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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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DELAWARE
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94-0905160
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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Large accelerated filer
¨
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Accelerated filer
¨
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Non-accelerated filer
þ
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Smaller reporting company
¨
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(Do not check if a smaller reporting company)
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Page
Number
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Item 1.
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CONSOLIDATED FINANCIAL STATEMENTS
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(Unaudited)
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August 24,
2014 |
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November 24,
2013 |
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(Dollars in thousands)
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||||||
ASSETS
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|||||||
Current Assets:
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||||
Cash and cash equivalents
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$
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367,360
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$
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489,258
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Trade receivables, net of allowance for doubtful accounts of $15,659 and $18,264
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441,163
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446,671
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Inventories:
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Raw materials
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4,229
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3,361
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Work-in-process
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6,000
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6,597
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Finished goods
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712,110
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593,909
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Total inventories
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722,339
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603,867
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Deferred tax assets, net
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213,055
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187,836
|
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Other current assets
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111,814
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112,082
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Total current assets
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1,855,731
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1,839,714
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Property, plant and equipment, net of accumulated depreciation of $785,017 and $775,933
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396,806
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439,861
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Goodwill
|
240,944
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241,228
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Other intangible assets, net
|
46,823
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49,149
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Non-current deferred tax assets, net
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416,504
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448,839
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Other non-current assets
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101,550
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108,627
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Total assets
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$
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3,058,358
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$
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3,127,418
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LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY
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|||||||
Current Liabilities:
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Short-term debt
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$
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130,243
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$
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41,861
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Accounts payable
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262,385
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254,516
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Accrued salaries, wages and employee benefits
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157,717
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209,966
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Restructuring liabilities
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37,834
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—
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Accrued interest payable
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28,092
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5,346
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Accrued income taxes
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8,954
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11,301
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Other accrued liabilities
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220,690
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262,488
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Total current liabilities
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845,915
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785,478
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Long-term debt
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1,296,608
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1,504,016
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Long-term capital leases
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10,568
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10,243
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Postretirement medical benefits
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117,093
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122,248
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Pension liability
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326,047
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326,767
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Long-term employee related benefits
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74,151
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73,386
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Long-term income tax liabilities
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31,596
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30,683
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Other long-term liabilities
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57,697
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61,097
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Total liabilities
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2,759,675
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2,913,918
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Commitments and contingencies
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Temporary equity
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52,877
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38,524
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Stockholders’ Equity:
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Levi Strauss & Co. stockholders’ equity
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||||
Common stock — $.01 par value; 270,000,000 shares authorized; 37,428,224 shares and 37,446,087 shares issued and outstanding
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374
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374
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Additional paid-in capital
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1,909
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7,361
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Retained earnings
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554,021
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475,960
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Accumulated other comprehensive loss
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(312,095
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)
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(312,029
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)
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Total Levi Strauss & Co. stockholders’ equity
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244,209
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171,666
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Noncontrolling interest
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1,597
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3,310
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Total stockholders’ equity
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245,806
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174,976
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Total liabilities, temporary equity and stockholders’ equity
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$
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3,058,358
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$
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3,127,418
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Three Months Ended
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Nine Months Ended
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||||||||||||
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August 24,
2014 |
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August 25,
2013 |
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August 24,
2014 |
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August 25,
2013 |
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(Dollars in thousands)
(Unaudited)
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||||||||||||||
Net revenues
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$
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1,154,129
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$
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1,141,284
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$
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3,365,966
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$
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3,386,860
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Cost of goods sold
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591,926
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568,448
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1,697,105
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1,673,435
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Gross profit
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562,203
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572,836
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1,668,861
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1,713,425
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Selling, general and administrative expenses
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454,712
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454,750
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1,325,546
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1,314,247
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Restructuring, net
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2,371
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—
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79,411
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—
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|
||||
Operating income
|
105,120
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118,086
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263,904
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399,178
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|
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Interest expense
|
(27,179
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)
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(30,903
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)
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(90,318
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)
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(95,943
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)
|
||||
Loss on early extinguishment of debt
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—
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—
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(11,151
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)
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(689
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)
|
||||
Other expense, net
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(5,605
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)
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(10,661
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)
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(7,544
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)
|
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(5,425
|
)
|
||||
Income before income taxes
|
72,336
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|
76,522
|
|
|
154,891
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|
|
297,121
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|
||||
Income tax expense
|
22,536
|
|
|
20,077
|
|
|
44,479
|
|
|
85,592
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|
||||
Net income
|
49,800
|
|
|
56,445
|
|
|
110,412
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|
|
211,529
|
|
||||
Net loss attributable to noncontrolling interest
|
820
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|
630
|
|
|
1,637
|
|
|
715
|
|
||||
Net income attributable to Levi Strauss & Co.
|
$
|
50,620
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$
|
57,075
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$
|
112,049
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$
|
212,244
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Three Months Ended
|
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Nine Months Ended
|
||||||||||||
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August 24,
2014 |
|
August 25,
2013 |
|
August 24,
2014 |
|
August 25,
2013 |
||||||||
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(Dollars in thousands)
(Unaudited)
|
||||||||||||||
Net income
|
$
|
49,800
|
|
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$
|
56,445
|
|
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$
|
110,412
|
|
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$
|
211,529
|
|
Other comprehensive income (loss), net of related income taxes:
|
|
|
|
|
|
|
|
||||||||
Pension and postretirement benefits
|
2,339
|
|
|
3,718
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|
|
6,857
|
|
|
10,826
|
|
||||
Net investment hedge gains (losses)
|
3,644
|
|
|
(8,329
|
)
|
|
74
|
|
|
(5,928
|
)
|
||||
Foreign currency translation (losses) gains
|
(7,917
|
)
|
|
9,823
|
|
|
(7,856
|
)
|
|
1,650
|
|
||||
Unrealized gain (loss) on marketable securities
|
291
|
|
|
(171
|
)
|
|
783
|
|
|
(541
|
)
|
||||
Total other comprehensive (loss) income
|
(1,643
|
)
|
|
5,041
|
|
|
(142
|
)
|
|
6,007
|
|
||||
Comprehensive income
|
48,157
|
|
|
61,486
|
|
|
110,270
|
|
|
217,536
|
|
||||
Comprehensive loss attributable to noncontrolling interest
|
873
|
|
|
451
|
|
|
1,713
|
|
|
1,644
|
|
||||
Comprehensive income attributable to Levi Strauss & Co.
|
$
|
49,030
|
|
|
$
|
61,937
|
|
|
$
|
111,983
|
|
|
$
|
219,180
|
|
|
Nine Months Ended
|
||||||
|
August 24,
2014 |
|
August 25,
2013 |
||||
|
(Dollars in thousands)
(Unaudited)
|
||||||
Cash Flows from Operating Activities:
|
|
|
|
||||
Net income
|
$
|
110,412
|
|
|
$
|
211,529
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
81,119
|
|
|
86,600
|
|
||
Asset impairments
|
3,858
|
|
|
1,917
|
|
||
Gain on disposal of assets
|
(66
|
)
|
|
(2,120
|
)
|
||
Unrealized foreign exchange losses
|
5,906
|
|
|
323
|
|
||
Realized (gain) loss on settlement of forward foreign exchange contracts not designated for hedge accounting
|
(3,358
|
)
|
|
2,547
|
|
||
Employee benefit plans’ amortization from accumulated other comprehensive loss
|
11,192
|
|
|
17,478
|
|
||
Employee benefit plans’ curtailment gain, net
|
—
|
|
|
(815
|
)
|
||
Noncash restructuring charges
|
3,386
|
|
|
—
|
|
||
Noncash loss on extinguishment of debt
|
3,170
|
|
|
689
|
|
||
Amortization of deferred debt issuance costs
|
2,960
|
|
|
3,232
|
|
||
Stock-based compensation
|
9,305
|
|
|
6,303
|
|
||
Allowance for doubtful accounts
|
531
|
|
|
2,394
|
|
||
Change in operating assets and liabilities:
|
|
|
|
||||
Trade receivables
|
4,190
|
|
|
95,373
|
|
||
Inventories
|
(119,209
|
)
|
|
(87,434
|
)
|
||
Other current assets
|
(5,895
|
)
|
|
6,989
|
|
||
Other non-current assets
|
(5,035
|
)
|
|
873
|
|
||
Accounts payable and other accrued liabilities
|
(7,631
|
)
|
|
(42,640
|
)
|
||
Restructuring liabilities
|
39,759
|
|
|
—
|
|
||
Income tax liabilities
|
10,590
|
|
|
37,660
|
|
||
Accrued salaries, wages and employee benefits and long-term employee related benefits
|
(61,358
|
)
|
|
(75,322
|
)
|
||
Other long-term liabilities
|
(1,435
|
)
|
|
8,845
|
|
||
Other, net
|
(1,102
|
)
|
|
(605
|
)
|
||
Net cash provided by operating activities
|
81,289
|
|
|
273,816
|
|
||
Cash Flows from Investing Activities:
|
|
|
|
||||
Purchases of property, plant and equipment
|
(50,461
|
)
|
|
(63,002
|
)
|
||
Proceeds from sale of assets
|
1,471
|
|
|
2,168
|
|
||
Proceeds (payments) on settlement of forward foreign exchange contracts not designated for hedge accounting
|
3,358
|
|
|
(2,547
|
)
|
||
Acquisitions, net of cash acquired
|
(318
|
)
|
|
—
|
|
||
Net cash used for investing activities
|
(45,950
|
)
|
|
(63,381
|
)
|
||
Cash Flows from Financing Activities:
|
|
|
|
||||
Proceeds from issuance of long-term debt
|
—
|
|
|
140,000
|
|
||
Repayments of long-term debt and capital leases
|
(207,789
|
)
|
|
(326,198
|
)
|
||
Proceeds from senior revolving credit facility
|
165,000
|
|
|
—
|
|
||
Repayments of senior revolving credit facility
|
(75,000
|
)
|
|
—
|
|
||
Proceeds from short-term credit facilities
|
18,776
|
|
|
42,694
|
|
||
Repayments of short-term credit facilities
|
(18,793
|
)
|
|
(50,409
|
)
|
||
Other short-term borrowings, net
|
(2,932
|
)
|
|
(6,100
|
)
|
||
Debt issuance costs
|
(2,684
|
)
|
|
(2,557
|
)
|
||
Restricted cash
|
617
|
|
|
123
|
|
||
Repurchase of common stock
|
(5,188
|
)
|
|
(365
|
)
|
||
Excess tax benefits from stock-based compensation
|
799
|
|
|
165
|
|
||
Dividend to stockholders
|
(30,003
|
)
|
|
(25,076
|
)
|
||
Net cash used for financing activities
|
(157,197
|
)
|
|
(227,723
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(40
|
)
|
|
(6,518
|
)
|
||
Net decrease in cash and cash equivalents
|
(121,898
|
)
|
|
(23,806
|
)
|
||
Beginning cash and cash equivalents
|
489,258
|
|
|
406,134
|
|
||
Ending cash and cash equivalents
|
$
|
367,360
|
|
|
$
|
382,328
|
|
|
|
|
|
||||
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Cash paid during the period for:
|
|
|
|
||||
Interest
|
$
|
61,994
|
|
|
$
|
61,209
|
|
Income taxes
|
41,598
|
|
|
26,441
|
|
•
|
In June 2014, the FASB issued Accounting Standards Update No. 2014-12,
"Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide that a Performance Target Could be Achieved after the Requisite Service Period,"
("ASU 2014-12"). ASU 2014-12 requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The Company does not anticipate that the adoption of this standard will have a material impact on its consolidated financial statements.
|
•
|
In May 2014, the FASB issued Accounting Standards Update No. 2014-09,
"Revenue from Contracts with Customers (Topic 606),"
("ASU 2014-09"). ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. The Company is currently assessing the impact that adopting this new accounting guidance will have on its consolidated financial statements and footnote disclosures.
|
|
August 24, 2014
|
|
November 24, 2013
|
||||||||||||||||||||
|
|
|
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
|
$
|
25,544
|
|
|
$
|
25,544
|
|
|
$
|
—
|
|
|
$
|
23,752
|
|
|
$
|
23,752
|
|
|
$
|
—
|
|
Forward foreign exchange contracts, net
(3)
|
3,661
|
|
|
—
|
|
|
3,661
|
|
|
7,145
|
|
|
—
|
|
|
7,145
|
|
||||||
Total
|
$
|
29,205
|
|
|
$
|
25,544
|
|
|
$
|
3,661
|
|
|
$
|
30,897
|
|
|
$
|
23,752
|
|
|
$
|
7,145
|
|
Financial liabilities carried at fair value
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Forward foreign exchange contracts, net
(3)
|
$
|
9,513
|
|
|
$
|
—
|
|
|
$
|
9,513
|
|
|
$
|
2,335
|
|
|
$
|
—
|
|
|
$
|
2,335
|
|
(1)
|
Fair values estimated using Level 1 inputs are inputs which consist of quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Rabbi trust assets consist of a diversified portfolio of equity, fixed income and other securities.
|
(2)
|
Fair values estimated using Level 2 inputs are inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly and include among other things, quoted prices for similar assets or liabilities in markets that are active or inactive as well as inputs other than quoted prices that are observable. For forward foreign exchange contracts, inputs include foreign currency exchange and interest rates and, where applicable, credit default swap prices.
|
(3)
|
The Company’s over-the-counter forward foreign exchange contracts are subject to International Swaps and Derivatives Association, Inc. master agreements. These agreements permit the net-settlement of these contracts on a per-institution basis.
|
|
August 24, 2014
|
|
November 24, 2013
|
||||||||||||
|
Carrying
Value
|
|
Estimated Fair Value
(1)
|
|
Carrying
Value
|
|
Estimated Fair Value
(1)
|
||||||||
|
(Dollars in thousands)
|
||||||||||||||
Financial liabilities carried at adjusted historical cost
|
|
|
|
|
|
|
|
||||||||
Senior revolving credit facility
|
$
|
90,070
|
|
|
$
|
90,070
|
|
|
$
|
—
|
|
|
$
|
—
|
|
4.25% Yen-denominated Eurobonds due 2016
|
39,045
|
|
|
40,706
|
|
|
39,659
|
|
|
38,523
|
|
||||
7.75% Euro senior notes due 2018
|
203,577
|
|
|
212,890
|
|
|
405,304
|
|
|
432,098
|
|
||||
7.625% senior notes due 2020
|
536,120
|
|
|
572,870
|
|
|
526,112
|
|
|
577,956
|
|
||||
6.875% senior notes due 2022
|
545,320
|
|
|
591,368
|
|
|
537,447
|
|
|
588,275
|
|
||||
Short-term borrowings
|
40,464
|
|
|
40,464
|
|
|
41,976
|
|
|
41,976
|
|
||||
Total
|
$
|
1,454,596
|
|
|
$
|
1,548,368
|
|
|
$
|
1,550,498
|
|
|
$
|
1,678,828
|
|
(1)
|
Fair value estimate incorporates mid-market price quotes.
|
|
August 24, 2014
|
|
November 24, 2013
|
||||||||||||||||||||
|
Assets
|
|
(Liabilities)
|
|
Derivative Net Carrying Value
|
|
Assets
|
|
(Liabilities)
|
|
Derivative Net Carrying Value
|
||||||||||||
|
Carrying
Value
|
|
Carrying
Value
|
|
|
Carrying
Value
|
|
Carrying
Value
|
|
||||||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||||||
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Forward foreign exchange contracts
|
$
|
4,127
|
|
|
$
|
(466
|
)
|
|
$
|
3,661
|
|
|
$
|
11,145
|
|
|
$
|
(4,000
|
)
|
|
$
|
7,145
|
|
Forward foreign exchange contracts
|
3,639
|
|
|
(13,152
|
)
|
|
(9,513
|
)
|
|
880
|
|
|
(3,215
|
)
|
|
(2,335
|
)
|
||||||
Total
|
$
|
7,766
|
|
|
$
|
(13,618
|
)
|
|
|
|
$
|
12,025
|
|
|
$
|
(7,215
|
)
|
|
|
||||
Non-derivatives designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
4.25% Yen-denominated Eurobonds due 2016
|
$
|
—
|
|
|
$
|
(15,022
|
)
|
|
|
|
$
|
—
|
|
|
$
|
(20,564
|
)
|
|
|
||||
7.75% Euro senior notes due 2018
|
—
|
|
|
(199,200
|
)
|
|
|
|
—
|
|
|
(404,430
|
)
|
|
|
||||||||
Total
|
$
|
—
|
|
|
$
|
(214,222
|
)
|
|
|
|
$
|
—
|
|
|
$
|
(424,994
|
)
|
|
|
|
August 24, 2014
|
|
November 24, 2013
|
||||||||||||||||||||
|
Gross Amounts of Recognized Assets / (Liabilities)
|
|
Gross Amounts Offset in the Statement of Financial Position
|
|
Net Amounts of Assets / (Liabilities) Presented in the Statement of Financial Position
|
|
Gross Amounts of Recognized Assets / (Liabilities)
|
|
Gross Amounts Offset in the Statement of Financial Position
|
|
Net Amounts of Assets / (Liabilities) Presented in the Statement of Financial Position
|
||||||||||||
|
|
|
|
|
|||||||||||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||||||
Over-the-counter forward foreign exchange contracts
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Financial assets
|
$
|
4,688
|
|
|
$
|
(4,105
|
)
|
|
$
|
583
|
|
|
$
|
8,600
|
|
|
$
|
(4,880
|
)
|
|
$
|
3,720
|
|
Financial liabilities
|
(11,078
|
)
|
|
4,105
|
|
|
(6,973
|
)
|
|
(5,855
|
)
|
|
4,880
|
|
|
(975
|
)
|
||||||
Total
|
|
|
|
|
$
|
(6,390
|
)
|
|
|
|
|
|
$
|
2,745
|
|
||||||||
Embedded derivative contracts
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Financial assets
|
$
|
3,078
|
|
|
$
|
—
|
|
|
$
|
3,078
|
|
|
$
|
3,425
|
|
|
$
|
—
|
|
|
$
|
3,425
|
|
Financial liabilities
|
(2,540
|
)
|
|
—
|
|
|
(2,540
|
)
|
|
(1,360
|
)
|
|
—
|
|
|
(1,360
|
)
|
||||||
Total
|
|
|
|
|
$
|
538
|
|
|
|
|
|
|
$
|
2,065
|
|
|
Gain or (Loss)
Recognized in AOCI
(Effective Portion)
|
|
Gain or (Loss) Recognized in Other
Expense, net (Ineffective
Portion and Amount Excluded from
Effectiveness Testing)
|
||||||||||||||||||||
|
As of
|
|
As of
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||
August 24,
2014 |
November 24,
2013 |
August 24,
2014 |
|
August 25,
2013 |
|
August 24,
2014 |
|
August 25,
2013 |
|||||||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||||||
Forward foreign exchange contracts
|
$
|
4,637
|
|
|
$
|
4,637
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
4.25% Yen-denominated Eurobonds due 2016
|
(20,727
|
)
|
|
(21,161
|
)
|
|
$
|
490
|
|
|
$
|
(661
|
)
|
|
$
|
594
|
|
|
$
|
3,243
|
|
||
7.75% Euro senior notes due 2018
|
(27,676
|
)
|
|
(27,361
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Cumulative income taxes
|
17,140
|
|
|
17,186
|
|
|
|
|
|
|
|
|
|
||||||||||
Total
|
$
|
(26,626
|
)
|
|
$
|
(26,699
|
)
|
|
|
|
|
|
|
|
|
|
Gain or (Loss)
|
||||||||||||||
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
August 24,
2014 |
|
August 25,
2013 |
|
August 24,
2014 |
|
August 25,
2013 |
||||||||
|
(Dollars in thousands)
|
||||||||||||||
Forward foreign exchange contracts:
|
|
|
|
|
|
|
|
||||||||
Realized
|
$
|
(3,411
|
)
|
|
$
|
3,650
|
|
|
$
|
3,358
|
|
|
$
|
(2,547
|
)
|
Unrealized
|
1,882
|
|
|
2,664
|
|
|
(10,461
|
)
|
|
8,833
|
|
||||
Total
|
$
|
(1,529
|
)
|
|
$
|
6,314
|
|
|
$
|
(7,103
|
)
|
|
$
|
6,286
|
|
|
|
August 24,
2014 |
|
November 24,
2013 |
|
||||
|
|
(Dollars in thousands)
|
|
||||||
|
|
|
|
||||||
|
Long-term debt
|
|
|
|
|
||||
|
Unsecured:
|
|
|
|
|
||||
|
4.25% Yen-denominated Eurobonds due 2016
|
$
|
38,517
|
|
|
$
|
39,545
|
|
|
|
7.75% Euro senior notes due 2018
|
199,200
|
|
|
404,430
|
|
|
||
|
7.625% senior notes due 2020
|
525,000
|
|
|
525,000
|
|
|
||
|
6.875% senior notes due 2022
|
533,891
|
|
|
535,041
|
|
|
||
|
Total unsecured
|
1,296,608
|
|
|
1,504,016
|
|
|
||
|
Total long-term debt
|
$
|
1,296,608
|
|
|
$
|
1,504,016
|
|
|
|
Short-term debt
|
|
|
|
|
||||
|
Secured:
|
|
|
|
|
||||
|
Senior revolving credit facility
|
$
|
90,000
|
|
|
$
|
—
|
|
|
|
Unsecured:
|
|
|
|
|
||||
|
Short-term borrowings
|
40,243
|
|
|
41,861
|
|
|
||
|
Total short-term debt
|
$
|
130,243
|
|
|
$
|
41,861
|
|
|
|
Total long-term and short-term debt
|
$
|
1,426,851
|
|
|
$
|
1,545,877
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Pension Benefits
|
|
Postretirement Benefits
|
||||||||||||
|
Three Months Ended
|
|
Three Months Ended
|
||||||||||||
|
August 24,
2014 |
|
August 25,
2013 |
|
August 24,
2014 |
|
August 25,
2013 |
||||||||
|
(Dollars in thousands)
|
||||||||||||||
Net periodic benefit cost:
|
|
|
|
|
|
|
|
||||||||
Service cost
|
$
|
2,106
|
|
|
$
|
2,052
|
|
|
$
|
63
|
|
|
$
|
94
|
|
Interest cost
|
13,775
|
|
|
12,918
|
|
|
1,292
|
|
|
1,239
|
|
||||
Expected return on plan assets
|
(13,909
|
)
|
|
(14,105
|
)
|
|
—
|
|
|
—
|
|
||||
Amortization of prior service benefit
|
—
|
|
|
(24
|
)
|
|
(1
|
)
|
|
(122
|
)
|
||||
Amortization of actuarial loss
|
2,692
|
|
|
3,810
|
|
|
1,063
|
|
|
1,691
|
|
||||
Curtailment gain
|
(1,790
|
)
|
|
(305
|
)
|
|
—
|
|
|
—
|
|
||||
Net settlement loss
|
—
|
|
|
415
|
|
|
—
|
|
|
—
|
|
||||
Net periodic benefit cost
|
2,874
|
|
|
4,761
|
|
|
2,417
|
|
|
2,902
|
|
||||
Changes in accumulated other comprehensive loss:
|
|
|
|
|
|
|
|
||||||||
Amortization of prior service benefit
|
—
|
|
|
24
|
|
|
1
|
|
|
122
|
|
||||
Amortization of actuarial loss
|
(2,692
|
)
|
|
(3,810
|
)
|
|
(1,063
|
)
|
|
(1,691
|
)
|
||||
Curtailment loss
|
(1
|
)
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
||||
Net settlement loss
|
—
|
|
|
(406
|
)
|
|
—
|
|
|
—
|
|
||||
Total recognized in accumulated other comprehensive loss
|
(2,693
|
)
|
|
(4,204
|
)
|
|
(1,062
|
)
|
|
(1,569
|
)
|
||||
Total recognized in net periodic benefit cost and accumulated other comprehensive loss
|
$
|
181
|
|
|
$
|
557
|
|
|
$
|
1,355
|
|
|
$
|
1,333
|
|
|
Pension Benefits
|
|
Postretirement Benefits
|
||||||||||||
|
Nine Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
August 24,
2014 |
|
August 25,
2013 |
|
August 24,
2014 |
|
August 25,
2013 |
||||||||
|
(Dollars in thousands)
|
||||||||||||||
Net periodic benefit cost:
|
|
|
|
|
|
|
|
||||||||
Service cost
|
$
|
6,431
|
|
|
$
|
6,548
|
|
|
$
|
192
|
|
|
$
|
282
|
|
Interest cost
|
41,312
|
|
|
38,978
|
|
|
3,907
|
|
|
3,718
|
|
||||
Expected return on plan assets
|
(41,788
|
)
|
|
(42,065
|
)
|
|
—
|
|
|
—
|
|
||||
Amortization of prior service benefit
|
(36
|
)
|
|
(61
|
)
|
|
(4
|
)
|
|
(366
|
)
|
||||
Amortization of actuarial loss
|
8,097
|
|
|
12,241
|
|
|
3,139
|
|
|
5,074
|
|
||||
Curtailment loss (gain)
|
2,653
|
|
|
(815
|
)
|
|
733
|
|
|
—
|
|
||||
Net settlement (gain) loss
|
(73
|
)
|
|
1,044
|
|
|
—
|
|
|
—
|
|
||||
Net periodic benefit cost
|
16,596
|
|
|
15,870
|
|
|
7,967
|
|
|
8,708
|
|
||||
Changes in accumulated other comprehensive loss:
|
|
|
|
|
|
|
|
||||||||
Amortization of prior service benefit
|
36
|
|
|
61
|
|
|
4
|
|
|
366
|
|
||||
Amortization of actuarial loss
|
(8,097
|
)
|
|
(12,241
|
)
|
|
(3,139
|
)
|
|
(5,074
|
)
|
||||
Curtailment gain
|
114
|
|
|
497
|
|
|
—
|
|
|
—
|
|
||||
Net settlement gain (loss)
|
4
|
|
|
(590
|
)
|
|
—
|
|
|
—
|
|
||||
Total recognized in accumulated other comprehensive loss
|
(7,943
|
)
|
|
(12,273
|
)
|
|
(3,135
|
)
|
|
(4,708
|
)
|
||||
Total recognized in net periodic benefit cost and accumulated other comprehensive loss
|
$
|
8,653
|
|
|
$
|
3,597
|
|
|
$
|
4,832
|
|
|
$
|
4,000
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
August 24,
2014 |
|
August 25,
2013 |
|
August 24,
2014 |
|
August 25,
2013 |
||||||||
|
(Dollars in thousands)
|
||||||||||||||
Restructuring, net:
|
|
|
|
|
|
|
|
||||||||
Severance and employee-related benefits
(1)
|
$
|
2,817
|
|
|
$
|
—
|
|
|
$
|
67,566
|
|
|
$
|
—
|
|
Adjustments to severance and employee-related benefits
|
(1,765
|
)
|
|
—
|
|
|
(4,810
|
)
|
|
—
|
|
||||
Lease and other contract termination costs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Other
(2)
|
3,108
|
|
|
—
|
|
|
13,269
|
|
|
—
|
|
||||
Non-cash pension and postretirement curtailment (gains) losses
(3)
|
(1,789
|
)
|
|
—
|
|
|
3,386
|
|
|
—
|
|
||||
Total
|
$
|
2,371
|
|
|
$
|
—
|
|
|
$
|
79,411
|
|
|
$
|
—
|
|
(1)
|
Severance and employee-related benefits relate to items such as severance, based on separation benefits provided by Company policy or statutory benefit plans, out-placement services and career counseling for employees affected by the global productivity initiative.
|
(2)
|
Other restructuring costs are expensed as incurred and primarily relate to consulting fees and legal expenses associated with exit activities.
|
(3)
|
Non-cash pension and postretirement curtailment gains or losses resulting from the global productivity initiative are included in restructuring charges, with the associated liabilities included in "Pension liability" and "Postretirement medical benefit" in the Company's consolidated balance sheets.
|
|
Three Months Ended August 24, 2014
|
||||||||||||||||||||||
|
Liabilities
|
|
|
|
Adjustments
|
|
|
|
Foreign Currency Fluctuation
|
|
Liabilities
|
||||||||||||
|
May 25,
2014
|
|
Charges
|
|
|
Payments
|
|
|
August 24, 2014
|
||||||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Severance and employee-related benefits
|
$
|
47,376
|
|
|
$
|
2,817
|
|
|
$
|
(1,765
|
)
|
|
$
|
(12,135
|
)
|
|
$
|
(725
|
)
|
|
$
|
35,568
|
|
Lease and other contract termination costs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Other
|
2,373
|
|
|
3,108
|
|
|
—
|
|
|
(2,865
|
)
|
|
—
|
|
|
2,616
|
|
||||||
Total
|
$
|
49,749
|
|
|
$
|
5,925
|
|
|
$
|
(1,765
|
)
|
|
$
|
(15,000
|
)
|
|
$
|
(725
|
)
|
|
$
|
38,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Current portion
|
$
|
49,749
|
|
|
|
|
|
|
|
|
|
|
$
|
37,834
|
|
||||||||
Long-term portion
|
—
|
|
|
|
|
|
|
|
|
|
|
350
|
|
||||||||||
Total
|
$
|
49,749
|
|
|
|
|
|
|
|
|
|
|
$
|
38,184
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Nine Months Ended August 24, 2014
|
||||||||||||||||||||||
|
Liabilities
|
|
|
|
Adjustments
|
|
|
|
Foreign Currency Fluctuation
|
|
Liabilities
|
||||||||||||
|
November 24, 2013
|
|
Charges
|
|
|
Payments
|
|
|
August 24, 2014
|
||||||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Severance and employee-related benefits
|
$
|
—
|
|
|
$
|
67,566
|
|
|
$
|
(4,810
|
)
|
|
$
|
(25,613
|
)
|
|
$
|
(1,575
|
)
|
|
$
|
35,568
|
|
Lease and other contract termination costs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Other
|
—
|
|
|
13,269
|
|
|
—
|
|
|
(10,653
|
)
|
|
—
|
|
|
2,616
|
|
||||||
Total
|
$
|
—
|
|
|
$
|
80,835
|
|
|
$
|
(4,810
|
)
|
|
$
|
(36,266
|
)
|
|
$
|
(1,575
|
)
|
|
$
|
38,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Current portion
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
$
|
37,834
|
|
||||||||
Long-term portion
|
—
|
|
|
|
|
|
|
|
|
|
|
350
|
|
||||||||||
Total
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
$
|
38,184
|
|
|
|
August 24,
2014 |
|
November 24,
2013 |
|
||||
|
|
(Dollars in thousands)
|
|
||||||
|
Pension and postretirement benefits
|
$
|
(219,915
|
)
|
|
$
|
(226,772
|
)
|
|
|
Net investment hedge losses
|
(26,625
|
)
|
|
(26,699
|
)
|
|
||
|
Foreign currency translation losses
|
(58,314
|
)
|
|
(50,458
|
)
|
|
||
|
Unrealized gain on marketable securities
|
2,049
|
|
|
1,266
|
|
|
||
|
Accumulated other comprehensive loss
|
(302,805
|
)
|
|
(302,663
|
)
|
|
||
|
Accumulated other comprehensive income attributable to noncontrolling interest
|
9,290
|
|
|
9,366
|
|
|
||
|
Accumulated other comprehensive loss attributable to Levi Strauss & Co.
|
$
|
(312,095
|
)
|
|
$
|
(312,029
|
)
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
||||||||||||
|
|
August 24,
2014 |
|
August 25,
2013 |
|
August 24,
2014 |
|
August 25,
2013 |
|
||||||||
|
|
(Dollars in thousands)
|
|
||||||||||||||
|
Foreign exchange management (losses) gains
|
$
|
(1,529
|
)
|
|
$
|
6,314
|
|
|
$
|
(7,103
|
)
|
|
$
|
6,286
|
|
|
|
Foreign currency transaction losses
(1)
|
(5,314
|
)
|
|
(18,210
|
)
|
|
(4,389
|
)
|
|
(18,728
|
)
|
|
||||
|
Interest income
|
506
|
|
|
357
|
|
|
1,534
|
|
|
1,138
|
|
|
||||
|
Investment income
|
255
|
|
|
214
|
|
|
562
|
|
|
3,019
|
|
|
||||
|
Other
|
477
|
|
|
664
|
|
|
1,852
|
|
|
2,860
|
|
|
||||
|
Total other expense, net
|
$
|
(5,605
|
)
|
|
$
|
(10,661
|
)
|
|
$
|
(7,544
|
)
|
|
$
|
(5,425
|
)
|
|
(1)
|
Foreign currency transaction gains and losses reflect the impact of foreign currency fluctuation on the Company's foreign currency denominated balances. Losses in 2013 were primarily due to the weakening of various currencies against the U.S. Dollar.
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
August 24,
2014 |
|
August 25,
2013 |
|
August 24,
2014 |
|
August 25,
2013 |
||||||||
|
(Dollars in thousands)
|
||||||||||||||
Net revenues:
|
|
|
|
|
|
|
|
||||||||
Americas
|
$
|
697,467
|
|
|
$
|
710,212
|
|
|
$
|
1,969,030
|
|
|
$
|
2,023,253
|
|
Europe
|
285,983
|
|
|
275,211
|
|
|
847,403
|
|
|
824,915
|
|
||||
Asia
|
170,679
|
|
|
155,861
|
|
|
549,533
|
|
|
538,692
|
|
||||
Total net revenues
|
$
|
1,154,129
|
|
|
$
|
1,141,284
|
|
|
$
|
3,365,966
|
|
|
$
|
3,386,860
|
|
Operating income:
|
|
|
|
|
|
|
|
||||||||
Americas
|
$
|
122,210
|
|
|
$
|
125,228
|
|
|
$
|
342,687
|
|
|
$
|
376,598
|
|
Europe
|
49,587
|
|
|
45,914
|
|
|
159,181
|
|
|
145,549
|
|
||||
Asia
|
17,366
|
|
|
22,666
|
|
|
88,550
|
|
|
104,233
|
|
||||
Regional operating income
|
189,163
|
|
|
193,808
|
|
|
590,418
|
|
|
626,380
|
|
||||
Corporate:
|
|
|
|
|
|
|
|
||||||||
Restructuring
|
2,371
|
|
|
—
|
|
|
79,411
|
|
|
—
|
|
||||
Other corporate staff costs and expenses
|
81,672
|
|
|
75,722
|
|
|
247,103
|
|
|
227,202
|
|
||||
Corporate expenses
|
84,043
|
|
|
75,722
|
|
|
326,514
|
|
|
227,202
|
|
||||
Total operating income
|
105,120
|
|
|
118,086
|
|
|
263,904
|
|
|
399,178
|
|
||||
Interest expense
|
(27,179
|
)
|
|
(30,903
|
)
|
|
(90,318
|
)
|
|
(95,943
|
)
|
||||
Loss on early extinguishment of debt
|
—
|
|
|
—
|
|
|
(11,151
|
)
|
|
(689
|
)
|
||||
Other expense, net
|
(5,605
|
)
|
|
(10,661
|
)
|
|
(7,544
|
)
|
|
(5,425
|
)
|
||||
Income before income taxes
|
$
|
72,336
|
|
|
$
|
76,522
|
|
|
$
|
154,891
|
|
|
$
|
297,121
|
|
Item 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
|
•
|
Net revenues.
Compared to the
third
quarter of
2013
, consolidated net revenues increased on both reported and constant-currency bases by
1%
, primarily reflecting increased sales from our global retail network, partially offset by lower sales at wholesale in the Americas.
|
•
|
Operating income
. Compared to the
third
quarter of
2013
, consolidated operating income decreased by
11%
and operating margin declined to
9%
, primarily reflecting lower gross margin in 2014. Higher advertising investment and the charges associated with the global productivity initiative were partially offset by savings realized from the initiative.
|
•
|
Cash flows.
Cash flows provided by operating activities were approximately
$81 million
for the
nine-month period
in
2014
as compared to
$274 million
for the same period in
2013
; the decrease reflected our lower beginning accounts receivable balance, our higher inventory levels, lower net revenues, and payments related to our global productivity initiative.
|
•
|
Net revenues is primarily comprised of sales of products to wholesale customers, including franchised stores, and direct sales to consumers at our company-operated and online stores and at our company-operated shop-in-shops located within department stores. It includes discounts, allowances for estimated returns and incentives. Net revenues also includes royalties earned from the use of our trademarks by third-party licensees in connection with the manufacturing, advertising and distribution of trademarked products.
|
•
|
Cost of goods sold is primarily comprised of product costs, labor and related overhead, sourcing costs, inbound freight, internal transfers, and the cost of operating our remaining manufacturing facilities, including the related depreciation expense.
|
•
|
Selling costs include, among other things, all occupancy costs and depreciation associated with our company-operated stores and commissions associated with our company-operated shop-in-shops.
|
•
|
We reflect substantially all distribution costs in selling, general and administrative expenses, including costs related to receiving and inspection at distribution centers, warehousing, shipping to our customers, handling, and certain other activities associated with our distribution network.
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||||||||||||||
|
August 24,
2014 |
|
August 25,
2013 |
|
%
Increase
(Decrease)
|
|
August 24,
2014 |
|
August 25,
2013 |
|
August 24,
2014 |
|
August 25,
2013 |
|
%
Increase
(Decrease)
|
|
August 24,
2014 |
|
August 25,
2013 |
||||||||||||||
|
|
|
% of Net
Revenues
|
|
% of Net
Revenues
|
|
|
|
% of Net
Revenues
|
|
% of Net
Revenues
|
||||||||||||||||||||||
|
(Dollars in millions)
|
||||||||||||||||||||||||||||||||
Net revenues
|
$
|
1,154.1
|
|
|
$
|
1,141.3
|
|
|
1.1
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
$
|
3,366.0
|
|
|
$
|
3,386.9
|
|
|
(0.6
|
)%
|
|
100.0
|
%
|
|
100.0
|
%
|
Cost of goods sold
|
591.9
|
|
|
568.5
|
|
|
4.1
|
%
|
|
51.3
|
%
|
|
49.8
|
%
|
|
1,697.1
|
|
|
1,673.5
|
|
|
1.4
|
%
|
|
50.4
|
%
|
|
49.4
|
%
|
||||
Gross profit
|
562.2
|
|
|
572.8
|
|
|
(1.9
|
)%
|
|
48.7
|
%
|
|
50.2
|
%
|
|
1,668.9
|
|
|
1,713.4
|
|
|
(2.6
|
)%
|
|
49.6
|
%
|
|
50.6
|
%
|
||||
Selling, general and administrative expenses
|
454.7
|
|
|
454.7
|
|
|
—
|
|
|
39.4
|
%
|
|
39.8
|
%
|
|
1,325.6
|
|
|
1,314.2
|
|
|
0.9
|
%
|
|
39.4
|
%
|
|
38.8
|
%
|
||||
Restructuring, net
|
2.4
|
|
|
—
|
|
|
—
|
|
|
0.2
|
%
|
|
—
|
|
|
79.4
|
|
|
—
|
|
|
—
|
|
|
2.4
|
%
|
|
—
|
|
||||
Operating income
|
105.1
|
|
|
118.1
|
|
|
(11.0
|
)%
|
|
9.1
|
%
|
|
10.3
|
%
|
|
263.9
|
|
|
399.2
|
|
|
(33.9
|
)%
|
|
7.8
|
%
|
|
11.8
|
%
|
||||
Interest expense
|
(27.2
|
)
|
|
(30.9
|
)
|
|
(12.1
|
)%
|
|
(2.4
|
)%
|
|
(2.7
|
)%
|
|
(90.3
|
)
|
|
(96.0
|
)
|
|
(5.9
|
)%
|
|
(2.7
|
)%
|
|
(2.8
|
)%
|
||||
Loss on early extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11.2
|
)
|
|
(0.7
|
)
|
|
1,518.4
|
%
|
|
(0.3
|
)%
|
|
—
|
|
||||
Other expense, net
|
(5.6
|
)
|
|
(10.7
|
)
|
|
(47.4
|
)%
|
|
(0.5
|
)%
|
|
(0.9
|
)%
|
|
(7.5
|
)
|
|
(5.4
|
)
|
|
39.1
|
%
|
|
(0.2
|
)%
|
|
(0.2
|
)%
|
||||
Income before income taxes
|
72.3
|
|
|
76.5
|
|
|
(5.5
|
)%
|
|
6.3
|
%
|
|
6.7
|
%
|
|
154.9
|
|
|
297.1
|
|
|
(47.9
|
)%
|
|
4.6
|
%
|
|
8.8
|
%
|
||||
Income tax expense
|
22.5
|
|
|
20.1
|
|
|
12.2
|
%
|
|
2.0
|
%
|
|
1.8
|
%
|
|
44.5
|
|
|
85.6
|
|
|
(48.0
|
)%
|
|
1.3
|
%
|
|
2.5
|
%
|
||||
Net income
|
49.8
|
|
|
56.4
|
|
|
(11.8
|
)%
|
|
4.3
|
%
|
|
4.9
|
%
|
|
110.4
|
|
|
211.5
|
|
|
(47.8
|
)%
|
|
3.3
|
%
|
|
6.2
|
%
|
||||
Net loss attributable to noncontrolling interest
|
0.8
|
|
|
0.7
|
|
|
30.2
|
%
|
|
0.1
|
%
|
|
0.1
|
%
|
|
1.6
|
|
|
0.7
|
|
|
129.0
|
%
|
|
—
|
|
|
—
|
|
||||
Net income attributable to Levi Strauss & Co.
|
$
|
50.6
|
|
|
$
|
57.1
|
|
|
(11.3
|
)%
|
|
4.4
|
%
|
|
5.0
|
%
|
|
$
|
112.0
|
|
|
$
|
212.2
|
|
|
(47.2
|
)%
|
|
3.3
|
%
|
|
6.3
|
%
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||||||||
|
|
|
|
|
% Increase
(Decrease)
|
|
|
|
|
|
% Increase
(Decrease)
|
||||||||||||||||
|
August 24,
2014 |
|
August 25,
2013 |
|
As
Reported
|
|
Constant
Currency
|
|
August 24,
2014 |
|
August 25,
2013 |
|
As
Reported
|
|
Constant
Currency
|
||||||||||||
|
(Dollars in millions)
|
||||||||||||||||||||||||||
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Americas
|
$
|
697.5
|
|
|
$
|
710.2
|
|
|
(1.8
|
)%
|
|
(1.5
|
)%
|
|
$
|
1,969.0
|
|
|
$
|
2,023.3
|
|
|
(2.7
|
)%
|
|
(2.1
|
)%
|
Europe
|
286.0
|
|
|
275.2
|
|
|
3.9
|
%
|
|
2.3
|
%
|
|
847.4
|
|
|
824.9
|
|
|
2.7
|
%
|
|
1.0
|
%
|
||||
Asia
|
170.7
|
|
|
155.9
|
|
|
9.5
|
%
|
|
10.9
|
%
|
|
549.6
|
|
|
538.7
|
|
|
2.0
|
%
|
|
6.3
|
%
|
||||
Total net revenues
|
$
|
1,154.2
|
|
|
$
|
1,141.3
|
|
|
1.1
|
%
|
|
1.1
|
%
|
|
$
|
3,366.0
|
|
|
$
|
3,386.9
|
|
|
(0.6
|
)%
|
|
(0.1
|
)%
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||
|
August 24,
2014 |
|
August 25,
2013 |
|
%
Increase
(Decrease)
|
|
August 24,
2014 |
|
August 25,
2013 |
|
%
Increase
(Decrease)
|
||||||||||
|
(Dollars in millions)
|
||||||||||||||||||||
Net revenues
|
$
|
1,154.1
|
|
|
$
|
1,141.3
|
|
|
1.1
|
%
|
|
$
|
3,366.0
|
|
|
$
|
3,386.9
|
|
|
(0.6
|
)%
|
Cost of goods sold
|
591.9
|
|
|
568.5
|
|
|
4.1
|
%
|
|
1,697.1
|
|
|
1,673.5
|
|
|
1.4
|
%
|
||||
Gross profit
|
$
|
562.2
|
|
|
$
|
572.8
|
|
|
(1.9
|
)%
|
|
$
|
1,668.9
|
|
|
$
|
1,713.4
|
|
|
(2.6
|
)%
|
Gross margin
|
48.7
|
%
|
|
50.2
|
%
|
|
|
|
49.6
|
%
|
|
50.6
|
%
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||||||||||||||
|
August 24,
2014 |
|
August 25,
2013 |
|
%
Increase
(Decrease)
|
|
August 24,
2014 |
|
August 25,
2013 |
|
August 24,
2014 |
|
August 25,
2013 |
|
%
Increase
(Decrease)
|
|
August 24,
2014 |
|
August 25,
2013 |
||||||||||||||
|
|
|
% of Net
Revenues
|
|
% of Net
Revenues
|
|
|
|
% of Net
Revenues
|
|
% of Net
Revenues
|
||||||||||||||||||||||
|
(Dollars in millions)
|
||||||||||||||||||||||||||||||||
Selling
|
$
|
176.2
|
|
|
$
|
172.5
|
|
|
2.1
|
%
|
|
15.3
|
%
|
|
15.1
|
%
|
|
$
|
534.4
|
|
|
$
|
523.3
|
|
|
2.1
|
%
|
|
15.9
|
%
|
|
15.5
|
%
|
Advertising and promotion
|
71.6
|
|
|
60.6
|
|
|
18.2
|
%
|
|
6.2
|
%
|
|
5.3
|
%
|
|
157.1
|
|
|
148.5
|
|
|
5.8
|
%
|
|
4.7
|
%
|
|
4.4
|
%
|
||||
Administration
|
96.5
|
|
|
101.1
|
|
|
(4.6
|
)%
|
|
8.4
|
%
|
|
8.9
|
%
|
|
290.0
|
|
|
291.3
|
|
|
(0.5
|
)%
|
|
8.6
|
%
|
|
8.6
|
%
|
||||
Other
|
110.4
|
|
|
120.5
|
|
|
(8.4
|
)%
|
|
9.6
|
%
|
|
10.6
|
%
|
|
344.1
|
|
|
351.1
|
|
|
(2.0
|
)%
|
|
10.2
|
%
|
|
10.4
|
%
|
||||
Total SG&A
|
$
|
454.7
|
|
|
$
|
454.7
|
|
|
—
|
|
|
39.4
|
%
|
|
39.8
|
%
|
|
$
|
1,325.6
|
|
|
$
|
1,314.2
|
|
|
0.9
|
%
|
|
39.4
|
%
|
|
38.8
|
%
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
||||||||||||||||||||||||||||||
|
August 24,
2014 |
|
August 25,
2013 |
|
%
Increase
(Decrease)
|
|
August 24,
2014 |
|
August 25,
2013 |
|
August 24,
2014 |
|
August 25,
2013 |
|
%
Increase
(Decrease)
|
|
August 24,
2014 |
|
August 25,
2013 |
|
||||||||||||||
|
|
|
% of Net
Revenues
|
|
% of Net
Revenues
|
|
|
|
% of Net
Revenues
|
|
% of Net
Revenues
|
|
||||||||||||||||||||||
|
(Dollars in millions)
|
|
||||||||||||||||||||||||||||||||
Operating income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Americas
|
$
|
122.2
|
|
|
$
|
125.2
|
|
|
(2.4
|
)%
|
|
17.5
|
%
|
|
17.6
|
%
|
|
$
|
342.7
|
|
|
$
|
376.6
|
|
|
(9.0
|
)%
|
|
17.4
|
%
|
|
18.6
|
%
|
|
Europe
|
49.6
|
|
|
45.9
|
|
|
8.0
|
%
|
|
17.3
|
%
|
|
16.7
|
%
|
|
159.2
|
|
|
145.6
|
|
|
9.4
|
%
|
|
18.8
|
%
|
|
17.6
|
%
|
|
||||
Asia
|
17.4
|
|
|
22.7
|
|
|
(23.4
|
)%
|
|
10.2
|
%
|
|
14.5
|
%
|
|
88.5
|
|
|
104.2
|
|
|
(15.0
|
)%
|
|
16.1
|
%
|
|
19.3
|
%
|
|
||||
Total regional operating income
|
189.2
|
|
|
193.8
|
|
|
(2.4
|
)%
|
|
16.4
|
%
|
*
|
17.0
|
%
|
*
|
590.4
|
|
|
626.4
|
|
|
(5.7
|
)%
|
|
17.5
|
%
|
*
|
18.5
|
%
|
*
|
||||
Corporate expenses
|
84.1
|
|
|
75.7
|
|
|
11.0
|
%
|
|
7.3
|
%
|
*
|
6.6
|
%
|
*
|
326.5
|
|
|
227.2
|
|
|
43.7
|
%
|
|
9.7
|
%
|
*
|
6.7
|
%
|
*
|
||||
Total operating income
|
$
|
105.1
|
|
|
$
|
118.1
|
|
|
(11.0
|
)%
|
|
9.1
|
%
|
*
|
10.3
|
%
|
*
|
$
|
263.9
|
|
|
$
|
399.2
|
|
|
(33.9
|
)%
|
|
7.8
|
%
|
*
|
11.8
|
%
|
*
|
Operating margin
|
9.1
|
%
|
|
10.3
|
%
|
|
|
|
|
|
|
|
7.8
|
%
|
|
11.8
|
%
|
|
|
|
|
|
|
|
•
|
Americas
. For the
three-month period
, the decline in operating income reflected the region's lower net revenues, as a decline in the region's gross margin was fully offset by lower SG&A in the region. For the
nine-month period
, the decrease in operating income and operating margin primarily reflected the region's lower gross margin, partially offset by the region's lower SG&A.
|
•
|
Europe
. For both periods, operating income and operating margin increased primarily due to the region's higher gross margin, which was driven by higher retail revenues.
|
•
|
Asia
. For both periods, the decrease in operating income and operating margin primarily reflected the region's lower gross margin.
|
|
|
Nine Months Ended
|
|
||||||
|
|
August 24,
2014 |
|
August 25,
2013 |
|
||||
|
|
(Dollars in millions)
|
|
||||||
|
Cash provided by operating activities
|
$
|
81.3
|
|
|
$
|
273.8
|
|
|
|
Cash used for investing activities
|
(46.0
|
)
|
|
(63.4
|
)
|
|
||
|
Cash used for financing activities
|
(157.2
|
)
|
|
(227.7
|
)
|
|
||
|
Cash and cash equivalents
|
367.4
|
|
|
382.3
|
|
|
•
|
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 timely and effectively implement organizational cost-saving initiatives as planned that are intended to increase productivity and efficiency in our global operations, take advantage of lower-cost service delivery options in our distribution practices and overhaul our procurement practices in order to globally streamline our operations without business disruption or mitigation to such disruptions;
|
•
|
consequences of impacts to the businesses of our wholesale customers, including a sudden 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;
|
•
|
availability of 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 online 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 rate fluctuations;
|
•
|
the impact of the variables that affect the net periodic benefit cost and future funding requirements of our postretirement benefits and pension plans;
|
•
|
our dependence on key distribution channels, customers and suppliers;
|
•
|
our ability to utilize our tax credits and net operating loss carryforwards;
|
•
|
ongoing or future litigation matters and disputes and regulatory developments;
|
•
|
changes in or application of trade and tax laws; and
|
•
|
political, social and economic instability in countries where we and 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
|
•
|
eliminating approximately 800 positions within our global non-retail and non-manufacturing employee population; and
|
•
|
initiating centrally-led cost-savings and productivity projects.
|
•
|
actual or perceived disruption of service or reduction in service standards to wholesale customers;
|
•
|
the failure to preserve adequate internal controls as we restructure our general and administrative functions;
|
•
|
the failure to preserve supplier, distribution, sales and other important relationships and to resolve conflicts that may arise;
|
•
|
diversion of management attention from ongoing business activities; and
|
•
|
the failure to maintain employee morale and retain key employees.
|
Item 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
•
|
35,098 of the SARs, referred to as service-vested SARs, were granted with the following vesting schedule: 25% percent of the SAR grant vests on the day prior to the one-year anniversary of the date of grant, with the remaining 75% balance vesting monthly over 36 months commencing on such anniversary, at a rate of 2.08% per month;
|
•
|
23,399 of the SARs, referred to as performance-based SARs, were granted with the following vesting schedule: 50% of the performance-based SARs will vest to the extent that the Company has achieved certain goals based on the Company's (i) average earnings before interest and taxes margin percentage and (ii) the compound annual growth rate of the Company's net revenues, each over fiscal years 2014, 2015 and 2016, and the remaining 50% of the performance-based SARs will vest based on the Company's performance against a three-year market-related relative total shareholder return goal. Our Board will determine the extent to which the goals under the performance-based SARs have been satisfied on or before March 1, 2017.
|
Item 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
Item 4.
|
MINE SAFETY DISCLOSURES
|
Item 5.
|
OTHER INFORMATION
|
Item 6.
|
EXHIBITS
|
Date:
|
October 6, 2014
|
|
LEVI STRAUSS & Co.
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ W
ADE
W. W
EBSTER
|
|
|
|
Wade W. Webster
Vice President and Controller
(Principal Accounting Officer)
|
|
|
/
S
/ C
HARLES
V. B
ERGH
|
|
|
Charles V. Bergh
|
|
|
President and Chief Executive Officer
|
|
|
/
S
/ H
ARMIT
S
INGH
|
|
|
Harmit Singh
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
/
S
/ C
HARLES
V. B
ERGH
|
|
|
Charles V. Bergh
|
|
|
President and Chief Executive Officer
|
|
|
October 6, 2014
|
|
|
/
S
/ H
ARMIT
S
INGH
|
|
|
Harmit Singh
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
October 6, 2014
|
Investor Contact:
|
|
Chris Ogle
|
|
Media Contact:
|
|
Amber Rensen
|
|
|
Levi Strauss & Co.
|
|
|
|
Levi Strauss & Co.
|
|
|
(800) 438-0349
|
|
|
|
(415) 501-7777
|
|
|
Investor-relations@levi.com
|
|
|
|
newsmediarequests@levi.com
|