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.) |
Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
Class A Common Stock, $0.001 par value per share | LEVI | New York Stock Exchange |
Large accelerated filer ¨ | Accelerated filer ¨ | Emerging growth company ¨ |
Non-accelerated filer þ | 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. | |||
• | our Investor Relations page (https://levistrauss.com/investors/financial-news); |
• | our Twitter account (https://twitter.com/LeviStraussCo); |
• | our company blog (https://www.levistrauss.com/unzipped-blog/); |
• | our Facebook page (https://www.facebook.com/levistraussco/); |
• | our LinkedIn page (https://www.linkedin.com/company/levi-strauss-&-co-); |
• | our Instagram page (https://www.instagram.com/levistraussco/); and |
• | our YouTube channel (https://www.youtube.com/user/levistraussvideo);. |
Item 1. | CONSOLIDATED FINANCIAL STATEMENTS |
(Unaudited) | |||||||
May 26, 2019 | November 25, 2018 | ||||||
(Dollars in thousands) | |||||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 860,933 | $ | 713,120 | |||
Short-term investments in marketable securities | 79,736 | — | |||||
Trade receivables, net of allowance for doubtful accounts of $9,876 and $10,037 | 574,389 | 534,164 | |||||
Inventories: | |||||||
Raw materials | 5,275 | 3,681 | |||||
Work-in-process | 2,933 | 2,977 | |||||
Finished goods | 887,111 | 877,115 | |||||
Total inventories | 895,319 | 883,773 | |||||
Other current assets | 196,769 | 157,002 | |||||
Total current assets | 2,607,146 | 2,288,059 | |||||
Property, plant and equipment, net of accumulated depreciation of $1,014,365 and $974,206 | 480,515 | 460,613 | |||||
Goodwill | 235,688 | 236,246 | |||||
Other intangible assets, net | 42,808 | 42,835 | |||||
Deferred tax assets, net | 414,620 | 397,791 | |||||
Other non-current assets | 128,616 | 117,116 | |||||
Total assets | $ | 3,909,393 | $ | 3,542,660 | |||
LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY | |||||||
Current Liabilities: | |||||||
Short-term debt | $ | 11,481 | $ | 31,935 | |||
Accounts payable | 339,497 | 351,329 | |||||
Accrued salaries, wages and employee benefits | 164,788 | 298,990 | |||||
Accrued interest payable | 5,787 | 6,089 | |||||
Accrued income taxes | 34,579 | 15,466 | |||||
Accrued sales allowances (Note 1) | 116,282 | — | |||||
Other accrued liabilities | 435,300 | 348,390 | |||||
Total current liabilities | 1,107,714 | 1,052,199 | |||||
Long-term debt | 1,011,119 | 1,020,219 | |||||
Postretirement medical benefits | 70,147 | 74,181 | |||||
Pension liability | 190,588 | 195,639 | |||||
Long-term employee related benefits | 79,517 | 107,556 | |||||
Long-term income tax liabilities | 11,339 | 9,805 | |||||
Other long-term liabilities | 117,716 | 116,462 | |||||
Total liabilities | 2,588,140 | 2,576,061 | |||||
Commitments and contingencies | |||||||
Temporary equity (Note 1) | — | 299,140 | |||||
Stockholders’ Equity: | |||||||
Levi Strauss & Co. stockholders’ equity | |||||||
Common stock — $.001 par value; 1,200,000,000 Class A shares authorized, 42,166,667 shares and no shares issued and outstanding as of May 26, 2019 and November 25, 2018, respectively; and 422,000,000 Class B shares authorized, 350,332,920 shares and 376,028,430 shares issued and outstanding, as of May 26, 2019 and November 25, 2018, respectively | 392 | 376 | |||||
Additional paid-in capital (Note 1) | 629,703 | — | |||||
Accumulated other comprehensive loss | (411,256 | ) | (424,584 | ) | |||
Retained earnings | 1,094,666 | 1,084,321 | |||||
Total Levi Strauss & Co. stockholders’ equity | 1,313,505 | 660,113 | |||||
Noncontrolling interest | 7,748 | 7,346 | |||||
Total stockholders’ equity | 1,321,253 | 667,459 | |||||
Total liabilities, temporary equity and stockholders’ equity | $ | 3,909,393 | $ | 3,542,660 |
Three Months Ended | Six Months Ended | ||||||||||||||
May 26, 2019 | May 27, 2018 | May 26, 2019 | May 27, 2018 | ||||||||||||
(Dollars in thousands, except per share amounts) (Unaudited) | |||||||||||||||
Net revenues | $ | 1,312,940 | $ | 1,245,742 | $ | 2,747,398 | $ | 2,589,427 | |||||||
Cost of goods sold | 612,517 | 574,865 | 1,264,167 | 1,180,426 | |||||||||||
Gross profit | 700,423 | 670,877 | 1,483,231 | 1,409,001 | |||||||||||
Selling, general and administrative expenses | 637,525 | 593,595 | 1,219,421 | 1,156,797 | |||||||||||
Operating income | 62,898 | 77,282 | 263,810 | 252,204 | |||||||||||
Interest expense | (15,126 | ) | (14,465 | ) | (32,670 | ) | (29,962 | ) | |||||||
Underwriter commission paid on behalf of selling stockholders | (24,860 | ) | — | (24,860 | ) | — | |||||||||
Other income, net | 3,166 | 12,895 | 1,520 | 2,495 | |||||||||||
Income before income taxes | 26,078 | 75,712 | 207,800 | 224,737 | |||||||||||
Income tax (benefit) expense | (2,429 | ) | (1,320 | ) | 32,842 | 166,334 | |||||||||
Net income | 28,507 | 77,032 | 174,958 | 58,403 | |||||||||||
Net income attributable to noncontrolling interest | (277 | ) | (2,100 | ) | (151 | ) | (2,483 | ) | |||||||
Net income attributable to Levi Strauss & Co. | $ | 28,230 | $ | 74,932 | $ | 174,807 | $ | 55,920 | |||||||
Earnings per common share attributable to common stockholders: | |||||||||||||||
Basic | $ | 0.07 | $ | 0.20 | $ | 0.46 | $ | 0.15 | |||||||
Diluted | $ | 0.07 | $ | 0.19 | $ | 0.44 | $ | 0.14 | |||||||
Weighted-average common shares outstanding: | |||||||||||||||
Basic | 389,518,461 | 377,132,162 | 383,278,398 | 376,384,657 | |||||||||||
Diluted | 409,332,997 | 387,764,580 | 401,405,411 | 387,130,124 |
Three Months Ended | Six Months Ended | ||||||||||||||
May 26, 2019 | May 27, 2018 | May 26, 2019 | May 27, 2018 | ||||||||||||
(Dollars in thousands) (Unaudited) | |||||||||||||||
Net income | $ | 28,507 | $ | 77,032 | $ | 174,958 | $ | 58,403 | |||||||
Other comprehensive income (loss), before related income taxes: | |||||||||||||||
Pension and postretirement benefits | 3,464 | 3,157 | 6,886 | 6,517 | |||||||||||
Derivative instruments | 12,667 | 28,975 | 14,404 | 6,127 | |||||||||||
Foreign currency translation losses | (8,843 | ) | (34,353 | ) | (4,757 | ) | (14,572 | ) | |||||||
Unrealized gains (losses) on marketable securities | 329 | (116 | ) | 1,219 | 174 | ||||||||||
Total other comprehensive income (loss), before related income taxes | 7,617 | (2,337 | ) | 17,752 | (1,754 | ) | |||||||||
Income taxes expense related to items of other comprehensive income | (2,432 | ) | (7,229 | ) | (4,173 | ) | (2,383 | ) | |||||||
Comprehensive income, net of income taxes | 33,692 | 67,466 | 188,537 | 54,266 | |||||||||||
Comprehensive income attributable to noncontrolling interest | (348 | ) | (1,939 | ) | (402 | ) | (2,583 | ) | |||||||
Comprehensive income attributable to Levi Strauss & Co. | $ | 33,344 | $ | 65,527 | $ | 188,135 | $ | 51,683 |
Levi Strauss & Co. Stockholders | |||||||||||||||||||||||
Class A & Class B Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive (Loss)/Income | Noncontrolling Interest | Total Stockholders' Equity | ||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||
Balance at November 26, 2017 | $ | 375 | $ | — | $ | 1,100,916 | $ | (404,381 | ) | $ | 5,478 | $ | 702,388 | ||||||||||
Net (loss) income | — | — | (19,012 | ) | — | 383 | (18,629 | ) | |||||||||||||||
Other comprehensive income, net of tax | — | — | — | 5,167 | 261 | 5,428 | |||||||||||||||||
Stock-based compensation and dividends, net | 2 | 5,254 | — | — | — | 5,256 | |||||||||||||||||
Reclassification to temporary equity | — | 9,590 | (42,589 | ) | — | — | (32,999 | ) | |||||||||||||||
Repurchase of common stock | — | (14,844 | ) | — | — | — | (14,844 | ) | |||||||||||||||
Cash dividends declared ($0.24 per share) | — | — | (90,000 | ) | — | — | (90,000 | ) | |||||||||||||||
Balance at February 25, 2018 | 377 | — | 949,315 | (399,214 | ) | 6,122 | 556,600 | ||||||||||||||||
Net income | — | — | 74,932 | — | 2,100 | 77,032 | |||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | (9,405 | ) | (161 | ) | (9,566 | ) | ||||||||||||||
Stock-based compensation and dividends, net | — | 5,566 | — | — | — | 5,566 | |||||||||||||||||
Reclassification to temporary equity | — | (2,438 | ) | (27,796 | ) | — | — | (30,234 | ) | ||||||||||||||
Repurchase of common stock | — | (3,128 | ) | (4,055 | ) | — | — | (7,183 | ) | ||||||||||||||
Balance at May 27, 2018 | $ | 377 | $ | — | $ | 992,396 | $ | (408,619 | ) | $ | 8,061 | $ | 592,215 | ||||||||||
Balance at November 25, 2018 | $ | 376 | $ | — | $ | 1,084,321 | $ | (424,584 | ) | $ | 7,346 | $ | 667,459 | ||||||||||
Net income (loss) | — | — | 146,577 | — | (126 | ) | 146,451 | ||||||||||||||||
Other comprehensive income, net of tax | — | — | — | 8,214 | 180 | 8,394 | |||||||||||||||||
Stock-based compensation and dividends, net | — | 1,497 | — | — | — | 1,497 | |||||||||||||||||
Reclassification to temporary equity | — | (506 | ) | (23,339 | ) | — | — | (23,845 | ) | ||||||||||||||
Repurchase of common stock | — | (991 | ) | (2,923 | ) | — | — | (3,914 | ) | ||||||||||||||
Cash dividends declared ($0.29 per share) | — | — | (110,000 | ) | — | — | (110,000 | ) | |||||||||||||||
Balance at February 24, 2019 | 376 | — | 1,094,636 | (416,370 | ) | 7,400 | 686,042 | ||||||||||||||||
Net income | — | — | 28,230 | — | 277 | 28,507 | |||||||||||||||||
Other comprehensive income, net of tax | — | — | — | 5,114 | 71 | 5,185 | |||||||||||||||||
Stock-based compensation and dividends, net | 2 | 12,515 | — | — | — | 12,517 | |||||||||||||||||
Repurchase of common stock | — | (24,696 | ) | — | — | — | (24,696 | ) | |||||||||||||||
Reclassification from temporary equity in connection with initial public offering (Note 1) | — | 351,185 | (28,200 | ) | — | — | 322,985 | ||||||||||||||||
Issuance of Class A common stock in connection with initial public offering (Note 1) | 14 | 234,569 | — | — | — | 234,583 | |||||||||||||||||
Cancel liability-settled awards and replace with equity-settled awards in connection with initial public offering (Note 1) | — | 56,130 | — | — | — | 56,130 | |||||||||||||||||
Balance at May 26, 2019 | $ | 392 | $ | 629,703 | $ | 1,094,666 | $ | (411,256 | ) | $ | 7,748 | $ | 1,321,253 |
Six Months Ended | |||||||
May 26, 2019 | May 27, 2018 | ||||||
(Dollars in thousands) (Unaudited) | |||||||
Cash Flows from Operating Activities: | |||||||
Net income | $ | 174,958 | $ | 58,403 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 58,745 | 64,695 | |||||
Unrealized foreign exchange losses (gains) | 14,899 | (10,678 | ) | ||||
Realized (gain) loss on settlement of forward foreign exchange contracts not designated for hedge accounting | (7,134 | ) | 18,148 | ||||
Employee benefit plans’ amortization from accumulated other comprehensive loss and settlement loss | 6,886 | 6,517 | |||||
Stock-based compensation | 14,014 | 10,822 | |||||
Other, net | 1,813 | 3,767 | |||||
(Benefit from) provision for deferred income taxes | (19,937 | ) | 135,168 | ||||
Change in operating assets and liabilities: | |||||||
Trade receivables | 119,916 | 135,739 | |||||
Inventories | (32,628 | ) | (95,690 | ) | |||
Other current assets | (22,546 | ) | (1,580 | ) | |||
Other non-current assets | (5,198 | ) | (7,435 | ) | |||
Accounts payable and other accrued liabilities | (47,137 | ) | 38,284 | ||||
Restructuring liabilities | (126 | ) | (254 | ) | |||
Income tax liabilities | 20,675 | (980 | ) | ||||
Accrued salaries, wages and employee benefits and long-term employee related benefits | (115,443 | ) | (127,321 | ) | |||
Other long-term liabilities | 56 | (47 | ) | ||||
Net cash provided by operating activities | 161,813 | 227,558 | |||||
Cash Flows from Investing Activities: | |||||||
Purchases of property, plant and equipment | (76,961 | ) | (61,153 | ) | |||
Proceeds (Payments) on settlement of forward foreign exchange contracts not designated for hedge accounting | 13,125 | (18,148 | ) | ||||
Payments to acquire short-term investments | (84,829 | ) | — | ||||
Proceeds from sale, maturity and collection of short-term investments | 5,481 | — | |||||
Net cash used for investing activities | (143,184 | ) | (79,301 | ) | |||
Cash Flows from Financing Activities: | |||||||
Proceeds from short-term credit facilities | 17,929 | 22,689 | |||||
Repayments of short-term credit facilities | (27,866 | ) | (20,673 | ) | |||
Other short-term borrowings, net | (9,422 | ) | (14,537 | ) | |||
Proceeds from issuance of Class A common stock | 254,329 | — | |||||
Payments for underwriter commission and other offering costs | (19,746 | ) | — | ||||
Repurchase of common stock, including shares surrendered for tax withholdings on equity award exercises | (28,610 | ) | (22,027 | ) | |||
Dividend to stockholders | (55,000 | ) | (45,000 | ) | |||
Other financing, net | (565 | ) | (644 | ) | |||
Net cash provided by (used for) financing activities | 131,049 | (80,192 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents and restricted cash | (1,913 | ) | (3,424 | ) | |||
Net increase in cash and cash equivalents and restricted cash | 147,765 | 64,641 | |||||
Beginning cash and cash equivalents, and restricted cash | 713,698 | 634,691 | |||||
Ending cash and cash equivalents, and restricted cash | 861,463 | 699,332 | |||||
Less: Ending restricted cash | (530 | ) | (608 | ) | |||
Ending cash and cash equivalents | $ | 860,933 | $ | 698,724 | |||
Noncash Investing Activity: | |||||||
Property, plant and equipment acquired and not yet paid at end of period | $ | 14,775 | $ | 14,454 | |||
Property, plant and equipment additions due to build-to-suit lease transactions | 10,861 | 1,822 | |||||
Realized loss on foreign currency contracts not yet paid at end of period | 5,990 | — | |||||
Supplemental disclosure of cash flow information: | |||||||
Cash paid for interest during the period | $ | 26,849 | $ | 25,824 | |||
Cash paid for income taxes during the period, net of refunds | 52,800 | 35,066 |
• | In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. Under the new standard and its related amendments (collectively known as Accounting Standards Codification 606 ("ASC 606")), an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. Enhanced disclosures are required regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. |
May 26, 2019 | |||||||||||
As Reported | Remove Effect of Adoption | Balances Without Adoption of Topic 606 | |||||||||
(Dollars in thousands) | |||||||||||
Trade receivables, net of allowance for doubtful accounts | $ | 574,389 | $ | 164,840 | $ | 409,549 | |||||
Inventories: Finished goods | 887,111 | (17,827 | ) | 904,938 | |||||||
Other current assets | 196,769 | 17,827 | 178,942 | ||||||||
Total current assets | 2,607,146 | 164,840 | 2,442,306 | ||||||||
Total assets | 3,909,393 | 164,840 | 3,744,553 | ||||||||
Accrued sales allowances | 116,282 | 116,282 | — | ||||||||
Other accrued liabilities | 435,300 | 48,558 | 386,742 | ||||||||
Total current liabilities | 1,107,714 | 164,840 | 942,874 | ||||||||
Total liabilities, temporary equity and stockholders' equity | $ | 3,909,393 | $ | 164,840 | $ | 3,744,553 |
• | In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires that restricted cash be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown in the statement of cash flows. Restricted cash is reported in Other non-current assets in the Company's Consolidated Balance Sheets. The Company adopted this standard in the first quarter of 2019, and other than the change in presentation within the Consolidated Statements of Cash Flows, the adoption of ASU 2016-18 did not have an impact on the Company's consolidated financial statements. |
• | In March 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits (Topic 715) Improving the Presentation of Net Periodic Cost and Net Periodic Postretirement Benefit Cost. ASU 2017-07 changes the income statement presentation of net periodic benefit costs requiring separation between operating expense (service cost component) and non-operating expense (all other components, including interest cost, expected return on plan assets, amortization of prior service costs or credits, curtailments and settlements, actuarial gains and losses, etc.). Accordingly, the Company determined this impacts the Company's Consolidated Statements of Income, as the service cost components of net periodic benefit costs are reported within operating income and the other components of net periodic benefit costs are reported in the Other Income, Net line item. The presentation change in the Consolidated Statements of Income requires application on a retrospective basis. A practical expedient is permitted under the guidance which allows the Company to use information previously disclosed in the pension and other postretirement benefit plans footnote as the basis to apply the retrospective presentation requirements. As a result of the Company's adoption of this standard, other components of net periodic benefit |
• | In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815) Targeted Improvements to Accounting for Hedging Activities. ASU 2017-12 refines and expands hedge accounting for both financial and commodity risks. This ASU creates more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes. In addition, this ASU makes certain targeted improvements to simplify the application of hedge accounting guidance. The Company adopted this standard during the first quarter of 2019 upon entering into foreign exchange risk contracts designated as hedges. |
• | In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires the identification of arrangements that should be accounted for as leases by lessees. In general, for operating or financing lease arrangements exceeding a 12-month term, a right-of-use asset and a lease obligation will be recognized on the balance sheet of the lessee while the income statement will reflect lease expense for operating leases and amortization and interest expense for financing leases. The Company has identified leases for real estate, personal property and other arrangements. The new standard is required to be applied using a modified retrospective approach with two adoption methods permissible. The Company expects to elect the transition method that applies the new lease standard at the adoption date instead of the earliest period presented. Given the significant number of leases, the Company anticipates the new guidance will have a material impact on the consolidated balance sheets. |
May 26, 2019 | November 25, 2018 | ||||||||||||||||||||||
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 | $ | 45,707 | $ | 45,707 | $ | — | $ | 34,385 | $ | 34,385 | $ | — | |||||||||||
Short-term investments in marketable securities | 79,736 | — | 79,736 | — | — | — | |||||||||||||||||
Derivative instruments(3) | 21,914 | — | 21,914 | 18,372 | — | 18,372 | |||||||||||||||||
Total | $ | 147,357 | $ | 45,707 | $ | 101,650 | $ | 52,757 | $ | 34,385 | $ | 18,372 | |||||||||||
Financial liabilities carried at fair value | |||||||||||||||||||||||
Derivative instruments(3) | 12,226 | — | 12,226 | 4,447 | — | 4,447 | |||||||||||||||||
Total | $ | 12,226 | $ | — | $ | 12,226 | $ | 4,447 | $ | — | $ | 4,447 |
(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. Short-term investments in marketable securities consist of fixed income securities. For forward foreign exchange contracts, inputs include foreign currency exchange and interest rates and, where applicable, credit default swap prices. |
(3) | The Company’s cash flow hedges 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. Refer to Note 3 for more information. |
May 26, 2019 | November 25, 2018 | ||||||||||||||
Carrying Value | Estimated Fair Value | Carrying Value | Estimated Fair Value | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Financial liabilities carried at adjusted historical cost | |||||||||||||||
5.00% senior notes due 2025(1) | $ | 488,323 | $ | 501,704 | $ | 487,272 | $ | 478,774 | |||||||
3.375% senior notes due 2027(1) | 528,104 | 554,331 | 538,219 | 546,238 | |||||||||||
Short-term borrowings | 11,719 | 11,719 | 32,470 | 32,470 | |||||||||||
Total | $ | 1,028,146 | $ | 1,067,754 | $ | 1,057,961 | $ | 1,057,482 |
(1) | Fair values are estimated using Level 1 inputs and incorporate mid-market price quotes. 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. |
May 26, 2019 | November 25, 2018 | ||||||||||||||||||||||
Assets | (Liabilities) | Derivative Net Carrying Value | Assets | (Liabilities) | Derivative Net Carrying Value | ||||||||||||||||||
Carrying Value | Carrying Value | Carrying Value | Carrying Value | ||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||
Derivatives designated as hedging instruments | |||||||||||||||||||||||
Foreign exchange risk cash flow hedges(1) | $ | 8,340 | $ | — | $ | 8,340 | $ | — | $ | — | $ | — | |||||||||||
Foreign exchange risk cash flow hedges(2) | — | (2,576 | ) | (2,576 | ) | — | — | — | |||||||||||||||
Total | $ | 8,340 | $ | (2,576 | ) | $ | — | $ | — | ||||||||||||||
Derivatives not designated as hedging instruments | |||||||||||||||||||||||
Forward foreign exchange contracts(1) | 21,912 | (8,338 | ) | 13,574 | 18,372 | — | 18,372 | ||||||||||||||||
Forward foreign exchange contracts(2) | 2,569 | (12,219 | ) | (9,650 | ) | — | (4,447 | ) | (4,447 | ) | |||||||||||||
Total | $ | 24,481 | $ | (20,557 | ) | $ | 18,372 | $ | (4,447 | ) | |||||||||||||
Non-derivatives designated as hedging instruments | |||||||||||||||||||||||
Euro senior notes | $ | — | $ | (531,050 | ) | $ | — | $ | (541,500 | ) |
(1) | Included in "Other current assets" or "Other non-current assets" on the Company’s consolidated balance sheets. |
(2) | Included in "Other accrued liabilities" or "Other long-term liabilities" on the Company’s consolidated balance sheets. |
May 26, 2019 | November 25, 2018 | ||||||||||||||||||||||
Gross Amounts of Assets / (Liabilities) Presented in the Balance Sheet | Gross Amounts Not Offset in the Balance Sheet | Net Amounts of Assets / (Liabilities) | Gross Amounts of Assets / (Liabilities) Presented in the Balance Sheet | Gross Amounts Not Offset in the Balance Sheet | Net Amounts of Assets / (Liabilities) | ||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||
Foreign exchange risk contracts and forward foreign exchange contracts | |||||||||||||||||||||||
Financial assets | $ | 30,234 | $ | (10,194 | ) | $ | 20,040 | $ | 16,417 | $ | (1,756 | ) | $ | 14,661 | |||||||||
Financial liabilities | (21,318 | ) | 10,194 | (11,124 | ) | (2,181 | ) | 1,756 | (425 | ) | |||||||||||||
Total | $ | 8,916 | $ | 14,236 | |||||||||||||||||||
Embedded derivative contracts | |||||||||||||||||||||||
Financial assets | $ | 2,587 | $ | — | $ | 2,587 | $ | 1,955 | $ | — | $ | 1,955 | |||||||||||
Financial liabilities | (1,815 | ) | — | (1,815 | ) | (2,266 | ) | — | (2,266 | ) | |||||||||||||
Total | $ | 772 | $ | (311 | ) |
Amount of Gain (Loss) Recognized in OCI (Effective Portion) | Amount of Gain (Loss) Reclassified from AOCI into Net Income(1) | ||||||||||||||||||||||
As of | As of | Three Months Ended | Six Months Ended | ||||||||||||||||||||
May 26, 2019 | November 25, 2018 | May 26, 2019 | May 27, 2018 | May 26, 2019 | May 27, 2018 | ||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||
Foreign exchange risk contracts | $ | 3,954 | $ | — | $ | (163 | ) | $ | — | $ | 717 | $ | — | ||||||||||
Realized forward foreign exchange swaps (2) | 4,637 | 4,637 | — | — | — | — | |||||||||||||||||
Yen-denominated Eurobonds | (19,811 | ) | (19,811 | ) | — | — | — | — | |||||||||||||||
Euro-denominated senior notes | (43,966 | ) | (54,416 | ) | — | — | — | — | |||||||||||||||
Cumulative income taxes | 26,564 | 29,703 | — | — | — | — | |||||||||||||||||
Total | $ | (28,622 | ) | $ | (39,887 | ) |
May 26, 2019 | |||||||
Three Months Ended | Six Months Ended | ||||||
Amount of Gain (Loss) on Cash Flow Hedge Activity: | (Dollars in thousands) | ||||||
Revenues | $ | (1,985 | ) | $ | (2,444 | ) | |
Cost of Goods Sold | $ | 1,822 | $ | 3,161 |
Three Months Ended | Six Months Ended | ||||||||||||||
May 26, 2019 | May 27, 2018 | May 26, 2019 | May 27, 2018 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Realized gain (loss) | $ | 3,147 | $ | (7,845 | ) | $ | 7,760 | $ | (18,148 | ) | |||||
Unrealized gain (loss) | 1,115 | 21,556 | (9,637 | ) | 15,772 | ||||||||||
Total | $ | 4,262 | $ | 13,711 | $ | (1,877 | ) | $ | (2,376 | ) |
May 26, 2019 | November 25, 2018 | ||||||
(Dollars in thousands) | |||||||
Long-term debt | |||||||
5.00% senior notes due 2025 | $ | 486,587 | $ | 485,605 | |||
3.375% senior notes due 2027 | 524,532 | 534,614 | |||||
Total long-term debt | $ | 1,011,119 | $ | 1,020,219 | |||
Short-term debt | |||||||
Short-term borrowings | $ | 11,481 | $ | 31,935 | |||
Total debt | $ | 1,022,600 | $ | 1,052,154 |
Three Months Ended | Six Months Ended | ||||||||||||||
May 26, 2019 | May 27, 2018 | May 26, 2019 | May 27, 2018 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Net periodic benefit cost: | |||||||||||||||
Pension benefits | $ | 4,016 | $ | 766 | $ | 7,993 | $ | 1,615 | |||||||
Postretirement benefits | 893 | 926 | 1,786 | 1,852 | |||||||||||
Net periodic benefit cost | $ | 4,909 | $ | 1,692 | $ | 9,779 | $ | 3,467 |
Service RSUs | Performance RSUs | ||||||||||||||||
Units | Weighted-Average Fair Value | Weighted-Average Remaining Contractual Life (Years) | Units | Weighted-Average Fair Value | Weighted-Average Remaining Contractual Life (Years) | ||||||||||||
(Units in thousands) | |||||||||||||||||
Outstanding at November 25, 2018 | 1,030 | $ | 8.17 | 1.7 | 1,744 | $ | 8.08 | 1.4 | |||||||||
Granted | 310 | 14.25 | 586 | 15.84 | |||||||||||||
Vested | (109 | ) | 8.80 | — | — | ||||||||||||
Granted Replacement Awards | 6,542 | 16.67 | 2,083 | 22.71 | |||||||||||||
Forfeited | (68 | ) | 16.67 | (37 | ) | 22.23 | |||||||||||
Outstanding at May 26, 2019 | 7,705 | $ | 15.49 | 2.1 | 4,376 | $ | 16.10 | 1.5 |
Phantom Service RSUs | Phantom Performance RSUs | ||||||||||||||||||||
Units | Weighted-Average Fair Value | Fair Value At Period End | Units | Weighted-Average Fair Value | Fair Value At Period End | ||||||||||||||||
(Units in thousands) | |||||||||||||||||||||
Outstanding at November 25, 2018 | 9,100 | $ | 7.59 | $ | 14.60 | 1,710 | $ | 8.22 | $ | 14.60 | |||||||||||
Granted | 1,793 | 14.88 | 504 | 14.88 | |||||||||||||||||
Vested | (3,542 | ) | 6.79 | — | — | ||||||||||||||||
Canceled | (6,542 | ) | 9.81 | (2,083 | ) | 9.69 | |||||||||||||||
Forfeited | (215 | ) | 8.59 | (64 | ) | 9.45 | |||||||||||||||
Outstanding at May 26, 2019 | 594 | $ | 9.57 | $ | 22.06 | 67 | $ | 11.63 | $ | 22.06 | |||||||||||
Expected to vest at May 26, 2019 | 546 | $ | 9.47 | $ | 22.06 | 57 | $ | 11.47 | $ | 22.06 |
May 26, 2019 | November 25, 2018 | May 27, 2018 | |||||||||
(Dollars in thousands) | |||||||||||
Pension and postretirement benefits | $ | (223,860 | ) | $ | (229,023 | ) | $ | (227,464 | ) | ||
Derivative instruments | (28,622 | ) | (39,887 | ) | (51,114 | ) | |||||
Foreign currency translation losses | (153,103 | ) | (149,318 | ) | (124,578 | ) | |||||
Unrealized gains on marketable securities | 3,885 | 2,948 | 4,175 | ||||||||
Accumulated other comprehensive loss | (401,700 | ) | (415,280 | ) | (398,981 | ) | |||||
Accumulated other comprehensive income attributable to noncontrolling interest | 9,556 | 9,304 | 9,638 | ||||||||
Accumulated other comprehensive loss attributable to Levi Strauss & Co. | $ | (411,256 | ) | $ | (424,584 | ) | $ | (408,619 | ) |
Three Months Ended May 26, 2019 | |||||||||||||||
Americas | Europe | Asia | Total | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Net revenues by channel: | |||||||||||||||
Wholesale | $ | 487,958 | $ | 207,980 | $ | 115,736 | $ | 811,674 | |||||||
Direct-to-consumer | 204,740 | 190,389 | 106,137 | 501,266 | |||||||||||
Total net revenues | $ | 692,698 | $ | 398,369 | $ | 221,873 | $ | 1,312,940 |
Six Months Ended May 26, 2019 | |||||||||||||||
Americas | Europe | Asia | Total | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Net revenues by channel: | |||||||||||||||
Wholesale | $ | 971,759 | $ | 460,913 | $ | 248,311 | $ | 1,680,983 | |||||||
Direct-to-consumer | 438,203 | 402,132 | 226,080 | 1,066,415 | |||||||||||
Total net revenues | $ | 1,409,962 | $ | 863,045 | $ | 474,391 | $ | 2,747,398 |
Three Months Ended May 27, 2018 | |||||||||||||||
Americas | Europe | Asia | Total | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Net revenues by channel: | |||||||||||||||
Wholesale | $ | 480,680 | $ | 196,581 | $ | 108,693 | $ | 785,954 | |||||||
Direct-to-consumer | 189,111 | 170,255 | 100,422 | 459,788 | |||||||||||
Total net revenues | $ | 669,791 | $ | 366,836 | $ | 209,115 | $ | 1,245,742 |
Six Months Ended May 27, 2018 | |||||||||||||||
Americas | Europe | Asia | Total | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Net revenues by channel: | |||||||||||||||
Wholesale | $ | 929,422 | $ | 456,446 | $ | 228,326 | $ | 1,614,194 | |||||||
Direct-to-consumer | 397,566 | 363,112 | 214,555 | 975,233 | |||||||||||
Total net revenues | $ | 1,326,988 | $ | 819,558 | $ | 442,881 | $ | 2,589,427 |
Three Months Ended | Six Months Ended | ||||||||||||||
May 26, 2019 | May 27, 2018 | May 26, 2019 | May 27, 2018 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Foreign exchange management gains (losses)(1) | $ | 4,261 | $ | 13,711 | $ | (1,877 | ) | $ | (2,376 | ) | |||||
Foreign currency transaction (losses) gains | (5,584 | ) | (2,698 | ) | (2,963 | ) | 619 | ||||||||
Interest income | 3,647 | 1,401 | 7,658 | 3,830 | |||||||||||
Investment income | 6 | — | 1,013 | 428 | |||||||||||
Other, net(2) | 836 | 481 | (2,311 | ) | (6 | ) | |||||||||
Total other income, net(2) | $ | 3,166 | $ | 12,895 | $ | 1,520 | $ | 2,495 |
(1) | Gains and losses on forward foreign exchange contracts primarily resulted from currency fluctuations relative to negotiated contract rates. Gains in the three months ended May 26, 2019 were primarily due to favorable currency fluctuations relative to negotiated contract rates on positions to sell the Euro. Gains in the three months ended May 27, 2018 were primarily due to favorable currency fluctuations relative to negotiated contract rates on positions to sell the Euro, Mexican Peso and British Pound. Beginning in the first quarter of 2019, the Company designated certain derivative instruments as cash flow hedges and as a a result, gains and losses for the effective portions of these hedges are recorded in "Accumulated other comprehensive loss". Refer to Note 3 for more information. |
(2) | The amounts in Other income, net have been conformed to reflect the adoption of ASU 2017-07, "Compensation-Retirement Benefits (Topic 715) Improving the Presentation of Net Periodic Cost and Net Periodic Postretirement Benefit Cost" and include non-service cost component of net periodic benefit costs. Refer to Note 1 for more information. |
Three Months Ended | Six Months Ended | ||||||||||||||
May 26, 2019 | May 27, 2018 | May 26, 2019 | May 27, 2018 | ||||||||||||
(Dollars in thousands, except per share amounts) | |||||||||||||||
Numerator: | |||||||||||||||
Net income attributable to Levi Strauss & Co. | $ | 28,230 | $ | 74,932 | $ | 174,807 | $ | 55,920 | |||||||
Denominator: | |||||||||||||||
Weighted-average common shares outstanding - basic | 389,518,461 | 377,132,162 | 383,278,398 | 376,384,657 | |||||||||||
Dilutive effect of stock awards | 19,814,536 | 10,632,418 | 18,127,013 | 10,745,467 | |||||||||||
Weighted-average common shares outstanding - diluted | 409,332,997 | 387,764,580 | 401,405,411 | 387,130,124 | |||||||||||
Earnings per common share attributable to common stockholders: | |||||||||||||||
Basic | $ | 0.07 | $ | 0.20 | $ | 0.46 | $ | 0.15 | |||||||
Diluted | $ | 0.07 | $ | 0.19 | $ | 0.44 | $ | 0.14 | |||||||
Anti-dilutive securities excluded from calculation of diluted earnings per share attributable to common stockholders | — | 2,817,830 | — | 7,564,301 |
Three Months Ended | Six Months Ended | ||||||||||||||
May 26, 2019 | May 27, 2018 | May 26, 2019 | May 27, 2018 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Net revenues: | |||||||||||||||
Americas | $ | 692,698 | $ | 669,791 | $ | 1,409,962 | $ | 1,326,988 | |||||||
Europe | 398,369 | 366,836 | 863,045 | 819,558 | |||||||||||
Asia | 221,873 | 209,115 | 474,391 | 442,881 | |||||||||||
Total net revenues | $ | 1,312,940 | $ | 1,245,742 | $ | 2,747,398 | $ | 2,589,427 | |||||||
Operating income: | |||||||||||||||
Americas | $ | 101,631 | $ | 97,212 | $ | 225,287 | $ | 208,457 | |||||||
Europe | 58,709 | 53,173 | 180,333 | 168,459 | |||||||||||
Asia | 17,063 | 16,410 | 60,028 | 57,119 | |||||||||||
Regional operating income | 177,403 | 166,795 | 465,648 | 434,035 | |||||||||||
Corporate expenses(1) | 114,505 | 89,513 | 201,838 | 181,831 | |||||||||||
Total operating income | 62,898 | 77,282 | 263,810 | 252,204 | |||||||||||
Interest expense | (15,126 | ) | (14,465 | ) | (32,670 | ) | (29,962 | ) | |||||||
Underwriter commission paid on behalf of selling stockholders | (24,860 | ) | — | (24,860 | ) | — | |||||||||
Other income, net(1) | 3,166 | 12,895 | 1,520 | 2,495 | |||||||||||
Income before income taxes | $ | 26,078 | $ | 75,712 | $ | 207,800 | $ | 224,737 |
(1) | The amounts in Corporate expenses and Other income, net have been conformed to reflect the adoption of ASU 2017-07, "Compensation-Retirement Benefits (Topic 715) Improving the Presentation of Net Periodic Cost and Net Periodic Postretirement Benefit Cost" and include non-service cost component of net periodic benefit costs. Refer to Note 1 for more information. |
Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | Factors that impact consumer discretionary spending, which remains volatile globally, continue to create a complex and challenging retail environment for us and our customers, characterized by unpredictable traffic patterns and a general promotional environment. In developed economies, mixed real wage growth and shifting consumer spending also continue to pressure global discretionary spending. Consumers continue to focus on value pricing and convenience with the off-price retail channel remaining strong and increased expectations for real-time delivery. |
• | The diversification of our business model across regions, channels, brands and categories affects our gross margin. For example, if our sales in higher gross margin business regions, channels, brands and categories grow at a faster rate than in our lower gross margin business regions, channels, brands and categories, we would expect a favorable impact to aggregate gross margin over time. Gross margin in Europe is generally higher than in our other two regional operating segments. Sales directly to consumers generally have higher gross margins than sales through third parties, although these sales typically have higher selling expenses. Value brands, which are focused on the value-conscious consumer, generally generate lower gross margin. Enhancements to our existing product offerings, or our expansion into new products categories, may also impact our future gross margin. |
• | More competitors are seeking growth globally, thereby increasing competition across regions. Some of these competitors are entering markets where we already have a mature business such as the United States, Mexico, Western Europe and Japan, and may provide consumers discretionary purchase alternatives or lower-priced apparel offerings. |
• | Wholesaler/retailer dynamics and wholesale channels remain challenged by mixed growth prospects due to increased competition from e-commerce shopping, pricing transparency enabled by the proliferation of online technologies, and vertically-integrated specialty stores. Retailers, including our top customers, have in the past and may in the future decide to consolidate, undergo restructurings or rationalize their stores, which could result in a reduction in the number of stores that carry our products. |
• | Many apparel companies that have traditionally relied on wholesale distribution channels have invested in expanding their own retail store and e-commerce distribution and consumer-facing technologies, which has increased competition in the retail market. |
• | Competition for, and price volatility of, resources throughout the supply chain have increased, causing us and other apparel manufacturers to continue to seek alternative sourcing channels and create new efficiencies in our global supply chain. Trends affecting the supply chain include the proliferation of lower-cost sourcing alternatives, resulting in reduced barriers to entry for new competitors, and the impact of fluctuating prices of labor and raw materials as well as the consolidation of suppliers. Trends such as these can bring additional pressure on us and other wholesalers and retailers to shorten lead-times, reduce costs and raise product prices. |
• | Foreign currencies continue to be volatile. Significant fluctuations of the U.S. Dollar against various foreign currencies, including the Euro, British Pound and Mexican Peso, will impact our financial results, affecting translation, revenue, operating margins and net income. |
• | The current environment has introduced greater uncertainty with respect to potential tax and trade regulations. The current domestic and international political environment, including changes to other U.S. policies related to global trade and tariffs, have resulted in uncertainty surrounding the future state of the global economy. Such changes may require us to modify our current sourcing practices, which may impact our product costs, and, if not mitigated, could have a material adverse effect on our business and results of operations. In addition, the United States enacted new tax legislation in fiscal year 2018, which is intended to stimulate economic growth and capital investments in the United States by, among other provisions, lowering tax rates for both corporations and individuals. |
• | Net revenues. Consolidated net revenues increased 5% on a reported basis and 9% on a constant-currency basis compared to the second quarter of 2018. This increase was driven by broad-based growth across all three regions. |
• | Operating income. Compared to the second quarter of 2018, consolidated operating income decreased 19% and operating margin decreased to 4.8%, as higher net revenues were more than offset by higher selling, general and administrative expenses ("SG&A") associated with higher advertising and promotion expense driven by more media spend in the second quarter of 2019 in comparison to 2018. |
• | Net income. Compared to the second quarter of 2018, consolidated net income decreased 63%, primarily due to a $24.9 million underwriter commission paid by us on behalf of selling stockholders in connection with our IPO. |
• | Adjusted Net Income. Compared to the second quarter of 2018, adjusted net income decreased due to lower operating income and decreased net gains on our foreign exchange derivatives. |
• | Earnings per share. Compared to the second quarter of 2018, diluted earnings per share decreased from $0.19 to $0.07 due to lower net income. |
• | Net revenues. Consolidated net revenues increased 6% on a reported basis and 10% on a constant-currency basis compared to the first six months of 2018. This increase was driven by growth across all three regions and all channels. |
• | Operating income. Compared to the first six months of 2018, consolidated operating income increased 5% and operating margin decreased slightly to 9.6%, as higher net revenues was partially offset by higher SG&A associated with higher selling expense to support store growth. |
• | Net income. Compared to the first six months of 2018, consolidated net income increased to $175 million from $58 million, primarily due to the prior period $137 million charge from the transitional impact from the 2017 Tax Cuts and Jobs Act (the "Tax Act"). |
• | Earnings per share. Compared to the first six months of 2018, diluted earnings per share increased from $0.14 to $0.44 due to higher net income. |
• | Net revenues comprises net sales and licensing revenues. Net sales include sales of products to wholesale customers, including franchised stores, and direct sales to consumers at our company-operated stores and shop-in-shops located within department stores and other third party locations, as well as company-operated e-commerce sites. Net revenues include discounts, allowances for estimated returns and incentives. Licensing revenues, which include revenues from the use of our trademarks in connection with the manufacturing, advertising and distribution of trademarked products by third-party licensees, are earned and recognized as products are sold by licensees based on royalty rates as set forth in the applicable licensing agreements. |
• | Cost of goods sold primarily comprises 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. On both a reported and constant-currency basis, cost of goods sold reflects the transactional currency impact resulting from the purchase of products in a currency other than the functional currency. |
• | Selling expenses 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, as well as costs associated with our e-commerce operations. |
• | We reflect substantially all distribution costs in selling, general and administrative expenses ("SG&A"), 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. |
• | SG&A and Other Income, net in the period ended May 27, 2018 have been conformed to reflect the adoption of ASU 2017-07, "Compensation-Retirement Benefits (Topic 715) Improving the Presentation of Net Periodic Cost and Net Periodic Postretirement Benefit Cost". Refer to Note 1 for more information. |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||
May 26, 2019 | May 27, 2018 | % Increase (Decrease) | May 26, 2019 | May 27, 2018 | May 26, 2019 | May 27, 2018 | % Increase (Decrease) | May 26, 2019 | May 27, 2018 | ||||||||||||||||||||||||
% of Net Revenues | % of Net Revenues | % of Net Revenues | % of Net Revenues | ||||||||||||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||||||||||||
Net revenues | $ | 1,312.9 | $ | 1,245.7 | 5.4 | % | 100.0 | % | 100.0 | % | $ | 2,747.4 | $ | 2,589.4 | 6.1 | % | 100.0 | % | 100.0 | % | |||||||||||||
Cost of goods sold | 612.5 | 574.8 | 6.6 | % | 46.7 | % | 46.1 | % | 1,264.2 | 1,180.4 | 7.1 | % | 46.0 | % | 45.6 | % | |||||||||||||||||
Gross profit | 700.4 | 670.9 | 4.4 | % | 53.3 | % | 53.9 | % | 1,483.2 | 1,409.0 | 5.3 | % | 54.0 | % | 54.4 | % | |||||||||||||||||
Selling, general and administrative expenses | 637.5 | 593.6 | 7.4 | % | 48.6 | % | 47.7 | % | 1,219.4 | 1,156.8 | 5.4 | % | 44.4 | % | 44.7 | % | |||||||||||||||||
Operating income | 62.9 | 77.3 | (18.6 | )% | 4.8 | % | 6.2 | % | 263.8 | 252.2 | 4.6 | % | 9.6 | % | 9.7 | % | |||||||||||||||||
Interest expense | (15.2 | ) | (14.5 | ) | 4.8 | % | (1.2 | )% | (1.2 | )% | (32.7 | ) | (30.0 | ) | 9.0 | % | (1.2 | )% | (1.2 | )% | |||||||||||||
Underwriter commission paid on behalf of selling stockholders | (24.9 | ) | — | * | (1.9 | )% | — | % | (24.9 | ) | — | * | (0.9 | )% | — | % | |||||||||||||||||
Other income, net | 3.2 | 12.9 | (75.2 | )% | 0.2 | % | 1.0 | % | 1.6 | 2.5 | (36.0 | )% | 0.1 | % | 0.1 | % | |||||||||||||||||
Income before income taxes | 26.0 | 75.7 | (65.7 | )% | 2.0 | % | 6.1 | % | 207.8 | 224.7 | (7.5 | )% | 7.6 | % | 8.7 | % | |||||||||||||||||
Income tax (benefit) expense | (2.5 | ) | (1.3 | ) | 92.3 | % | (0.2 | )% | (0.1 | )% | 32.8 | 166.3 | (80.3 | )% | 1.2 | % | 6.4 | % | |||||||||||||||
Net income | 28.5 | 77.0 | (63.0 | )% | 2.2 | % | 6.2 | % | 175.0 | 58.4 | 199.7 | % | 6.4 | % | 2.3 | % | |||||||||||||||||
Net income attributable to noncontrolling interest | (0.3 | ) | (2.1 | ) | (85.7 | )% | — | (0.2 | )% | (0.2 | ) | (2.5 | ) | (92.0 | )% | — | (0.1 | )% | |||||||||||||||
Net income attributable to Levi Strauss & Co. | $ | 28.2 | $ | 74.9 | (62.3 | )% | 2.1 | % | 6.0 | % | $ | 174.8 | $ | 55.9 | 212.7 | % | 6.4 | % | 2.2 | % |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
% Increase | % Increase | ||||||||||||||||||||||||||
May 26, 2019 | May 27, 2018 | As Reported | Constant Currency | May 26, 2019 | May 27, 2018 | As Reported | Constant Currency | ||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||||||
Net revenues: | |||||||||||||||||||||||||||
Americas | $ | 692.7 | $ | 669.7 | 3.4 | % | 4.0 | % | $ | 1,410.0 | $ | 1,326.9 | 6.3 | % | 7.0 | % | |||||||||||
Europe | 398.3 | 366.9 | 8.6 | % | 17.8 | % | 863.0 | 819.6 | 5.3 | % | 13.5 | % | |||||||||||||||
Asia | 221.9 | 209.1 | 6.1 | % | 12.2 | % | 474.4 | 442.9 | 7.1 | % | 13.1 | % | |||||||||||||||
Total net revenues | $ | 1,312.9 | $ | 1,245.7 | 5.4 | % | 9.2 | % | $ | 2,747.4 | $ | 2,589.4 | 6.1 | % | 10.0 | % |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
May 26, 2019 | May 27, 2018 | % Increase | May 26, 2019 | May 27, 2018 | % Increase | ||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||
Net revenues | $ | 1,312.9 | $ | 1,245.7 | 5.4 | % | $ | 2,747.4 | $ | 2,589.4 | 6.1 | % | |||||||||
Cost of goods sold | 612.5 | 574.8 | 6.6 | % | 1,264.2 | 1,180.4 | 7.1 | % | |||||||||||||
Gross profit | $ | 700.4 | $ | 670.9 | 4.4 | % | $ | 1,483.2 | $ | 1,409.0 | 5.3 | % | |||||||||
Gross margin | 53.3 | % | 53.9 | % | 54.0 | % | 54.4 | % |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||
May 26, 2019 | May 27, 2018 | % Increase (Decrease) | May 26, 2019 | May 27, 2018 | May 26, 2019 | May 27, 2018 | % Increase (Decrease) | May 26, 2019 | May 27, 2018 | ||||||||||||||||||||||||
% of Net Revenues | % of Net Revenues | % of Net Revenues | % of Net Revenues | ||||||||||||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||||||||||||
Selling | $ | 269.1 | $ | 254.2 | 5.9 | % | 20.5 | % | 20.4 | % | $ | 547.5 | $ | 508.2 | 7.7 | % | 19.9 | % | 19.6 | % | |||||||||||||
Advertising and promotion | 114.5 | 96.9 | 18.2 | % | 8.7 | % | 7.8 | % | 187.0 | 173.1 | 8.0 | % | 6.8 | % | 6.7 | % | |||||||||||||||||
Administration | 111.8 | 113.3 | (1.3 | )% | 8.5 | % | 9.1 | % | 206.2 | 221.1 | (6.7 | )% | 7.5 | % | 8.5 | % | |||||||||||||||||
Other | 142.1 | 129.2 | 10.0 | % | 10.8 | % | 10.4 | % | 278.7 | 254.4 | 9.6 | % | 10.1 | % | 9.8 | % | |||||||||||||||||
Total SG&A | $ | 637.5 | $ | 593.6 | 7.4 | % | 48.6 | % | 47.7 | % | $ | 1,219.4 | $ | 1,156.8 | 5.4 | % | 44.4 | % | 44.7 | % |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||
May 26, 2019 | May 27, 2018 | % Increase (Decrease) | May 26, 2019 | May 27, 2018 | May 26, 2019 | May 27, 2018 | % Increase | May 26, 2019 | May 27, 2018 | |||||||||||||||||||||||||
% of Net Revenues | % of Net Revenues | % of Net Revenues | % of Net Revenues | |||||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||
Operating income: | ||||||||||||||||||||||||||||||||||
Americas | $ | 101.6 | $ | 97.2 | 4.5 | % | 14.7 | % | 14.5 | % | $ | 225.3 | $ | 208.4 | 8.1 | % | 16.0 | % | 15.7 | % | ||||||||||||||
Europe | 58.7 | 53.2 | 10.3 | % | 14.7 | % | 14.5 | % | 180.3 | 168.5 | 7.0 | % | 20.9 | % | 20.6 | % | ||||||||||||||||||
Asia | 17.0 | 16.4 | 3.7 | % | 7.7 | % | 7.8 | % | 60.0 | 57.1 | 5.1 | % | 12.6 | % | 12.9 | % | ||||||||||||||||||
Total regional operating income | 177.3 | 166.8 | 6.3 | % | 13.5 | % | * | 13.4 | % | * | 465.6 | 434.0 | 7.3 | % | 16.9 | % | * | 16.8 | % | * | ||||||||||||||
Corporate expenses | 114.4 | 89.5 | 27.8 | % | 8.7 | % | * | 7.2 | % | * | 201.8 | 181.8 | 11.0 | % | 7.3 | % | * | 7.0 | % | * | ||||||||||||||
Total operating income | $ | 62.9 | $ | 77.3 | (18.6 | )% | 4.8 | % | * | 6.2 | % | * | $ | 263.8 | $ | 252.2 | 4.6 | % | 9.6 | % | * | 9.7 | % | * | ||||||||||
Operating margin | 4.8 | % | 6.2 | % | 9.6 | % | 9.7 | % |
• | Americas. Currency translation did not have a significant impact for the three-month and six-month periods ended May 26, 2019. The increase in operating income was primarily due to higher net revenues as a result of strong performance of our wholesale and DTC businesses. This was partially offset by higher SG&A expense to support store growth as well as higher advertising and promotion expense. |
• | Europe. Currency translation had an unfavorable impact of approximately $5 million and $13 million for the three-month and six-month periods ended May 26, 2019, respectively. The increase in operating income was due to higher net revenues across all channels, partially offset by higher selling costs to support store expansion and increased investment in advertising and promotion. |
• | Asia. Currency translation had an unfavorable impact of approximately $2 million and $4 million for the three-month and six-month periods ended May 26, 2019, respectively. The increase in operating income was due to higher wholesale and DTC revenues, partially offset by higher SG&A expense to support retail expansion. |
Six Months Ended | |||||||
May 26, 2019 | May 27, 2018 | ||||||
(Dollars in millions) | |||||||
Cash provided by operating activities | $ | 161.8 | $ | 227.6 | |||
Cash used for investing activities | (143.2 | ) | (79.3 | ) | |||
Cash provided by (used for) financing activities | 131.0 | (80.2 | ) | ||||
Cash and cash equivalents at period end | 860.9 | 698.7 |
• | Adjusted EBIT, Adjusted EBIT margin and Adjusted EBITDA do not reflect income tax payments that reduce cash available to us; |
• | Adjusted EBIT, Adjusted EBIT margin and Adjusted EBITDA do not reflect interest expense, or the cash requirements necessary to service interest or principal payments on our indebtedness, which reduces cash available to us; |
• | Adjusted EBIT, Adjusted EBIT margin and Adjusted EBITDA exclude other expense (income) net, which has primarily consisted of realized and unrealized gains and losses on our forward foreign exchange contracts and transaction gains and losses on our foreign exchange balances, although these items affect the amount and timing of cash available to us when these gains and losses are realized; |
• | all of these non-GAAP financial measures exclude underwriter commission paid on behalf of selling stockholders in connection with our IPO that reduces cash available to us; |
• | all of these non-GAAP financial measures exclude other costs associated with our IPO; |
• | all of these non-GAAP financial measures exclude the expense resulting from the impact of changes in fair value on our cash-settled stock-based compensation awards, even though, prior to March 2019, such awards were required to be settled in cash; |
• | all of these non-GAAP financial measures exclude restructuring and related charges, severance and other, net which can affect our current and future cash requirements; |
• | the expenses and other items that we exclude in our calculations of all of these non-GAAP financial measures may differ from the expenses and other items, if any, that other companies may exclude from all of these non-GAAP financial measures or similarly titled measures; |
• | Adjusted EBITDA excludes the recurring, non-cash expenses of depreciation of property and equipment and, although these are non-cash expenses, the assets being depreciated may need to be replaced in the future; and |
• | Adjusted net income and adjusted net income margin do not include all of the effects of income taxes and changes in income taxes reflected in net income. |
Three Months Ended | Six Months Ended | ||||||||||||||
May 26, 2019 | May 27, 2018 | May 26, 2019 | May 27, 2018 | ||||||||||||
(Dollars in millions) | |||||||||||||||
(Unaudited) | |||||||||||||||
Most comparable GAAP measure: | |||||||||||||||
Net income | $ | 28.5 | $ | 77.0 | $ | 175.0 | $ | 58.4 | |||||||
Non-GAAP measure: | |||||||||||||||
Net income | 28.5 | 77.0 | 175.0 | 58.4 | |||||||||||
Income tax (benefit) expense | (2.5 | ) | (1.3 | ) | 32.8 | 166.3 | |||||||||
Interest expense | 15.2 | 14.5 | 32.7 | 30.0 | |||||||||||
Other income, net(1) | (3.2 | ) | (12.9 | ) | (1.6 | ) | (2.5 | ) | |||||||
Underwriter commission paid on behalf of selling stockholders | 24.9 | — | 24.9 | — | |||||||||||
Other costs associated with the initial public offering | 3.5 | — | 3.5 | — | |||||||||||
Impact of changes in fair value on cash-settled stock-based compensation | 15.0 | 7.2 | 20.3 | 12.2 | |||||||||||
Restructuring and related charges, severance and other, net | 0.2 | 0.8 | 0.3 | 1.1 | |||||||||||
Adjusted EBIT | $ | 81.6 | $ | 85.3 | $ | 287.9 | $ | 265.5 | |||||||
Depreciation and amortization | 30.1 | 31.9 | 58.7 | 64.7 | |||||||||||
Adjusted EBITDA | $ | 111.7 | $ | 117.2 | $ | 346.6 | $ | 330.2 | |||||||
Adjusted EBIT margin | 6.2% | 6.8 | % | 10.5 | % | 10.3 | % |
Three Months Ended | Six Months Ended | ||||||||||||||
May 26, 2019 | May 27, 2018 | May 26, 2019 | May 27, 2018 | ||||||||||||
(Dollars in millions) | |||||||||||||||
(Unaudited) | |||||||||||||||
Most comparable GAAP measure: | |||||||||||||||
Net income | $ | 28.5 | $ | 77.0 | $ | 175.0 | $ | 58.4 | |||||||
Non-GAAP measure: | |||||||||||||||
Net income | 28.5 | 77.0 | 175.0 | 58.4 | |||||||||||
Underwriter commission paid on behalf of selling stockholders | 24.9 | — | 24.9 | — | |||||||||||
Other costs associated with the initial public offering | 3.5 | — | 3.5 | — | |||||||||||
Impact of changes in fair value on cash-settled stock-based compensation | 15.0 | 7.2 | 20.3 | 12.2 | |||||||||||
Restructuring and related charges, severance and other, net | 0.2 | 0.8 | 0.3 | 1.1 | |||||||||||
Remeasurement of deferred tax assets and liabilities | — | — | — | 99.1 | |||||||||||
Tax impact of adjustments | (2.8 | ) | (1.6 | ) | (3.8 | ) | (4.0 | ) | |||||||
Adjusted net income | $ | 69.3 | $ | 83.4 | $ | 220.2 | $ | 166.8 | |||||||
Adjusted net income margin | 5.3 | % | 6.7 | % | 8.0 | % | 6.4 | % |
May 26, 2019 | November 25, 2018 | ||||||
(Dollars in millions) | |||||||
(Unaudited) | |||||||
Most comparable GAAP measure: | |||||||
Total debt, excluding capital leases | $ | 1,022.6 | $ | 1,052.2 | |||
Non-GAAP measure: | |||||||
Total debt, excluding capital leases | $ | 1,022.6 | $ | 1,052.2 | |||
Cash and cash equivalents | (860.9 | ) | (713.1 | ) | |||
Short-term investments in marketable securities | (79.7 | ) | — | ||||
Net debt | $ | 82.0 | $ | 339.1 |
Six Months Ended | |||||||
May 26, 2019 | May 27, 2018 | ||||||
(Dollars in millions) | |||||||
(Unaudited) | |||||||
Most comparable GAAP measure: | |||||||
Net cash provided by operating activities | $ | 161.8 | $ | 227.6 | |||
Non-GAAP measure: | |||||||
Net cash provided by operating activities | $ | 161.8 | $ | 227.6 | |||
Underwriter commission paid on behalf of selling stockholders | 24.9 | — | |||||
Purchases of property, plant and equipment | (77.0 | ) | (61.2 | ) | |||
Proceeds (Payments) on settlement of forward foreign exchange contracts not designated for hedge accounting | 13.1 | (18.1 | ) | ||||
Repurchase of common stock, including shares surrendered for tax withholdings on equity award exercises | (28.6 | ) | (22.0 | ) | |||
Dividend to stockholders | (55.0 | ) | (45.0 | ) | |||
Adjusted free cash flow | $ | 39.2 | $ | 81.3 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
May 26, 2019 | May 27, 2018 | % Increase | May 26, 2019 | May 27, 2018 | % Increase | ||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||
Total revenues | |||||||||||||||||||||
As reported | $ | 1,312.9 | $ | 1,245.7 | 5.4 | % | $ | 2,747.4 | $ | 2,589.4 | 6.1 | % | |||||||||
Impact of foreign currency exchange rates | — | (43.7 | ) | * | — | (91.5 | ) | * | |||||||||||||
Constant-currency net revenues | $ | 1,312.9 | $ | 1,202.0 | 9.2 | % | $ | 2,747.4 | $ | 2,497.9 | 10.0 | % | |||||||||
Americas | |||||||||||||||||||||
As reported | $ | 692.7 | $ | 669.7 | 3.4 | % | $ | 1,410.0 | $ | 1,326.9 | 6.3 | % | |||||||||
Impact of foreign currency exchange rates | — | (3.7 | ) | * | — | (9.2 | ) | * | |||||||||||||
Constant-currency net revenues - Americas | $ | 692.7 | $ | 666.0 | 4.0 | % | $ | 1,410.0 | $ | 1,317.7 | 7.0 | % | |||||||||
Europe | |||||||||||||||||||||
As reported | $ | 398.3 | $ | 366.9 | 8.6 | % | $ | 863.0 | $ | 819.6 | 5.3 | % | |||||||||
Impact of foreign currency exchange rates | — | (28.7 | ) | * | — | (59.0 | ) | * | |||||||||||||
Constant-currency net revenues - Europe | $ | 398.3 | $ | 338.2 | 17.8 | % | $ | 863.0 | $ | 760.6 | 13.5 | % | |||||||||
Asia | |||||||||||||||||||||
As reported | $ | 221.9 | $ | 209.1 | 6.1 | % | $ | 474.4 | $ | 442.9 | 7.1 | % | |||||||||
Impact of foreign currency exchange rates | — | (11.3 | ) | * | — | (23.3 | ) | * | |||||||||||||
Constant-currency net revenues - Asia | $ | 221.9 | $ | 197.8 | 12.2 | % | $ | 474.4 | $ | 419.6 | 13.1 | % |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
May 26, 2019 | May 27, 2018 | % Increase (Decrease) | May 26, 2019 | May 27, 2018 | % Increase | ||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||
Adjusted EBIT | $ | 81.6 | $ | 85.3 | (4.3 | )% | $ | 287.9 | $ | 265.5 | 8.4 | % | |||||||||
Impact of foreign currency exchange rates | — | (6.0 | ) | * | — | (17.0 | ) | * | |||||||||||||
Constant-currency Adjusted EBIT | $ | 81.6 | $ | 79.3 | 2.9 | % | $ | 287.9 | $ | 248.5 | 15.9 | % | |||||||||
Constant-currency Adjusted EBIT margin (1) | 6.2 | % | 6.6 | % | 10.5 | % | 9.9 | % |
• | changes in general economic and financial conditions, and the resulting impact on the level of discretionary consumer spending for apparel and pricing trend fluctuations, and our ability to plan for and respond to the impact of those changes; |
• | our ability to effectively manage any global productivity and outsourcing actions as planned, which are intended to increase productivity and efficiency in our global operations, take advantage of lower-cost service-delivery models in our distribution network and streamline our procurement practices to maximize efficiency in our global operations, without business disruption or mitigation to such disruptions; |
• | consequences of impacts to the businesses of our wholesale customers, including significant store closures or a significant decline in a wholesale customer's financial condition leading to restructuring actions, bankruptcies, liquidations or other unfavorable events for our wholesale customers, caused by factors such as inability to secure financing, decreased discretionary consumer spending, inconsistent traffic patterns and an increase in promotional activity as a result of decreased traffic, pricing fluctuations, general economic and financial conditions and changing consumer preferences; |
• | our and our wholesale customers' decisions to modify strategies and adjust product mix and pricing, and our ability to manage any resulting product transition costs, including liquidating inventory or increasing promotional activity; |
• | our ability to purchase products through our independent contract manufacturers that are made with quality raw materials and 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 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 digital shopping experiences; |
• | our ability to respond to price, innovation and other competitive pressures in the global apparel industry, on and from 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 and interest rate fluctuations; |
• | our ability to successfully prevent or mitigate the impacts of data security breaches; |
• | our ability to attract and retain key executives and other key employees; |
• | our ability to protect our trademarks and other intellectual property; |
• | 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; |
• | the impact of the recently passed Tax Act in the United States, including related changes to our deferred tax assets and liabilities, tax obligations and effective tax rate in future periods, as well as the charge recorded in fiscal 2018; |
• | changes in or application of trade and tax laws, potential increases in import tariffs or taxes and the potential withdrawal from or renegotiation or replacement of the North America Free Trade Agreement ("NAFTA"); and |
• | political, social and economic instability, or natural disasters, in countries where we or our customers do business. |
Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Item 4. | CONTROLS AND PROCEDURES |
Item 1. | LEGAL PROCEEDINGS |
Item 1A. | RISK FACTORS |
• | the retailers in these channels maintain-and seek to grow-substantial private-label and exclusive offerings as they strive to differentiate the brands and products they offer from those of their competitors; |
• | the retailers may change their apparel strategies in a way that shifts focus away from our typical consumer or that otherwise results in a reduction of sales of our products generally, such as a reduction of fixture spaces devoted to our products or a shift to other brands; |
• | other channels, including vertically-integrated specialty stores and e-commerce sites, account for a substantial portion of jeanswear and casual wear sales. In some of our mature markets, these stores and sites have placed competitive pressure on our primary distribution channels, and many of these stores and sites are now looking to our developing markets to grow their business; and |
• | shrinking points of distribution, including fewer doors at our customer locations, or bankruptcy or financial difficulties of a customer. |
• | currency fluctuations, which have impacted our results of operations significantly in recent years; |
• | political, economic and social instability; |
• | changes in tariffs and taxes; |
• | regulatory restrictions on repatriating foreign funds back to the United States; and |
• | less protective foreign laws relating to intellectual property. |
• | actual or perceived disruption of service or reduction in service levels to customers and consumers; |
• | potential adverse effects on our internal control environment and inability to preserve adequate internal controls relating to our general and administrative functions in connection with the decision to outsource certain business service activities; |
• | actual or perceived disruption to suppliers, distribution networks and other important operational relationships and the inability to resolve potential conflicts in a timely manner; |
• | difficulty in obtaining timely delivery of products of acceptable quality from our contract manufacturers; |
• | diversion of management attention from ongoing business activities and strategic objectives; and |
• | failure to maintain employee morale and retain key employees. |
• | increasing our vulnerability to general adverse economic and industry conditions; |
• | limiting our flexibility in planning for or reacting to changes in our business and industry; |
• | placing us at a competitive disadvantage compared to some of our competitors that have less debt; and |
• | limiting our ability to obtain additional financing required to fund working capital and capital expenditures and for other general corporate purposes. |
• | the international expansion and increased presence of vertically integrated specialty stores; |
• | expansion into e-commerce by existing and new competitors; |
• | the proliferation of private labels and exclusive brands offered by department stores, chain stores and mass channel retailers; |
• | the introduction of lines of jeans, athleisure and casual apparel by well-known and successful athletic wear companies; and |
• | the transition of apparel companies who traditionally relied on wholesale distribution channels into their own retail distribution network. |
• | reduced gross margins across our product lines and distribution channels; |
• | increased retailer demands for allowances, incentives and other forms of economic support; and |
• | increased pressure on us to reduce our production costs and operating expenses. |
• | actual or anticipated fluctuations in our revenues or other operating results; |
• | variations between our actual operating results and the expectations of securities analysts, investors and the financial community; |
• | any forward-looking financial or operating information we may provide to the public or securities analysts, any changes in this information or our failure to meet expectations based on this information; |
• | actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company or our failure to meet these estimates or the expectations of investors; |
• | whether investors or securities analysts view our stock structure unfavorably, particularly our dual-class structure; |
• | additional shares of Class A common stock being sold into the market by us or our existing stockholders, or the anticipation of such sales, including if existing stockholders sell shares into the market when applicable “lock-up” periods end; |
• | announcements by us or our competitors of significant products or features, innovations, acquisitions, strategic partnerships, joint ventures, capital commitments, divestitures or other dispositions; |
• | changes in operating performance and stock market valuations of companies in our industry, including our vendors and competitors; |
• | price and volume fluctuations in the overall stock market, including as a result of general economic trends; |
• | lawsuits threatened or filed against us, or events that negatively impact our reputation; |
• | developments in new legislation and pending lawsuits or regulatory actions, including interim or final rulings by judicial or regulatory bodies; and |
• | other events or factors, including those resulting from war or incidents of terrorism, or responses to these events. |
• | establish a classified board of directors so that not all members are elected at one time; |
• | permit our board of directors to establish the number of directors and fill any vacancies and newly-created directorships; |
• | authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; |
• | provide that our board of directors is expressly authorized to make, alter or repeal our bylaws; |
• | restrict the forum for certain litigation against us to Delaware; |
• | reflect the dual class structure of our common stock; and |
• | establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders. |
• | any derivative action or proceeding brought on our behalf; |
• | any action asserting a breach of fiduciary duty; |
• | any action asserting a claim against us arising under the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws; and |
• | any action asserting a claim against us that is governed by the internal-affairs doctrine. |
Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Period | (a) Total number of shares (or units) purchased (1) | (b) Average price paid per share (or unit) | (c) Total number of shares (or units) purchased as part of publicly announced plans or programs | (d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs | |||||||||
February 25, 2019 - March 24, 2019 | — | — | — | — | |||||||||
March 25, 2019 - April 21, 2019 | — | — | — | — | |||||||||
April 22, 2019 - May 26, 2019 | — | $ | — | — | — | ||||||||
Total | — | $ | — | — | — |
Item 3. | DEFAULTS UPON SENIOR SECURITIES |
Item 4. | MINE SAFETY DISCLOSURES |
Item 5. | OTHER INFORMATION |
Item 6. | EXHIBITS |
Incorporated by Reference | ||||||||||
Exhibit Number | Description of Document | Form | SEC File No. | Exhibit | Filing Date | |||||
3.1 | 8-K | 001-06631 | 3.1 | 3/25/2019 | ||||||
3.2 | 8-K | 001-06631 | 3.2 | 3/25/2019 | ||||||
10.1 | S-1 | 333-229630 | 10.7 | 2/13/2019 | ||||||
10.2 | S-1/A | 333-229630 | 10.8 | 3/11/2019 | ||||||
10.3 | S-1/A | 333-229630 | 10.9 | 3/11/2019 | ||||||
10.4 | S-1 | 333-229630 | 10.10 | 2/13/2019 | ||||||
10.5 | ||||||||||
31.1 | ||||||||||
31.2 | ||||||||||
32.1 | ||||||||||
101.INS | XBRL Instance Document. Filed herewith. | |||||||||
101.SCH | XBRL Taxonomy Extension Schema Document. Filed herewith. | |||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. Filed herewith. | |||||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. Filed herewith. | |||||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. Filed herewith. | |||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. Filed herewith. | |||||||||
Date: | July 9, 2019 | LEVI STRAUSS & CO. | |
(Registrant) | |||
By: | /s/ GAVIN BROCKETT | ||
Gavin Brockett Senior Vice President and Global Controller | |||
(Principal Accounting Officer and Duly Authorized Officer) |
Participant: | |
Date of Grant: | |
Vesting Commencement Date: | |
Number of Restricted Stock Units: |
Vesting Schedule: | The Restricted Stock Units shall vest in a series of three (3) equal installments on the dates that are thirteen (13), twenty-four (24), and thirty-six (36) months following the Date of Grant, subject to Participant’s Continuous Service through each such vesting date. Notwithstanding the foregoing, if your Continuous Service terminates for a reason other than Cause after the first vesting installment, the remaining unvested portion of your Award shall become fully vested as of the date of such termination |
Issuance Schedule: | Subject to any Capitalization Adjustment, one share of Class A Common Stock (or its cash equivalent, at the discretion of the Company) will be issued for each Restricted Stock Unit that vests at the time set forth in Section 6 of the Award Agreement. |
LEVI STRAUSS & CO. | PARTICIPANT | |||
By: | By: | |||
Name: | Name: | |||
Title: | Date: | |||
Date: | ||||
Name: |
Employee Number / SS #: |
Date of Grant: |
Vesting Commencement Date: |
Number of Restricted Stock Units: |
Vesting Schedule: |
• | You may elect a single Settlement Date that occurs after the date of vesting of your entire Award. The “Settlement Date” is the earlier of (i) the date on which you have elected to receive the shares of vested Class A Common Stock associated with your Award, as set forth below, (ii) your Separation from Service, and (iii) a Change in Control. In the absence of your completion of this Distribution Election Agreement, such shares will be issued to you on the vesting dates of your Award, subject to Section 6 of your Agreement. Notwithstanding the foregoing, as described in Section 6 of your Agreement, the distribution of such shares, even if you make a deferral election using this Distribution Election Agreement, may be delayed if the Company determines that your sale of the shares on such date would violate the Company’s policy regarding insider trading of the Company’s stock, as determined by the Company in accordance with such policy. |
• | This Distribution Election Agreement is irrevocable. |
• | Notwithstanding any provision in this Distribution Election Agreement, your Agreement or the Plan to the contrary, the issuance of the Class A Common Stock shall be made in a manner that complies with the requirements of Section 409A of the Code, which shall include, without limitation, deferring such issuance for six (6) months after your Separation from Service, if such Separation from Service is the event causing such issuance and you are a “specified employee,” as defined in Section 409A(a)(2)(B)(i) of the Code and the regulations and other guidance promulgated thereunder; provided however, that nothing in this paragraph shall require that such issuance be made earlier than it would otherwise be made under the Award. |
l. | Withholding. The Company shall have the right to deduct from all deferrals or payments hereunder, any federal, state, or local tax required by law to be withheld, if applicable. |
2. | Nonassignable. Your rights and interests under this Distribution Election Agreement may not be assigned, pledged, or transferred other than as provided in the Restricted Stock Unit Agreement. |
3. | Termination of this Agreement. The Company reserves the right to terminate this Distribution Election Agreement at any time in accordance with the requirements of Section 409A of the Code. In such case, Class A Common Stock granted to you pursuant to your Restricted Stock Unit Grant Agreement may be issued to you immediately, only to the extent permitted by Section 409A of the Code and the regulations and other guidance promulgated thereunder. |
4. | Definition of Change in Control. As used in this Distribution Election Agreement, the term “Change in Control” shall have the meaning contained in Section 409A(a)(2)(A)(v) of the Code and the regulations and other guidance promulgated thereunder. |
5. | Definition of Separation from Service. As used in this Distribution Election Agreement, the term “Separation from Service” shall have the meaning contained in Section 409A(a)(2)(A)(i) of the Code and the regulations and other guidance promulgated thereunder. |
LEVI STRAUSS & CO. | PARTICIPANT | |||
By: | ||||
Signature | Signature | |||
Title: | Date: | |||
/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, 2019 |
/s/ HARMIT SINGH | ||
Harmit Singh | ||
Executive Vice President and Chief Financial Officer | ||
July 9, 2019 |
Document and Entity Information - shares |
6 Months Ended | |
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May 26, 2019 |
Jul. 03, 2019 |
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Document Information [Line Items] | ||
Entity Registrant Name | LEVI STRAUSS & CO | |
Entity Central Index Key | 0000094845 | |
Current Fiscal Year End Date | --11-24 | |
Entity Filer Category | Non-accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | May 26, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Shell Company | false | |
Entity Current Reporting Status | No | |
Common Class B [Member] | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 350,332,920 | |
Common Class A [Member] | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 42,166,667 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
May 26, 2019 |
Nov. 25, 2018 |
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ASSETS | ||
Accumulated depreciation | $ 1,014,365 | $ 974,206 |
Current Assets: | ||
Allowance for doubtful accounts | $ (9,876) | $ (10,037) |
Common Class A [Member] | ||
Levi Strauss & Co. stockholders’ equity | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 1,200,000,000 | 1,200,000,000 |
Common stock, shares issued | 42,166,667 | 0 |
Common stock, shares outstanding | 42,166,667 | 0 |
Common Class B [Member] | ||
Levi Strauss & Co. stockholders’ equity | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 422,000,000 | 422,000,000 |
Common stock, shares issued | 350,332,920 | 376,028,430 |
Common stock, shares outstanding | 350,332,920 | 376,028,430 |
Consolidated Statements of Income - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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May 26, 2019 |
May 27, 2018 |
May 26, 2019 |
May 27, 2018 |
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Income Statement [Abstract] | ||||
Net revenues | $ 1,312,940 | $ 1,245,742 | $ 2,747,398 | $ 2,589,427 |
Cost of goods sold | 612,517 | 574,865 | 1,264,167 | 1,180,426 |
Gross profit | 700,423 | 670,877 | 1,483,231 | 1,409,001 |
Selling, general and administrative expenses | 637,525 | 593,595 | 1,219,421 | 1,156,797 |
Operating income | 62,898 | 77,282 | 263,810 | 252,204 |
Interest expense | (15,126) | (14,465) | (32,670) | (29,962) |
Underwriter commission paid on behalf of selling stockholders | (24,860) | 0 | (24,860) | 0 |
Other income, net | 3,166 | 12,895 | 1,520 | 2,495 |
Income before income taxes | 26,078 | 75,712 | 207,800 | 224,737 |
Income tax (benefit) expense | (2,429) | (1,320) | 32,842 | 166,334 |
Net income | 28,507 | 77,032 | 174,958 | 58,403 |
Net income attributable to noncontrolling interest | (277) | (2,100) | (151) | (2,483) |
Net income attributable to Levi Strauss & Co. | $ 28,230 | $ 74,932 | $ 174,807 | $ 55,920 |
Earnings per common share attributable to common stockholders: | ||||
Basic (usd per share) | $ 0.07 | $ 0.20 | $ 0.46 | $ 0.15 |
Diluted (usd per share) | $ 0.07 | $ 0.19 | $ 0.44 | $ 0.14 |
Weighted-average common shares outstanding: | ||||
Basic (in shares) | 389,518,461 | 377,132,162 | 383,278,398 | 376,384,657 |
Diluted (in shares) | 409,332,997 | 387,764,580 | 401,405,411 | 387,130,124 |
Consolidated Statements of Stockholders' Equity (Parenthetical) - $ / shares |
3 Months Ended | |
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Feb. 24, 2019 |
Feb. 25, 2018 |
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Statement of Stockholders' Equity [Abstract] | ||
Cash dividends declared (in dollars per share) | $ 0.29 | $ 0.24 |
Significant Accounting Policies |
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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 largest brand-name 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 around the world 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. 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. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended November 25, 2018, included in the Company's final prospectus related to its initial public offering ("IPO"), dated March 20, 2019 (File No. 333-229630) (the "Prospectus"), filed with the Securities and Exchange Commission ("SEC") pursuant to Rule 424(b) under the Securities Act of 1933, as amended. 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 in the unaudited consolidated financial statements not misleading. The results of operations for the three and six months ended May 26, 2019 may not be indicative of the results to be expected for any other interim period or the year ending November 24, 2019. 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 2019 and 2018 consists of 13 weeks. All references to years and quarters relate to fiscal years and quarters rather than calendar years and quarters. Reclassification Certain insignificant amounts on the consolidated statements of cash flows have been conformed to the May 26, 2019 presentation. Stock Split On February 12, 2019, the Company’s stockholders approved an amendment to the Company’s certificate of incorporation (the "Amendment") to effect a ten-for-one stock split of shares of the Company’s outstanding common stock, such that each share of common stock, $0.01 par value, became ten shares of common stock, $0.001 par value per share. In addition, the Amendment increased the number of authorized shares of the Company's common stock by 930,000,000 to 1,200,000,000. The Amendment became effective on March 4, 2019 when filed with the Secretary of State of the State of Delaware. All share and per-share data in the unaudited consolidated financial statements and notes has been retroactively adjusted to reflect the stock split for all periods presented. Initial Public Offering In March 2019, the Company completed its IPO in which it issued and sold 14,960,557 shares of Class A common stock at a public offering price of $17.00 per share. The Company received net proceeds of $234.6 million after deducting underwriting discounts and commissions of $13.6 million and other direct and incremental offering expenses of $6.1 million. The Company agreed to pay all underwriting discounts and commissions applicable to the sales of shares of Class A common stock by the selling stockholders. This amount, $24.9 million, was paid at completion of the IPO in March 2019 and was recorded as non-operating expense in the second quarter of 2019. Additionally, the Company incurred $3.5 million of other costs associated with the IPO that were recorded in selling, general and administrative expenses ("SG&A"). In connection with the IPO, on March 19, 2019 the Company's Board of Directors approved the cancellation of the majority of the outstanding unvested cash-settled restricted stock units ("RSU's") and their concurrent replacement with similar equity-settled RSUs ("Replacement Awards"), pursuant to the Company's 2016 Equity Incentive Plan (the "2016 Plan"). RSUs for certain foreign affiliates will continue to be cash-settled. Other than the form of settlement, all other terms of the awards (including their vesting schedules) are the same. Prior to this modification, the cash-settled awards were classified as liabilities and stock-based compensation expense was measured using the fair value at the end of each reporting period. After the modification, the stock-based compensation expense for these awards was measured using the modification date fair value. As a result of the modification, accrued stock-based compensation expense of $45.8 million and $10.3 million were reclassified on the Company's consolidated balance sheets from accrued salaries, wages and employee benefits and other long-term liabilities, respectively, to additional paid in capital. Refer to Note 6 for more information. Prior to the IPO, the holders of shares issued under the 2016 Plan could require the Company to repurchase such shares at the then-current market value pursuant to a contractual put right. Equity-classified stock-based awards that may be settled in cash at the option of the holder were presented on the Company's consolidated balance sheets outside of permanent equity. Accordingly, temporary equity on the Company's consolidated balance sheets includes the redemption value of these awards generally related to the elapsed service period since the grant date reflecting patterns of compensation cost recognition, as well as the fair value of the Company's common stock issued pursuant to the 2016 Plan. Upon the completion of the IPO in the second quarter of 2019, this contractual put right was terminated and these awards are no longer presented as temporary equity. As a result, the balance in temporary equity as of immediately prior to the IPO of $351.2 million was reclassified to additional paid in capital. Refer to Note 6 for more information. On February 12, 2019, the Company’s stockholders also approved the adoption of an amended and restated certificate of incorporation (the "IPO Certificate") and amended and restated bylaws. The IPO Certificate provides for two classes of common stock: Class A common stock, par value $0.001 per share, and Class B common stock, par value $0.001 per share. All common stock outstanding at the time of the IPO converted automatically into Class B common stock, each having ten votes per share. Shares of Class A common stock, each having one vote per share, were sold in the IPO. Shares of Class B common stock sold by selling stockholders in the IPO automatically converted into shares of Class A common stock in connection with such sale. Holders of Class B common stock can voluntarily convert their shares into Class A common stock if and when they wish to do so in order to sell their shares to the public. On February 12, 2019, the Company’s stockholders approved the Company's 2019 Equity Incentive Plan (the "2019 Plan") and the Company's 2019 Employee Stock Purchase Plan (the "2019 ESPP"), each of which became effective on March 20, 2019, the effective date of the IPO registration statement. The maximum number of shares of the Company’s Class A common stock that may be issued under the 2019 Plan is 40,000,000. The 2019 ESPP authorizes the issuance of 12,000,000 shares of the Company’s Class A common stock and is subject to automatic annual increases. 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. Changes in Accounting Principle
The Company has identified certain changes in balance sheet classification under ASC 606. Allowances for estimated returns, discounts and retailer promotions and other similar incentives are presented as other accrued liabilities rather than netted within accounts receivable and the estimated cost of inventory associated with allowances for estimated returns are included as other current assets rather than inventories. The Company adopted the standard as of November 26, 2018 using the modified retrospective approach and determined there is no impact to retained earnings upon adoption. Refer to Note 10 for more information. The following table presents the related effect of the adoption of Topic 606 on the Consolidated Balance Sheets:
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 and footnote disclosures, from those disclosed in the Prospectus, except for the following: First Quarter of 2020
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Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE OF FINANCIAL INSTRUMENTS | FAIR VALUE OF FINANCIAL INSTRUMENTS Beginning the first quarter of 2019, the Company invested in short-term investments. Changes in the fair value of these marketable securities are recognized in accumulated other comprehensive income or loss. The following table presents the Company’s financial instruments that are carried at fair value:
_____________
The following table presents the carrying value, including related accrued interest, and estimated fair value of the Company’s financial instruments that are carried at adjusted historical cost:
_____________
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Derivative Instruments and Hedging Activities |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES Accounting Policy Financial Statement Presentation The Company records all derivatives on the balance sheet at fair value, which are included in "Other current assets", "Other non-current assets", "Other accrued liabilities" or "Other long-term liabilities" on the Company’s consolidated balance sheets. The portion of the fair value that represents cash flow occurring within one year are classified as current and the portion related to cash flows occurring beyond one year are classified as non-current. The cash flows from the designated derivative instruments used as hedges are classified in the Company's consolidated statements of cash flows in the same section as the cash flows of the hedged item. Cash Flow Hedges The Company's cash flow hedges are recorded in "Other comprehensive loss" and are not reclassified to earnings until the related net investment position has been liquidated. As a result of ASU 2017-12, for foreign exchange forward contracts accounted for as cash flow hedges, the ineffective portion (if any) will not be separately recorded. The classification of effective hedge results on the Company's consolidated statements of income (loss) is the same as that of the underlying exposure. For foreign exchange risk cash flow hedges, forward points are excluded from the assessment of hedge effectiveness and are recognized in "Net Revenues" or "Costs of goods sold" on a straight-line basis over the life of the contract. In each accounting period, differences between the change in fair value of the forward points and the amount recognized on a straight-line basis is recognized in "Other comprehensive income". Net Investment Hedges The Company designates certain non-derivative instruments as net investment hedges to hedge the Company's net investment position in certain of its foreign subsidiaries. For these instruments, the Company documents the hedge designation by identifying the hedging instrument, the nature of the risk being hedged and the approach for measuring hedge effectiveness. The ineffective portions of these hedges are recorded in "Other income, net" in the Company's consolidated statements of income. The effective portions of these hedges are recorded in "Accumulated other comprehensive loss" on the Company's consolidated balance sheets and are not reclassified to earnings until the related net investment position has been liquidated. No Hedging Designation The Company may also enter into derivative instruments that are not designated as hedges and do not qualify for hedge accounting. For derivatives not designated for hedge accounting, changes in the fair value are recorded in "Other income, net" in the Company’s consolidated statements of income. The Company's foreign currency management objective is to minimize the effect of fluctuations in foreign exchange rates on nonfunctional currency cash flows and selected assets or liabilities without exposing the Company to additional risk associated with transactions that could be regarded as speculative. The Company manages certain forecasted foreign currency exposures and uses a centralized currency management operation to take advantage of potential opportunities to naturally offset foreign currency exposures against each other. Designated Cash Flow Hedges The Company actively manages the risk of changes in functional currency equivalent cash flows resulting from anticipated non-functional currency denominated purchases and sales. The Company’s global sourcing organization uses the U.S. dollar as its functional currency and is primarily exposed to changes in functional currency equivalent cash flows from anticipated inventory purchases, as it procures inventory on behalf of subsidiaries with Euro functional currencies. Additionally, a European subsidiary uses Euros as its functional currency and is exposed to anticipated non-functional currency denominated sales. The Company manages these risks by using currency forward contracts formally designated and effective as cash flow hedges. Hedge effectiveness is generally determined by evaluating the ability of a hedging instrument's cumulative change in fair value to offset the cumulative change in the present value of expected cash flows on the underlying exposures. For forward contracts, forward points are excluded from the determination of hedge effectiveness and are included in current Cost of sales for hedges of anticipated inventory purchases and in Net Revenues for hedges of anticipated sales on a straight-line basis over the life of the contract. In each accounting period, differences between the change in fair value of the forward points and the amount recognized on a straight-line basis is recognized in other comprehensive income. There was no hedge ineffectiveness for the six months ended May 26, 2019. Net Investment Hedges The Company has designated a portion of its outstanding Euro-denominated senior notes as a net investment hedge to manage foreign currency exposures in its foreign operations. Non-designated Cash Flow Hedges The Company enters into derivative instruments not designated as hedges. These derivative instruments are not speculative and are used to manage the Company’s exposure to certain product sourcing activities, some intercompany sales, foreign subsidiaries' royalty payments, interest payments, earnings repatriations, net investment in foreign operations and funding activities but the Company has not elected to apply hedge accounting. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in "Other income, net" in the Company’s consolidated statements of income. As of May 26, 2019, the Company had forward foreign exchange contracts derivatives that were not designated as hedges in qualifying hedging relationships, of which $1.1 billion were contracts to buy and $606.6 million were contracts to sell various foreign currencies. These contracts are at various exchange rates and expire at various dates through May 2020. The table below provides data about the carrying values of derivative instruments and non-derivative instruments:
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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; however, the Company records the fair value on a gross basis on its consolidated balance sheets based on maturity dates, including those subject to master netting arrangements. The table below presents the gross and net amounts of these contracts recognized on the Company's consolidated balance sheets by type of financial instrument:
The table below provides data about the amount of gains and losses related to derivative instruments designated as cash flow hedges and non-derivative instruments designated as net investment hedges included in "Accumulated other comprehensive loss" ("AOCI") on the Company’s consolidated balance sheets:
_____________ (1) Amounts reclassified from AOCI were classified as net revenues and costs of goods sold on the consolidated statements of income. (2) Prior to and during 2005, the Company used foreign exchange currency swaps to hedge the net investment in its foreign operations. For hedges that qualified for hedge accounting, the net gains were included in AOCI and are not reclassified to earnings until the related net investment position has been liquidated. Within the next 12 months, $3.8 million of cash flow hedges are expected to be reclassified from AOCI into net income. The table below presents the effects of the Company's cash flow hedges of foreign exchange risk contracts on the Consolidated Statements of Income for the three and six months ended May 26, 2019:
The table below provides data about the amount of gains and losses related to derivatives instruments included in "Other income, net" in the Company's consolidated statements of income:
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Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DEBT | DEBT The following table presents the Company's debt:
Senior Revolving Credit Facility The Company's unused availability under its senior secured revolving credit facility was $805.6 million at May 26, 2019, as the Company's total availability of $837.0 million was reduced by $31.4 million of letters of credit and other credit usage allocated under the credit 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, 2019 was 5.32% and 5.27%, respectively, as compared to 5.19% and 5.00%, respectively, during the same periods of 2018. |
Employee Benefit Plans |
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Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EMPLOYEE BENEFIT PLANS | EMPLOYEE BENEFIT PLANS The following table summarizes the total net periodic benefit cost for the Company's defined pension plans and postretirement benefit plans:
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Stock-Based Incentive Compensation Plans |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK-BASED INCENTIVE COMPENSATION PLAN | STOCK-BASED INCENTIVE COMPENSATION PLANS Equity Awards Service and performance RSU activity during the six months ended May 26, 2019 was as follows:
Liability Awards Liability award activity during the six months ended May 26, 2019 was as follows:
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Commitments and Contingencies |
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May 26, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Forward Foreign Exchange Contracts The Company uses cash flow hedge 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. See Note 3 for additional information. Other Contingencies Litigation. In the ordinary course of business, the Company has various pending cases involving contractual matters, facility and employee-related matters, distribution matters, product liability claims, trademark infringement and other matters. The Company does not believe any of these pending legal proceedings will have a material impact on its financial condition, results of operations or cash flows. Customs Duty Audits. The Company imports both raw materials and finished garments into all of its operating regions and as such, is subject to numerous countries complex customs laws and regulations with respect to its import and export activity. The Company is currently undergoing audit assessments and the related legal appeal processes with various customs authorities. While the Company is vigorously defending its position and does not believe any of the claims for customs duty and related charges have merit, the ultimate resolution of these assessments and legal proceedings are subject to risk and uncertainty. |
Dividend |
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May 26, 2019 | |
Dividends [Abstract] | |
DIVIDEND | DIVIDEND In January 2019, the Company's Board of Directors declared two cash dividends of $55 million each. The first dividend was paid in the first quarter of 2019. The second dividend will be paid in the fourth quarter of 2019 to the holders of record of the Company's Class A common stock and Class B common stock at the close of business on October 5, 2019, and was recorded in "Other accrued liabilities" in the Company's consolidated balance sheets. The Company does not have an established 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 Company's financial condition and compliance with the terms of the Company's debt agreements. |
Accumulated Other Comprehensive Loss |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE LOSS | ACCUMULATED OTHER COMPREHENSIVE LOSS The following is a summary of the components of "Accumulated other comprehensive loss," net of related income taxes:
Refer to Note 3 for insignificant amounts reclassified out of "Accumulated other comprehensive loss" into net income related to the Company's derivative instruments. Other insignificant amounts that pertain to the Company's pension and postretirement benefit plans were also reclassified out of "Accumulated other comprehensive loss" into "Other Income, net" in the Company's consolidated statements of income. |
Net Revenues |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Revenues | NET REVENUES Disaggregated Revenue The table below provides the Company's revenues disaggregated by segment and channel.
Wholesale channel revenues includes sales through third-party retailers such as department stores, specialty retailers, leading third-party e-commerce sites and franchise locations dedicated to the Company's brands. The Company also sells products directly to consumers, which are reflected in the direct-to-consumer ("DTC") channel, through a variety of formats, including company-operated mainline and outlet stores, company-operated e-commerce sites and select shop-in-shops located in department stores and other third-party retail locations. Revenue transactions generally comprise a single performance obligation which consists of the sale of products to customers either through wholesale or direct-to-consumer channels. The Company satisfies the performance obligation and records revenues when transfer of control has passed to the customer, based on the terms of sale. Transfer of control passes to wholesale customers upon shipment or upon receipt depending on the agreement with the customer. Within the Company's DTC channel, control generally transfers to the customer at the time of sale within company-operated retail stores and upon delivery to the customer with respect to e-commerce transactions. Licensing revenues are included in the Company's wholesale channel and represent approximately 2% of total revenues which are recognized over time based on the contractual term with variable amounts recognized only when royalties exceed contractual minimum royalty guarantees. Payment terms for wholesale transactions depend on the country of sale or agreement with the customer, and payment is generally required after shipment or receipt by the wholesale customer. Payment is due at the time of sale for retail store and e-commerce transactions. At May 26, 2019, the Company did not have any material contract assets and or contract liabilities recorded in the consolidated balance sheets. Net revenues are recognized when the Company's performance obligations are satisfied upon transfer of control of promised goods. A customer is deemed to have control once they are able to direct the use and receive substantially all of the benefits of the product. This includes a present obligation to payment, the transfer of legal title, physical possession, the risks and rewards of ownership, and customer acceptance. Consideration promised in the Company’s contracts with customers includes a variable amount related to anticipated sales returns, discounts and miscellaneous claims from customers. Estimates of discretionary authorized returns, discounts and claims are based on (1) historical rates, (2) specific identification of outstanding returns not yet received from customers and outstanding discounts and claims and (3) expected returns, discounts and claims not yet finalized with customers. Actual returns, discounts and claims in any future period are inherently uncertain and thus may differ from estimates recorded. The Company treats all shipping to the Company's customers, handling and certain other distribution activities as a fulfillment cost and recognizes these costs as SG&A. Sales and value-added taxes collected from customers and remitted to governmental authorities are presented on a net basis in the consolidated statements of income. |
Other Income, Net |
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Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OTHER INCOME, NET | OTHER INCOME, NET The following table summarizes significant components of "Other income, net":
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Income Taxes |
6 Months Ended |
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May 26, 2019 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the "Tax Act"), which significantly changed U.S. tax law. The Tax Act lowered the Company’s U.S. statutory federal income tax rate from 35% to 21% effective on November 26, 2018. Beginning the first quarter of 2019, the Company's effective tax rate reflected a provision to tax Global Intangible Low-Taxed Income ("GILTI") of foreign subsidiaries and a tax benefit for Foreign Derived Intangible Income ("FDII"). The Company accounted for GILTI in the period in which it is incurred. The Company's effective income tax rate was 15.8% for the six months ended May 26, 2019, compared to 74.0% for the same prior-year period. The decrease in the effective tax rate in 2019 as compared to 2018 was primarily driven by a 61% one-time tax charge in 2018 related to the impact of the Tax Act. Of the impact, 44% is due to remeasurement of deferred tax assets and liabilities and 17% is related to transition charges on undistributed foreign earnings. |
Earnings Per Share Attributable to Common Stockholders |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share Attributable to Common Stockholders | EARNINGS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS Basic earnings per share attributable to common stockholders is calculated by dividing net income attributable to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings per share attributable to common stockholders adjusts the basic earnings per share attributable to common stockholders and the weighted-average number of common shares outstanding for the potentially dilutive impact of RSUs and stock appreciation rights using the treasury stock method. The following table sets forth the computation of the Company's basic and diluted earnings per share:
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Related Parties |
6 Months Ended |
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May 26, 2019 | |
Related Party Transactions [Abstract] | |
RELATED PARTIES | RELATED PARTIES Charles V. Bergh, President and Chief Executive Officer, Peter E. Haas Jr., a director of the Company, and Marc Rosen, Executive Vice President and President of Direct-to-Consumer, are board members of the Levi Strauss Foundation, which is not a consolidated entity of the Company. Seth R. Jaffe, Executive Vice President and General Counsel, is Vice President of the Levi Strauss Foundation. During the three and six months ended May 26, 2019, the Company donated $0.4 million and $8.9 million, respectively, to the Levi Strauss Foundation as compared to $0.4 million and $6.9 million for the same prior-year periods. |
Business Segment Information |
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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. The Company considers its chief executive officer to be the Company’s chief operating decision maker. The Company’s 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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Significant Accounting Policies (Policies) |
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May 26, 2019 | |||||
Accounting Policies [Abstract] | |||||
Basis of accounting | 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. |
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Consolidated entities policy | The unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions have been eliminated. |
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Fiscal period | 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 2019 and 2018 consists of 13 weeks. All references to years and quarters relate to fiscal years and quarters rather than calendar years and quarters. |
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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. |
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New accounting pronouncements | 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 and footnote disclosures, from those disclosed in the Prospectus, except for the following: First Quarter of 2020
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Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of New Accounting Pronouncements and Changes in Accounting Principles | The following table presents the related effect of the adoption of Topic 606 on the Consolidated Balance Sheets:
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Fair Value of Financial Instruments (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial assets and liabilities carried at fair value | The following table presents the Company’s financial instruments that are carried at fair value:
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Financial liabilities carried at adjusted historical cost | The following table presents the carrying value, including related accrued interest, and estimated fair value of the Company’s financial instruments that are carried at adjusted historical cost:
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Derivative Instruments and Hedging Activities (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying values of derivative instruments and non-derivative instruments | The table below provides data about the carrying values of derivative instruments and non-derivative instruments:
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Offsetting assets and liabilities | 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; however, the Company records the fair value on a gross basis on its consolidated balance sheets based on maturity dates, including those subject to master netting arrangements. The table below presents the gross and net amounts of these contracts recognized on the Company's consolidated balance sheets by type of financial instrument:
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Gains and losses included in AOCI | The table below provides data about the amount of gains and losses related to derivative instruments designated as cash flow hedges and non-derivative instruments designated as net investment hedges included in "Accumulated other comprehensive loss" ("AOCI") on the Company’s consolidated balance sheets:
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Gains and losses included in statements of income | The table below presents the effects of the Company's cash flow hedges of foreign exchange risk contracts on the Consolidated Statements of Income for the three and six months ended May 26, 2019:
The table below provides data about the amount of gains and losses related to derivatives instruments included in "Other income, net" in the Company's consolidated statements of income:
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Debt (Tables) |
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Schedule of long-term and short-term debt instruments | The following table presents the Company's debt:
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Employee Benefit Plans (Tables) |
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Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of defined benefit plans disclosures | The following table summarizes the total net periodic benefit cost for the Company's defined pension plans and postretirement benefit plans:
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Stock-Based Incentive Compensation Plans (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock units award activity | Liability award activity during the six months ended May 26, 2019 was as follows:
Service and performance RSU activity during the six months ended May 26, 2019 was as follows:
|
Accumulated Other Comprehensive Loss (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 26, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accumulated other comprehensive loss | The following is a summary of the components of "Accumulated other comprehensive loss," net of related income taxes:
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Net Revenues (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 26, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue | The table below provides the Company's revenues disaggregated by segment and channel.
|
Other Income, Net (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 26, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of other nonoperating income (expense) | The following table summarizes significant components of "Other income, net":
_____________
|
Earnings Per Share Attributable to Common Stockholders (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 26, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The following table sets forth the computation of the Company's basic and diluted earnings per share:
|
Business Segment Information (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 26, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Operating Profit (Loss) from Segments to Consolidated | Business segment information for the Company is as follows:
|
Derivative Instruments and Hedging Activities-Realized & Unrealized (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
May 26, 2019 |
May 27, 2018 |
May 26, 2019 |
May 27, 2018 |
|
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Cash flow hedges expected to be reclassified from AOCI into net income within next 12 months | $ 3,800 | $ 3,800 | ||
Revenues [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of Gain (Loss) on Cash Flow Hedge Activity | (1,985) | (2,444) | ||
Cost of Goods Sold [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of Gain (Loss) on Cash Flow Hedge Activity | 1,822 | 3,161 | ||
Forward foreign exchange contracts [Member] | Other Income [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Realized | 3,147 | $ (7,845) | 7,760 | $ (18,148) |
Unrealized | 1,115 | 21,556 | (9,637) | 15,772 |
Total | $ 4,262 | $ 13,711 | $ (1,877) | $ (2,376) |
Debt-Table (Details) - USD ($) $ in Thousands |
May 26, 2019 |
Nov. 25, 2018 |
---|---|---|
Schedule of Long-term and Short-term Debt Instruments [Line Items] | ||
Long-term debt | $ 1,011,119 | $ 1,020,219 |
Short-term debt | 11,481 | 31,935 |
Long-term and short-term debt | 1,022,600 | 1,052,154 |
5.00% Senior Notes, Due 2025 [Member] | Senior notes [Member] | ||
Schedule of Long-term and Short-term Debt Instruments [Line Items] | ||
Long-term debt | $ 486,587 | 485,605 |
Stated interest rate | 5.00% | |
3.375% Senior Notes Due 2027 [Member] | Senior notes [Member] | ||
Schedule of Long-term and Short-term Debt Instruments [Line Items] | ||
Long-term debt | $ 524,532 | 534,614 |
Stated interest rate | 3.375% | |
Short-term borrowings [Member] | ||
Schedule of Long-term and Short-term Debt Instruments [Line Items] | ||
Short-term debt | $ 11,481 | $ 31,935 |
Debt-Textuals (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
May 26, 2019 |
May 27, 2018 |
May 26, 2019 |
May 27, 2018 |
|
Debt Instruments [Line Items] | ||||
Weighted-average interest rate | 5.32% | 5.19% | 5.27% | 5.00% |
Senior revolving credit facility [Member] | ||||
Debt Instruments [Line Items] | ||||
Unused availability | $ 805.6 | $ 805.6 | ||
Total availability | 837.0 | 837.0 | ||
Letters of credit and other credit usage | $ 31.4 | $ 31.4 |
Employee Benefit Plans (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
May 26, 2019 |
May 27, 2018 |
May 26, 2019 |
May 27, 2018 |
|
Net periodic benefit cost: | ||||
Net periodic benefit cost | $ 4,909 | $ 1,692 | $ 9,779 | $ 3,467 |
Pension Benefits [Member] | ||||
Net periodic benefit cost: | ||||
Net periodic benefit cost | 4,016 | 766 | 7,993 | 1,615 |
Postretirement Benefits [Member] | ||||
Net periodic benefit cost: | ||||
Net periodic benefit cost | $ 893 | $ 926 | $ 1,786 | $ 1,852 |
Dividend (Details) $ in Millions |
1 Months Ended |
---|---|
Jan. 31, 2019
USD ($)
installment
| |
Dividends [Abstract] | |
Number of dividend installments declared | installment | 2 |
Dividend installments | $ | $ 55 |
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands |
May 26, 2019 |
Nov. 25, 2018 |
May 27, 2018 |
---|---|---|---|
Equity [Abstract] | |||
Pension and postretirement benefits | $ (223,860) | $ (229,023) | $ (227,464) |
Derivative instruments | (28,622) | (39,887) | (51,114) |
Foreign currency translation losses | (153,103) | (149,318) | (124,578) |
Unrealized gains on marketable securities | 3,885 | 2,948 | 4,175 |
Accumulated other comprehensive loss | (401,700) | (415,280) | (398,981) |
Accumulated other comprehensive income attributable to noncontrolling interest | 9,556 | 9,304 | 9,638 |
Accumulated other comprehensive loss attributable to Levi Strauss & Co. | $ (411,256) | $ (424,584) | $ (408,619) |
Other Income, Net (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
May 26, 2019 |
May 27, 2018 |
May 26, 2019 |
May 27, 2018 |
|
Other Income and Expenses [Abstract] | ||||
Foreign exchange management gains (losses) | $ 4,261 | $ 13,711 | $ (1,877) | $ (2,376) |
Foreign currency transaction (losses) gains | (5,584) | (2,698) | (2,963) | 619 |
Interest income | 3,647 | 1,401 | 7,658 | 3,830 |
Investment income | 6 | 0 | 1,013 | 428 |
Other, net(2) | 836 | 481 | (2,311) | (6) |
Total other income, net(2) | $ 3,166 | $ 12,895 | $ 1,520 | $ 2,495 |
Income Taxes (Details) |
6 Months Ended | |
---|---|---|
May 26, 2019 |
May 27, 2018 |
|
Income Tax Disclosure [Abstract] | ||
Effective income tax rate | 15.80% | 74.00% |
One-time tax charge | 61.00% | |
Remeasurement of deferred tax assets and liabilities | 44.00% | |
Transition charges on undistributed foreign earnings | 17.00% |
Earnings Per Share Attributable to Common Stockholders - Schedule of Computation of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
May 26, 2019 |
May 27, 2018 |
May 26, 2019 |
May 27, 2018 |
|
Numerator: | ||||
Net income (loss) attributable to Levi Strauss & Co. | $ 28,230 | $ 74,932 | $ 174,807 | $ 55,920 |
Denominator: | ||||
Weighted-average common shares outstanding - basic (in shares) | 389,518,461 | 377,132,162 | 383,278,398 | 376,384,657 |
Dilutive effect of stock awards (in shares) | 19,814,536 | 10,632,418 | 18,127,013 | 10,745,467 |
Weighted-average common shares outstanding - diluted (in shares) | 409,332,997 | 387,764,580 | 401,405,411 | 387,130,124 |
Earnings per common share attributable to common stockholders: | ||||
Basic (usd per share) | $ 0.07 | $ 0.20 | $ 0.46 | $ 0.15 |
Diluted (usd per share) | $ 0.07 | $ 0.19 | $ 0.44 | $ 0.14 |
Anti-dilutive securities excluded from calculation of diluted earnings per share attributable to common stockholders (in shares) | 0 | 2,817,830 | 0 | 7,564,301 |
Related Parties (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
May 26, 2019 |
May 27, 2018 |
May 26, 2019 |
May 27, 2018 |
|
Levi Strauss Foundation [Member] | ||||
Related Party Transaction [Line Items] | ||||
Related Party Donations | $ 0.4 | $ 0.4 | $ 8.9 | $ 6.9 |
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