefits and long-term employee related benefits | (72,422 | ) | (95,576 | ) | |||
Other long-term liabilities | 10,004 | 1,866 | |||||
Other, net | (180 | ) | 259 | ||||
Net cash provided by operating activities | 254,199 | 327,624 | |||||
Cash Flows from Investing Activities: | |||||||
Purchases of property, plant and equipment | (41,891 | ) | (36,571 | ) | |||
Proceeds from sale of property, plant and equipment | 147 | 202 | |||||
(Payments) proceeds on settlement of forward foreign exchange contracts not designated for hedge accounting | (6,197 | ) | 2,530 | ||||
Net cash used for investing activities | (47,941 | ) | (33,839 | ) | |||
Cash Flows from Financing Activities: | |||||||
Proceeds from issuance of long-term debt | 140,000 | 385,000 | |||||
Repayments of long-term debt and capital leases | (325,820 | ) | (407,203 | ) | |||
Proceeds from senior revolving credit facility | — | 50,000 | |||||
Repayments of senior revolving credit facility | — | (220,000 | ) | ||||
Short-term borrowings, net | (4,774 | ) | 6,566 | ||||
Debt issuance costs | (2,412 | ) | (6,972 | ) | |||
Restricted cash | (65 | ) | 969 | ||||
Repurchase of common stock | (365 | ) | (479 | ) | |||
Dividend to stockholders | (25,076 | ) | (20,036 | ) | |||
Net cash used for financing activities | (218,512 | ) | (212,155 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (4,095 | ) | (8,279 | ) | |||
Net (decrease) increase in cash and cash equivalents | (16,349 | ) | 73,351 | ||||
Beginning cash and cash equivalents | 406,134 | 204,542 | |||||
Ending cash and cash equivalents | $ | 389,785 | $ | 277,893 | |||
Supplemental disclosure of cash flow information: | |||||||
Cash paid during the period for: | |||||||
Interest | $ | 58,520 | $ | 68,466 | |||
Income taxes | 13,948 | 22,306 |
• | In March 2013, the FASB issued Accounting Standards Update No. 2013-05, "Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity," ("ASU 2013-05"). The objective of ASU 2013-05 is to resolve the diversity in practice regarding the release into net income of the cumulative translation adjustment upon derecognition of a subsidiary or group of assets within a foreign entity. The Company does not anticipate that the adoption of this standard will have a material impact on its consolidated financial statements, absent any material transactions involving the derecognition of subsidiaries or groups of assets within a foreign entity. |
• | In April 2013, the FASB issued Accounting Standards Update No. 2013-07, "Liquidation Basis of Accounting," ("ASU 2013-07"). The objective of ASU 2013-07 is to clarify when an entity should apply the liquidation basis of accounting. The update provides principles for the recognition and measurement of assets and liabilities and requirements for financial statements prepared using the liquidation basis of accounting. The Company does not anticipate that the adoption of this standard will have a material impact on its consolidated financial statements, absent any indications that liquidation is imminent. |
May 26, 2013 | November 25, 2012 | ||||||||||||||||||||||
Fair Value Estimated Using | Fair Value Estimated Using | ||||||||||||||||||||||
Fair Value | Level 1 Inputs(1) | Level 2 Inputs(2) | Fair Value | Level 1 Inputs(1) | Level 2 Inputs(2) | ||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||
Financial assets carried at fair value | |||||||||||||||||||||||
Rabbi trust assets | $ | 22,523 | $ | 22,523 | $ | — | $ | 20,322 | $ | 20,322 | $ | — | |||||||||||
Forward foreign exchange contracts, net(3) | 11,080 | — | 11,080 | 5,792 | — | 5,792 | |||||||||||||||||
Total | $ | 33,603 | $ | 22,523 | $ | 11,080 | $ | 26,114 | $ | 20,322 | $ | 5,792 | |||||||||||
Financial liabilities carried at fair value | |||||||||||||||||||||||
Forward foreign exchange contracts, net(3) | $ | 2,221 | $ | — | $ | 2,221 | $ | 3,018 | $ | — | $ | 3,018 |
(1) | Fair values estimated using Level 1 inputs are inputs which consist of quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Rabbi trust assets consist of a diversified portfolio of equity, fixed income and other securities. |
(2) | Fair values estimated using Level 2 inputs are inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly and include among other things, quoted prices for similar assets or liabilities in markets that are active or inactive as well as inputs other than quoted prices that are observable. For forward foreign exchange contracts, inputs include foreign currency exchange and interest rates and, where applicable, credit default swap prices. |
(3) | The Company’s over-the-counter forward foreign exchange contracts are subject to International Swaps and Derivatives Association, Inc. master agreements. These agreements permit the net-settlement of these contracts on a per-institution basis. |
May 26, 2013 | November 25, 2012 | ||||||||||||||
Carrying Value | Estimated Fair Value(1) | Carrying Value | Estimated Fair Value(1) | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Financial liabilities carried at adjusted historical cost | |||||||||||||||
Senior term loan due 2014 | $ | — | $ | — | $ | 324,890 | $ | 324,484 | |||||||
4.25% Yen-denominated Eurobonds due 2016 | 39,334 | 40,363 | 48,656 | 47,201 | |||||||||||
7.75% Euro senior notes due 2018 | 388,998 | 421,007 | 387,433 | 416,422 | |||||||||||
7.625% senior notes due 2020 | 526,335 | 588,678 | 526,223 | 572,161 | |||||||||||
6.875% senior notes due 2022 | 538,465 | 602,769 | 386,838 | 404,163 | |||||||||||
Short-term borrowings | 54,694 | 54,694 | 59,861 | 59,861 | |||||||||||
Total | $ | 1,547,826 | $ | 1,707,511 | $ | 1,733,901 | $ | 1,824,292 |
(1) | Fair value estimate incorporates mid-market price quotes. |
May 26, 2013 | November 25, 2012 | ||||||||||||||||||||||
Assets | (Liabilities) | Derivative Net Carrying Value | Assets | (Liabilities) | Derivative Net Carrying Value | ||||||||||||||||||
Carrying Value | Carrying Value | Carrying Value | Carrying Value | ||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||
Derivatives not designated as hedging instruments | |||||||||||||||||||||||
Forward foreign exchange contracts(1) | $ | 17,987 | $ | (6,907 | ) | $ | 11,080 | $ | 7,131 | $ | (1,339 | ) | $ | 5,792 | |||||||||
Forward foreign exchange contracts(2) | 2,753 | (4,974 | ) | (2,221 | ) | 5,183 | (8,201 | ) | (3,018 | ) | |||||||||||||
Total | $ | 20,740 | $ | (11,881 | ) | $ | 12,314 | $ | (9,540 | ) | |||||||||||||
Non-derivatives designated as hedging instruments | |||||||||||||||||||||||
4.25% Yen-denominated Eurobonds due 2016 | $ | — | $ | (22,743 | ) | $ | — | $ | (28,135 | ) | |||||||||||||
7.75% Euro senior notes due 2018 | — | (387,990 | ) | — | (386,520 | ) | |||||||||||||||||
Total | $ | — | $ | (410,733 | ) | $ | — | $ | (414,655 | ) |
(1) | Included in “Other current assets” or “Other non-current assets” on the Company’s consolidated balance sheets. |
(2) | Included in “Other accrued liabilities” on the Company’s consolidated balance sheets. |
Gain or (Loss) Recognized in AOCI (Effective Portion) | Gain or (Loss) Recognized in Other Income (Expense), net (Ineffective Portion and Amount Excluded from Effectiveness Testing) | ||||||||||||||||||||||
As of | As of | Three Months Ended | Six Months Ended | ||||||||||||||||||||
May 26, 2013 | November 25, 2012 | May 26, 2013 | May 27, 2012 | May 26, 2013 | May 27, 2012 | ||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||
Forward foreign exchange contracts | $ | 4,637 | $ | 4,637 | |||||||||||||||||||
4.25% Yen-denominated Eurobonds due 2016 | (20,893 | ) | (26,285 | ) | $ | 1,576 | $ | (83 | ) | $ | 3,904 | $ | 2,523 | ||||||||||
7.75% Euro senior notes due 2018 | (10,921 | ) | (9,451 | ) | — | — | — | — | |||||||||||||||
Cumulative income taxes | 10,725 | 12,246 | |||||||||||||||||||||
Total | $ | (16,452 | ) | $ | (18,853 | ) |
Gain or (Loss) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
May 26, 2013 | May 27, 2012 | May 26, 2013 | May 27, 2012 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Forward foreign exchange contracts: | |||||||||||||||
Realized | $ | (3,487 | ) | $ | 6,015 | $ | (6,197 | ) | $ | 2,530 | |||||
Unrealized | 6,277 | 15,318 | 6,169 | 3,551 | |||||||||||
Total | $ | 2,790 | $ | 21,333 | $ | (28 | ) | $ | 6,081 |
May 26, 2013 | November 25, 2012 | ||||||||
(Dollars in thousands) | |||||||||
Long-term debt | |||||||||
Unsecured: | |||||||||
Senior term loan due 2014 | $ | — | $ | 324,424 | |||||
4.25% Yen-denominated Eurobonds due 2016 | 39,212 | 48,508 | |||||||
7.75% Euro senior notes due 2018 | 387,990 | 386,520 | |||||||
7.625% senior notes due 2020 | 525,000 | 525,000 | |||||||
6.875% senior notes due 2022 | 535,858 | 385,000 | |||||||
Total unsecured | 1,488,060 | 1,669,452 | |||||||
Total long-term debt | $ | 1,488,060 | $ | 1,669,452 | |||||
Short-term debt | |||||||||
Short-term borrowings | $ | 54,370 | $ | 59,759 | |||||
Total short-term debt | $ | 54,370 | $ | 59,759 | |||||
Total long-term and short-term debt | $ | 1,542,430 | $ | 1,729,211 |
Pension Benefits | Postretirement Benefits | ||||||||||||||
Three Months Ended | Three Months Ended | ||||||||||||||
May 26, 2013 | May 27, 2012 | May 26, 2013 | May 27, 2012 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Net periodic benefit cost (income): | |||||||||||||||
Service cost | $ | 2,215 | $ | 2,247 | $ | 94 | $ | 100 | |||||||
Interest cost | 12,994 | 14,435 | 1,240 | 1,658 | |||||||||||
Expected return on plan assets | (13,946 | ) | (13,108 | ) | — | — | |||||||||
Amortization of prior service benefit | (17 | ) | (21 | ) | (122 | ) | (4,089 | ) | |||||||
Amortization of actuarial loss | 4,213 | 3,161 | 1,692 | 1,289 | |||||||||||
Curtailment gain | (510 | ) | (222 | ) | — | — | |||||||||
Net settlement loss | 584 | 310 | — | — | |||||||||||
Net periodic benefit cost (income) | 5,533 | 6,802 | 2,904 | (1,042 | ) | ||||||||||
Changes in accumulated other comprehensive loss: | |||||||||||||||
Actuarial loss | — | 74 | — | — | |||||||||||
Amortization of prior service benefit | 17 | 21 | 122 | 4,089 | |||||||||||
Amortization of actuarial loss | (4,213 | ) | (3,161 | ) | (1,692 | ) | (1,289 | ) | |||||||
Curtailment gain | 949 | — | — | — | |||||||||||
Net settlement loss | (184 | ) | (145 | ) | — | — | |||||||||
Total recognized in accumulated other comprehensive loss | (3,431 | ) | (3,211 | ) | (1,570 | ) | 2,800 | ||||||||
Total recognized in net periodic benefit cost (income) and accumulated other comprehensive loss | $ | 2,102 | $ | 3,591 | $ | 1,334 | $ | 1,758 |
Pension Benefits | Postretirement Benefits | ||||||||||||||
Six Months Ended | Six Months Ended | ||||||||||||||
May 26, 2013 | May 27, 2012 | May 26, 2013 | May 27, 2012 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Net periodic benefit cost (income): | |||||||||||||||
Service cost | $ | 4,496 | $ | 4,494 | $ | 188 | $ | 199 | |||||||
Interest cost | 26,060 | 28,848 | 2,479 | 3,317 | |||||||||||
Expected return on plan assets | (27,960 | ) | (26,117 | ) | — | — | |||||||||
Amortization of prior service benefit | (37 | ) | (41 | ) | (244 | ) | (8,178 | ) | |||||||
Amortization of actuarial loss | 8,431 | 6,303 | 3,383 | 2,578 | |||||||||||
Curtailment gain | (510 | ) | (995 | ) | — | — | |||||||||
Net settlement loss | 629 | 417 | — | — | |||||||||||
Net periodic benefit cost (income) | 11,109 | 12,909 | 5,806 | (2,084 | ) | ||||||||||
Changes in accumulated other comprehensive loss: | |||||||||||||||
Actuarial loss | — | 70 | — | — | |||||||||||
Amortization of prior service benefit | 37 | 41 | 244 | 8,178 | |||||||||||
Amortization of actuarial loss | (8,431 | ) | (6,303 | ) | (3,383 | ) | (2,578 | ) | |||||||
Curtailment gain (loss) | 509 | (1 | ) | — | — | ||||||||||
Net settlement loss | (184 | ) | (196 | ) | — | — | |||||||||
Total recognized in accumulated other comprehensive loss | (8,069 | ) | (6,389 | ) | (3,139 | ) | 5,600 | ||||||||
Total recognized in net periodic benefit cost (income) and accumulated other comprehensive loss | $ | 3,040 | $ | 6,520 | $ | 2,667 | $ | 3,516 |
May 26, 2013 | November 25, 2012 | ||||||||
(Dollars in thousands) | |||||||||
Pension and postretirement benefits | $ | (323,853 | ) | $ | (330,961 | ) | |||
Net investment hedge losses | (16,452 | ) | (18,853 | ) | |||||
Foreign currency translation losses | (63,596 | ) | (55,423 | ) | |||||
Unrealized gain on marketable securities | 644 | 1,014 | |||||||
Accumulated other comprehensive loss | (403,257 | ) | (404,223 | ) | |||||
Accumulated other comprehensive income attributable to noncontrolling interest | 9,304 | 10,412 | |||||||
Accumulated other comprehensive loss attributable to Levi Strauss & Co. | $ | (412,561 | ) | $ | (414,635 | ) |
Three Months Ended | Six Months Ended | ||||||||||||||||
May 26, 2013 | May 27, 2012 | May 26, 2013 | May 27, 2012 | ||||||||||||||
(Dollars in thousands) | |||||||||||||||||
Foreign exchange management gains (losses) | $ | 2,790 | $ | 21,333 | $ | (28 | ) | $ | 6,081 | ||||||||
Foreign currency transaction (losses) gains | (4,915 | ) | (12,237 | ) | (518 | ) | 3,204 | ||||||||||
Interest income | 390 | 461 | 781 | 808 | |||||||||||||
Investment income | — | 100 | 2,805 | 227 | |||||||||||||
Other | 905 | 1,040 | 2,196 | 1,549 | |||||||||||||
Total other income (expense), net | $ | (830 | ) | $ | 10,697 | $ | 5,236 | $ | 11,869 |
Three Months Ended | Six Months Ended | ||||||||||||||||
May 26, 2013 | May 27, 2012 | May 26, 2013 | May 27, 2012 | ||||||||||||||
(Dollars in thousands) | |||||||||||||||||
Net revenues: | |||||||||||||||||
Americas | $ | 665,914 | $ | 605,169 | $ | 1,313,041 | $ | 1,252,463 | |||||||||
Europe | 253,117 | 253,897 | 549,704 | 543,349 | |||||||||||||
Asia Pacific | 179,867 | 188,091 | 382,831 | 416,306 | |||||||||||||
Total net revenues | $ | 1,098,898 | $ | 1,047,157 | $ | 2,245,576 | $ | 2,212,118 | |||||||||
Operating income: | |||||||||||||||||
Americas | $ | 118,907 | $ | 71,325 | $ | 251,370 | $ | 150,961 | |||||||||
Europe | 36,709 | 29,556 | 99,635 | 81,629 | |||||||||||||
Asia Pacific | 32,602 | 18,752 | 81,567 | 59,912 | |||||||||||||
Regional operating income | 188,218 | 119,633 | 432,572 | 292,502 | |||||||||||||
Corporate expenses | 88,581 | 74,003 | 151,480 | 136,661 | |||||||||||||
Total operating income | 99,637 | 45,630 | 281,092 | 155,841 | |||||||||||||
Interest expense | (32,883 | ) | (32,411 | ) | (65,040 | ) | (70,984 | ) | |||||||||
Loss on early extinguishment of debt | (575 | ) | (8,206 | ) | (689 | ) | (8,206 | ) | |||||||||
Other income (expense), net | (830 | ) | 10,697 | 5,236 | 11,869 | ||||||||||||
Income before income taxes | $ | 65,349 | $ | 15,710 | $ | 220,599 | $ | 88,520 |
Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | Net revenues. Compared to the second quarter of 2012, consolidated net revenues increased on both a reported and constant-currency basis by 5% and 6%, respectively. The increase reflected higher sales in the Americas, both at our company-operated retail network and to certain wholesale customers. |
• | Operating income. Compared to the second quarter of 2012, consolidated operating income increased by 118% and operating margin rose to 9%, primarily reflecting a higher gross margin due to the lower cost of cotton. |
• | Cash flows. Cash flows provided by operating activities were $254 million for the six-month period in 2013 as compared to $328 million for the same period in 2012; the decrease primarily reflected our lower beginning accounts receivable balance. |
• | Balance sheet. In March 2013, we issued an additional $140 million aggregate principal amount of our 6.875% Senior Notes due 2022. We used the net proceeds along with cash on hand to repay in full our outstanding $275 million Senior Term Loan due 2014, extending the maturity profile of our debt while securing a low weighted-average cost of borrowing. |
• | Net revenues is primarily comprised of sales of products to wholesale customers, including franchised stores, and direct sales to consumers at our company-operated and online stores and at our company-operated shop-in-shops located within department stores. It includes discounts, allowances for estimated returns and incentives. Net revenues also includes royalties earned from the use of our trademarks by third-party licensees in connection with the manufacturing, advertising and distribution of trademarked products. |
• | Cost of goods sold is primarily comprised of product costs, labor and related overhead, sourcing costs, inbound freight, internal transfers, and the cost of operating our remaining manufacturing facilities, including the related depreciation expense. |
• | Selling costs include, among other things, all occupancy costs and depreciation associated with our company-operated stores and commissions associated with our company-operated shop-in-shops. |
• | We reflect substantially all distribution costs in selling, general and administrative expenses, including costs related to receiving and inspection at distribution centers, warehousing, shipping to our customers, handling, and certain other activities associated with our distribution network. |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||
May 26, 2013 | May 27, 2012 | % Increase (Decrease) | May 26, 2013 | May 27, 2012 | May 26, 2013 | May 27, 2012 | % Increase (Decrease) | May 26, 2013 | May 27, 2012 | ||||||||||||||||||||||||
% of Net Revenues | % of Net Revenues | % of Net Revenues | % of Net Revenues | ||||||||||||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||||||||||||
Net revenues | $ | 1,098.9 | $ | 1,047.2 | 4.9 | % | 100.0 | % | 100.0 | % | $ | 2,245.6 | $ | 2,212.1 | 1.5 | % | 100.0 | % | 100.0 | % | |||||||||||||
Cost of goods sold | 550.2 | 566.5 | (2.9 | )% | 50.1 | % | 54.1 | % | 1,105.0 | 1,182.6 | (6.6 | )% | 49.2 | % | 53.5 | % | |||||||||||||||||
Gross profit | 548.7 | 480.7 | 14.2 | % | 49.9 | % | 45.9 | % | 1,140.6 | 1,029.5 | 10.8 | % | 50.8 | % | 46.5 | % | |||||||||||||||||
Selling, general and administrative expenses | 449.1 | 435.1 | 3.2 | % | 40.9 | % | 41.5 | % | 859.5 | 873.7 | (1.6 | )% | 38.3 | % | 39.5 | % | |||||||||||||||||
Operating income | 99.6 | 45.6 | 118.4 | % | 9.1 | % | 4.4 | % | 281.1 | 155.8 | 80.4 | % | 12.5 | % | 7.0 | % | |||||||||||||||||
Interest expense | (32.9 | ) | (32.4 | ) | 1.5 | % | (3.0 | )% | (3.1 | )% | (65.0 | ) | (71.0 | ) | (8.4 | )% | (2.9 | )% | (3.2 | )% | |||||||||||||
Loss on early extinguishment of debt | (0.6 | ) | (8.2 | ) | (93.0 | )% | (0.1 | )% | (0.8 | )% | (0.7 | ) | (8.2 | ) | (91.6 | )% | — | (0.4 | )% | ||||||||||||||
Other income (expense), net | (0.8 | ) | 10.7 | (107.8 | )% | (0.1 | )% | 1.0 | % | 5.2 | 11.9 | (55.9 | )% | 0.2 | % | 0.5 | % | ||||||||||||||||
Income before income taxes | 65.3 | 15.7 | 316.0 | % | 5.9 | % | 1.5 | % | 220.6 | 88.5 | 149.2 | % | 9.8 | % | 4.0 | % | |||||||||||||||||
Income tax expense | 17.1 | 2.5 | 594.8 | % | 1.6 | % | 0.2 | % | 65.5 | 26.0 | 152.2 | % | 2.9 | % | 1.2 | % | |||||||||||||||||
Net income | 48.2 | 13.2 | 264.0 | % | 4.4 | % | 1.3 | % | 155.1 | 62.5 | 148.0 | % | 6.9 | % | 2.8 | % | |||||||||||||||||
Net (income) loss attributable to noncontrolling interest | (0.1 | ) | — | 500.0 | % | — | — | 0.1 | — | (195.5 | )% | — | — | ||||||||||||||||||||
Net income attributable to Levi Strauss & Co. | $ | 48.1 | $ | 13.2 | 263.9 | % | 4.4 | % | 1.3 | % | $ | 155.2 | $ | 62.5 | 148.5 | % | 6.9 | % | 2.8 | % |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
% Increase (Decrease) | % Increase (Decrease) | ||||||||||||||||||||||||||
May 26, 2013 | May 27, 2012 | As Reported | Constant Currency | May 26, 2013 | May 27, 2012 | As Reported | Constant Currency | ||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||||||
Net revenues: | |||||||||||||||||||||||||||
Americas | $ | 665.9 | $ | 605.2 | 10.0 | % | 9.9 | % | $ | 1,313.1 | $ | 1,252.5 | 4.8 | % | 4.7 | % | |||||||||||
Europe | 253.1 | 253.9 | (0.3 | )% | 0.9 | % | 549.7 | 543.3 | 1.2 | % | 0.8 | % | |||||||||||||||
Asia Pacific | 179.9 | 188.1 | (4.4 | )% | (0.5 | )% | 382.8 | 416.3 | (8.0 | )% | (5.6 | )% | |||||||||||||||
Total net revenues | $ | 1,098.9 | $ | 1,047.2 | 4.9 | % | 5.9 | % | $ | 2,245.6 | $ | 2,212.1 | 1.5 | % | 1.8 | % |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
May 26, 2013 | May 27, 2012 | % Increase (Decrease) | May 26, 2013 | May 27, 2012 | % Increase (Decrease) | ||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||
Net revenues | $ | 1,098.9 | $ | 1,047.2 | 4.9 | % | $ | 2,245.6 | $ | 2,212.1 | 1.5 | % | |||||||||
Cost of goods sold | 550.2 | 566.5 | (2.9 | )% | 1,105.0 | 1,182.6 | (6.6 | )% | |||||||||||||
Gross profit | $ | 548.7 | $ | 480.7 | 14.2 | % | $ | 1,140.6 | $ | 1,029.5 | 10.8 | % | |||||||||
Gross margin | 49.9 | % | 45.9 | % | 50.8 | % | 46.5 | % |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||
May 26, 2013 | May 27, 2012 | % Increase (Decrease) | May 26, 2013 | May 27, 2012 | May 26, 2013 | May 27, 2012 | % Increase (Decrease) | May 26, 2013 | May 27, 2012 | ||||||||||||||||||||||||
% of Net Revenues | % of Net Revenues | % of Net Revenues | % of Net Revenues | ||||||||||||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||||||||||||
Selling | $ | 172.1 | $ | 173.4 | (0.8 | )% | 15.7 | % | 16.6 | % | $ | 350.8 | $ | 350.4 | 0.1 | % | 15.6 | % | 15.8 | % | |||||||||||||
Advertising and promotion | 55.1 | 46.7 | 17.9 | % | 5.0 | % | 4.5 | % | 87.9 | 92.6 | (5.1 | )% | 3.9 | % | 4.2 | % | |||||||||||||||||
Administration | 102.7 | 98.8 | 3.9 | % | 9.3 | % | 9.4 | % | 190.2 | 193.8 | (1.9 | )% | 8.5 | % | 8.8 | % | |||||||||||||||||
Other | 119.2 | 116.2 | 2.6 | % | 10.8 | % | 11.1 | % | 230.6 | 236.9 | (2.6 | )% | 10.3 | % | 10.7 | % | |||||||||||||||||
Total SG&A | $ | 449.1 | $ | 435.1 | 3.2 | % | 40.9 | % | 41.5 | % | $ | 859.5 | $ | 873.7 | (1.6 | )% | 38.3 | % | 39.5 | % |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||
May 26, 2013 | May 27, 2012 | % Increase (Decrease) | May 26, 2013 | May 27, 2012 | May 26, 2013 | May 27, 2012 | % Increase (Decrease) | May 26, 2013 | May 27, 2012 | |||||||||||||||||||||||||
% of Net Revenues | % of Net Revenues | % of Net Revenues | % of Net Revenues | |||||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||
Operating income: | ||||||||||||||||||||||||||||||||||
Americas | $ | 118.9 | $ | 71.3 | 66.7 | % | 17.9 | % | 11.8 | % | $ | 251.4 | $ | 151.0 | 66.5 | % | 19.1 | % | 12.1 | % | ||||||||||||||
Europe | 36.7 | 29.6 | 24.2 | % | 14.5 | % | 11.6 | % | 99.6 | 81.6 | 22.1 | % | 18.1 | % | 15.0 | % | ||||||||||||||||||
Asia Pacific | 32.6 | 18.7 | 73.9 | % | 18.1 | % | 10.0 | % | 81.6 | 59.9 | 36.1 | % | 21.3 | % | 14.4 | % | ||||||||||||||||||
Total regional operating income | 188.2 | 119.6 | 57.3 | % | 17.1 | % | * | 11.4 | % | * | 432.6 | 292.5 | 47.9 | % | 19.3 | % | * | 13.2 | % | * | ||||||||||||||
Corporate expenses | 88.6 | 74.0 | 19.7 | % | 8.1 | % | * | 7.1 | % | * | 151.5 | 136.7 | 10.8 | % | 6.7 | % | * | 6.2 | % | * | ||||||||||||||
Total operating income | $ | 99.6 | $ | 45.6 | 118.4 | % | 9.1 | % | * | 4.4 | % | * | $ | 281.1 | $ | 155.8 | 80.4 | % | 12.5 | % | * | 7.0 | % | * | ||||||||||
Operating margin | 9.1 | % | 4.4 | % | 12.5 | % | 7.0 | % |
Six Months Ended | |||||||||
May 26, 2013 | May 27, 2012 | ||||||||
(Dollars in millions) | |||||||||
Cash provided by operating activities | $ | 254.2 | $ | 327.6 | |||||
Cash used for investing activities | (47.9 | ) | (33.8 | ) | |||||
Cash used for financing activities | (218.5 | ) | (212.2 | ) | |||||
Cash and cash equivalents | 389.8 | 277.9 |
• | changes in the level of consumer spending for apparel in view of general economic and environmental conditions and pricing trends, and our ability to plan for and respond to the impact of those changes; |
• | consequences of impacts to the businesses of our wholesale customers caused by factors such as lower consumer spending, pricing changes, general economic conditions and changing consumer preferences; |
• | our ability to mitigate the variability of costs related to manufacturing, sourcing, and raw materials supply and to manage consumer response to such mitigating actions; |
• | our effectiveness in increasing productivity and efficiency in our operations and our ability to implement organizational changes intended to optimize operations without business disruption or mitigation to such disruptions; |
• | 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, as well as in-store and online shopping experiences; |
• | our ability to respond to price, innovation and other competitive pressures in the apparel industry, on our key customers and in our key markets; |
• | our ability to increase the number of dedicated stores for our products, including through opening and profitably operating company-operated stores; |
• | consequences of foreign currency exchange rate fluctuations; |
• | the impact of the variables that affect the net periodic benefit cost and future funding requirements of our postretirement benefits and pension plans; |
• | our dependence on key distribution channels, customers and suppliers; |
• | our ability to utilize our tax credits and net operating loss carryforwards; |
• | ongoing or future litigation matters and disputes and regulatory developments; |
• | changes in or application of trade and tax laws; and |
• | political, social and economic instability in countries where we do business. |
Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Item 4. | CONTROLS AND PROCEDURES |
Item 1. | LEGAL PROCEEDINGS |
Item 1A. | RISK FACTORS |
Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Item 3. | DEFAULTS UPON SENIOR SECURITIES |
Item 4. | MINE SAFETY DISCLOSURES |
Item 5. | OTHER INFORMATION |
Item 6. | EXHIBITS |
4.1 | First Supplemental Indenture, dated as of March 14, 2013, between the Registrant and Wells Fargo Bank, National Association, as trustee, governing the 6 7/8% Senior Notes due 2022. Incorporated by reference to Exhibit 4.1 to Registrant's Current Report on Form 8-K filed with the Commission on March 15, 2013. | |
4.2 | Registration Rights Agreement, dated March 14, 2013, between the Registrant and Merrill Lynch, Pierce, Fenner & Smith Incorporated in relation to the 6 7/8% Senior Notes due 2022. Incorporated by reference to Exhibit 4.2 to Registrant's Current Report on Form 8-K filed with the Commission on March 15, 2013. | |
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. | |
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. | |
32 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith. | |
101.INS | XBRL Instance Document. Furnished herewith. | |
101.SCH | XBRL Taxonomy Extension Schema Document. Furnished herewith. | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. Furnished herewith. | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. Furnished herewith. | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. Furnished herewith. | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. Furnished herewith. |
Date: | July 9, 2013 | LEVI STRAUSS & Co. | |
(Registrant) | |||
By: | /s/ HEIDI L. MANES | ||
Heidi L. Manes Vice President and Controller (Principal Accounting Officer) |
4.1 | First Supplemental Indenture, dated as of March 14, 2013, between the Registrant and Wells Fargo Bank, National Association, as trustee, governing the 6 7/8% Senior Notes due 2022. Incorporated by reference to Exhibit 4.1 to Registrant's Current Report on Form 8-K filed with the Commission on March 15, 2013. | |
4.2 | Registration Rights Agreement, dated March 14, 2013, between the Registrant and Merrill Lynch, Pierce, Fenner & Smith Incorporated in relation to the 6 7/8% Senior Notes due 2022. Incorporated by reference to Exhibit 4.2 to Registrant's Current Report on Form 8-K filed with the Commission on March 15, 2013. | |
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. | |
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. | |
32 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith. | |
101.INS | XBRL Instance Document. Furnished herewith. | |
101.SCH | XBRL Taxonomy Extension Schema Document. Furnished herewith. | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. Furnished herewith. | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. Furnished herewith. | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. Furnished herewith. | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. Furnished herewith. |
/S/ CHARLES V. BERGH | ||
Charles V. Bergh | ||
President and Chief Executive Officer |
/S/ HARMIT SINGH | ||
Harmit Singh | ||
Executive Vice President and Chief Financial Officer |
/S/ CHARLES V. BERGH | ||
Charles V. Bergh | ||
President and Chief Executive Officer | ||
July 9, 2013 |
/s/ HARMIT SINGH | ||
Harmit Singh | ||
Executive Vice President and Chief Financial Officer | ||
July 9, 2013 |
Related Parties
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6 Months Ended |
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May 26, 2013
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Related Party Transactions [Abstract] | |
RELATED PARTIES | 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 26, 2013, the Company donated $0.4 million and $3.5 million, respectively, to the Levi Strauss Foundation as compared to $1.6 million and $1.9 million, respectively, for the same prior-year periods. |
Consolidated Statements of Income (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
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May 26, 2013
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May 27, 2012
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May 26, 2013
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May 27, 2012
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Income Statement [Abstract] | ||||
Net revenues | $ 1,098,898 | $ 1,047,157 | $ 2,245,576 | $ 2,212,118 |
Cost of goods sold | 550,187 | 566,471 | 1,104,987 | 1,182,638 |
Gross profit | 548,711 | 480,686 | 1,140,589 | 1,029,480 |
Selling, general and administrative expenses | 449,074 | 435,056 | 859,497 | 873,639 |
Operating income | 99,637 | 45,630 | 281,092 | 155,841 |
Interest expense | (32,883) | (32,411) | (65,040) | (70,984) |
Loss on early extinguishment of debt | (575) | (8,206) | (689) | (8,206) |
Other income (expense), net | (830) | 10,697 | 5,236 | 11,869 |
Income before income taxes | 65,349 | 15,710 | 220,599 | 88,520 |
Income tax expense | 17,140 | 2,467 | 65,515 | 25,980 |
Net income | 48,209 | 13,243 | 155,084 | 62,540 |
Net loss (income) attributable to noncontrolling interest | (60) | (10) | 85 | (89) |
Net income attributable to Levi Strauss & Co. | $ 48,149 | $ 13,233 | $ 155,169 | $ 62,451 |
Debt
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May 26, 2013
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DEBT | DEBT
Senior Term Loan due 2014 During the three months ended May 26, 2013, the Company repaid in full the remaining balance of its Senior Term Loan due 2014 with the proceeds of the notes issued on March 14, 2013, and cash on hand. See “Additional Issuance of Senior Notes due 2022” below. Additional Issuance of Senior Notes due 2022 Additional Senior Notes due 2022. On March 14, 2013, the Company issued an additional $140.0 million in 6.875% senior notes due 2022 (the “Additional Senior Notes due 2022”) to qualified institutional buyers in compliance with the Securities Act of 1933, as amended (the “Securities Act”). The Additional Senior Notes due 2022 have the same terms and are part of the same series as the $385.0 million aggregate principal amount of 6.875% senior notes due 2022 the Company issued in May 2012 (the “Existing Senior Notes due 2022”). The Additional Senior Notes due 2022 were offered at a premium of $11.2 million, which will be amortized to interest expense over the term of the notes. Costs of approximately $2.6 million associated with the issuance of the notes, representing underwriting fees and other expenses, will also be amortized to interest expense over the term of the notes. Exchange offer. In accordance with a registration rights agreement, the Company conducted an exchange offer to allow holders of the Additional Senior Notes due 2022 to exchange the Additional Senior Notes due 2022 for new notes in the same principal amount with substantially identical terms ("Exchange Notes"), except that the Exchange Notes were registered under the Securities Act. The exchange offer expired at 5:00 p.m. on New York City time on June 11, 2013, and all of the Additional Senior Notes due 2022 were exchanged. Covenants. The Exchange Notes and the Existing Senior Notes due 2022 will be treated as a single class for all purposes under the indenture governing the Company's Existing Senior Notes due 2022, including without limitation, the covenants, events of default, asset sale, change of control, covenant suspension and other terms. Use of Proceeds. The Company used the net proceeds from the offering, together with cash on hand, to prepay in full its Senior Term Loan due 2014. The Company recorded a $0.7 million loss on the early extinguishment of debt, which was comprised of the write-off of the remaining unamortized discount and unamortized debt issuance costs. Senior Revolving Credit Facility The Company’s unused availability under its senior secured revolving credit facility was $558.9 million at May 26, 2013, as the Company’s total availability of $627.5 million was reduced by $68.6 million of letters of credit and other credit usage allocated under the facility. Interest Rates on Borrowings The Company’s weighted-average interest rate on average borrowings outstanding during the three and six months ended May 26, 2013, was 7.70% and 7.29%, respectively, as compared to 7.17% and 7.08%, respectively, in each of the same periods of 2012. |
Employee Benefit Plans (Tables)
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May 26, 2013
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Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of defined benefit plans disclosures | 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:
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Business Segment Information
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 26, 2013
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BUSINESS SEGMENT INFORMATION | BUSINESS SEGMENT INFORMATION The Company manages its business according to three regional segments, the Americas, Europe and Asia Pacific. The Company considers its chief executive officer to be the Company’s chief operating decision maker. The Company’s management, including the chief operating decision maker, manages business operations, evaluates performance and allocates resources based on the regional segments’ net revenues and operating income. Business segment information for the Company is as follows:
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Comprehensive Income-AOCI (Details) (USD $)
In Thousands, unless otherwise specified |
May 26, 2013
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Nov. 25, 2012
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Equity [Abstract] | ||
Pension and postretirement benefits | $ (323,853) | $ (330,961) |
Net investment hedge losses | (16,452) | (18,853) |
Foreign currency translation losses | (63,596) | (55,423) |
Unrealized gain (loss) on marketable securities | 644 | 1,014 |
Accumulated other comprehensive loss | (403,257) | (404,223) |
Accumulated other comprehensive income attributable to noncontrolling interest | 9,304 | 10,412 |
Accumulated other comprehensive loss attributable to Levi Strauss & Co. | $ (412,561) | $ (414,635) |
Business Segment Information (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 26, 2013
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Table Text Block] | Business segment information for the Company is as follows:
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Other Income (Expense), Net (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 26, 2013
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Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of other nonoperating income (expense) | The following table summarizes significant components of “Other income (expense), net”:
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Income Taxes (Details)
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6 Months Ended | |
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May 26, 2013
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May 27, 2012
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Income Tax Disclosure [Abstract] | ||
Effective rate | 29.70% | 29.30% |
Subsequent Events (Details) (Subsequent event [Member], Domestic Tax Authority [Member], USD $)
In Millions, unless otherwise specified |
Aug. 25, 2013
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Subsequent event [Member] | Domestic Tax Authority [Member]
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Income Tax Examination [Line Items] | |
Unrecognized Tax Benefits | $ 23.4 |
Unrecognized Tax Benefits that Would Impact Effective Tax Rate | $ 11 |
Comprehensive Income (Loss) (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 26, 2013
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accumulated other comprehensive income (Loss) | The following is a summary of the components of “Accumulated other comprehensive loss,” net of related income taxes:
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Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified |
6 Months Ended | |
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May 26, 2013
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May 27, 2012
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Cash Flows from Operating Activities: | ||
Net income | $ 155,084 | $ 62,540 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 57,263 | 62,777 |
Asset impairments | 1,091 | 233 |
Gain on disposal of property, plant and equipment | (144) | (151) |
Unrealized foreign exchange (gains) losses | (11,048) | (19,463) |
Realized (gain) loss on settlement of forward foreign exchange contracts not designated for hedge accounting | 6,197 | (2,530) |
Employee benefit plans' amortization from accumulated other comprehensive loss | 11,717 | 858 |
Employee benefit plans' curtailment (gain) loss, net | (510) | (995) |
Noncash loss (gain) on extinguishment of debt | 689 | (3,643) |
Amortization of deferred debt issuance costs | 2,143 | 2,223 |
Stock-based compensation | 3,246 | 2,542 |
Allowance for doubtful accounts | 2,367 | 3,740 |
Change in operating assets and liabilities: | ||
Trade receivables | 156,324 | 280,568 |
Inventories | (20,949) | 95,336 |
Other current assets | 7,767 | 18,322 |
Other non-current assets | (289) | (4,557) |
Accounts payable and other accrued liabilities | (84,347) | (73,242) |
Income tax liabilities | 30,196 | (3,483) |
Accrued salaries, wages and employee benefits and long-term employee related benefits | (72,422) | (95,576) |
Other long-term liabilities | 10,004 | 1,866 |
Other, net | (180) | 259 |
Net cash provided by operating activities | 254,199 | 327,624 |
Cash Flows from Investing Activities: | ||
Purchases of property, plant and equipment | (41,891) | (36,571) |
Proceeds from sale of property, plant and equipment | 147 | 202 |
Proceeds (payments) on settlement of forward foreign exchange contracts not designated for hedge accounting | (6,197) | 2,530 |
Net cash used for investing activities | (47,941) | (33,839) |
Cash Flows from Financing Activities: | ||
Proceeds from issuance of long-term debt | 140,000 | 385,000 |
Repayments of long-term debt and capital leases | (325,820) | (407,203) |
Proceeds from senior revolving credit facility | 0 | 50,000 |
Repayments of senior revolving credit facility | 0 | (220,000) |
Short-term borrowings, net | (4,774) | 6,566 |
Debt issuance costs | (2,412) | (6,972) |
Restricted cash | (65) | 969 |
Repurchase of common stock | (365) | (479) |
Dividend to stockholders | (25,076) | (20,036) |
Net cash (used for) provided by financing activities | (218,512) | (212,155) |
Effect of exchange rate changes on cash and cash equivalents | (4,095) | (8,279) |
Net increase (decrease) in cash and cash equivalents | (16,349) | 73,351 |
Beginning cash and cash equivalents | 406,134 | 204,542 |
Ending cash and cash equivalents | 389,785 | 277,893 |
Cash paid (received) during the period for: | ||
Interest | 58,520 | 68,466 |
Income Taxes Paid, Net | $ 13,948 | $ 22,306 |
Significant Accounting Policies
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6 Months Ended | ||||||||
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May 26, 2013
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Accounting Policies [Abstract] | |||||||||
SIGNIFICANT ACCOUNTING POLICIES | SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Levi Strauss & Co. (the “Company”) is one of the world’s leading branded apparel companies. The Company designs, markets and sells – directly or through third parties and licensees – products that include jeans, casual and dress pants, tops, shorts, skirts, jackets, footwear and related accessories for men, women and children under the Levi’s®, Dockers®, Signature by Levi Strauss & Co.™ and Denizen® brands. The Company operates its business through three geographic regions: Americas, Europe and Asia Pacific. Basis of Presentation and Principles of Consolidation The unaudited consolidated financial statements of the Company and its wholly-owned and majority-owned foreign and domestic subsidiaries are prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information. In the opinion of management, all adjustments necessary for a fair statement of the financial position and the results of operations for the periods presented have been included. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended November 25, 2012, included in the Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission (“SEC”) on February 7, 2013. The unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions have been eliminated. Management believes the disclosures are adequate to make the information presented herein not misleading. The results of operations for the three and six months ended May 26, 2013, may not be indicative of the results to be expected for any other interim period or the year ending November 24, 2013. The Company’s fiscal year ends on the last Sunday of November in each year, although the fiscal years of certain foreign subsidiaries end on November 30. Each quarter of both fiscal years 2013 and 2012 consists of 13 weeks. All references to years relate to fiscal years rather than calendar years. Subsequent events have been evaluated through the issuance date of these financial statements. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the related notes to the 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. Temporary Equity Equity-classified stock-based compensation awards that may be settled in cash, at the option of the holder, are presented on the balance sheet outside permanent equity. Accordingly, “Temporary equity” on the face of the accompanying consolidated balance sheets includes the portion of the intrinsic value of these awards relating to the elapsed service period since the grant date as well as the fair value of common stock issued pursuant to the Company's 2006 Equity Incentive Plan ("EIP"). The increase in temporary equity from the year ended November 25, 2012, to May 26, 2013, was due to an increase in the fair value of the Company's common stock. 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 2012 Annual Report on Form 10-K, except for the following, which have been grouped by their required effective dates for the Company: First Quarter of 2015
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Employee Benefit Plans
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 26, 2013
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Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EMPLOYEE BENEFIT PLANS | 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:
|
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