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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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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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May 29,
2016 |
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November 29,
2015 |
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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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359,540
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$
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318,571
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Trade receivables, net of allowance for doubtful accounts of $12,598 and $11,025
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334,796
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498,196
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Inventories:
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Raw materials
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3,153
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3,368
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Work-in-process
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3,568
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3,031
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Finished goods
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783,651
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600,460
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Total inventories
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790,372
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606,859
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Other current assets
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100,495
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104,523
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Total current assets
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1,585,203
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1,528,149
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Property, plant and equipment, net of accumulated depreciation of $826,480 and $811,013
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383,260
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390,829
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Goodwill
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236,065
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235,041
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Other intangible assets, net
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43,104
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43,350
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Non-current deferred tax assets, net
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576,490
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580,640
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Other non-current assets
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93,450
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106,386
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Total assets
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$
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2,917,572
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$
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2,884,395
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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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124,247
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$
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114,978
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Current maturities of long-term debt
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36,439
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32,625
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Accounts payable
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282,165
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238,309
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Accrued salaries, wages and employee benefits
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140,005
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182,430
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Restructuring liabilities
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10,853
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20,141
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Accrued interest payable
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5,701
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5,510
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Accrued income taxes
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23,571
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6,567
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Other accrued liabilities
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242,886
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245,607
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Total current liabilities
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865,867
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846,167
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Long-term debt
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1,005,565
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1,004,938
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Long-term capital leases
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12,504
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12,320
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Postretirement medical benefits
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99,167
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105,240
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Pension liability
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346,770
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358,443
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Long-term employee related benefits
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64,609
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73,342
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Long-term income tax liabilities
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22,039
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26,312
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Other long-term liabilities
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61,542
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56,987
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Total liabilities
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2,478,063
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2,483,749
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Commitments and contingencies
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Temporary equity
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71,729
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68,783
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Stockholders’ Equity:
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Levi Strauss & Co. stockholders’ equity
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Common stock — $.01 par value; 270,000,000 shares authorized; 37,452,319 shares and 37,460,145 shares issued and outstanding
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375
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375
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Additional paid-in capital
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2,119
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3,291
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Retained earnings
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741,217
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705,668
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Accumulated other comprehensive loss
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(378,647
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)
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(379,066
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)
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Total Levi Strauss & Co. stockholders’ equity
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365,064
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330,268
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Noncontrolling interest
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2,716
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1,595
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Total stockholders’ equity
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367,780
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331,863
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Total liabilities, temporary equity and stockholders’ equity
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$
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2,917,572
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$
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2,884,395
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Three Months Ended
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Six Months Ended
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May 29,
2016 |
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May 31,
2015 |
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May 29,
2016 |
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May 31,
2015 |
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(Dollars in thousands)
(Unaudited)
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Net revenues
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$
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1,011,587
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$
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1,012,180
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$
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2,068,087
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$
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2,067,255
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Cost of goods sold
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494,389
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511,949
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991,291
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1,029,959
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Gross profit
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517,198
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500,231
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1,076,796
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1,037,296
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Selling, general and administrative expenses
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459,351
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449,662
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900,514
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874,944
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Restructuring, net
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(191
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)
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2,954
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1,657
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7,292
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Operating income
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58,038
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47,615
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174,625
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155,060
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Interest expense
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(20,411
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)
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(21,913
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)
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(35,313
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)
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(45,225
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)
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Loss on early extinguishment of debt
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—
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(14,002
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)
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—
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(14,002
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)
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Other income (expense), net
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4,295
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7,639
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2,076
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(18,389
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)
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Income before income taxes
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41,922
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19,339
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141,388
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77,444
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Income tax expense
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10,862
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|
7,887
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44,037
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27,709
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Net income
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31,060
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|
11,452
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97,351
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|
49,735
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Net (income) loss attributable to noncontrolling interest
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(335
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)
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|
239
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(790
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)
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|
348
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|
||||
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Net income attributable to Levi Strauss & Co.
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$
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30,725
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$
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11,691
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$
|
96,561
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$
|
50,083
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Three Months Ended
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Six Months Ended
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||||||||||||
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May 29,
2016 |
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May 31,
2015 |
|
May 29,
2016 |
|
May 31,
2015 |
||||||||
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(Dollars in thousands)
(Unaudited)
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||||||||||||||
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Net income
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$
|
31,060
|
|
|
$
|
11,452
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$
|
97,351
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|
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$
|
49,735
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|
|
Other comprehensive income (loss), before related income taxes:
|
|
|
|
|
|
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|
||||||||
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Pension and postretirement benefits
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3,735
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4,328
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7,317
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|
|
8,935
|
|
||||
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Net investment hedge (losses) gains
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(250
|
)
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|
463
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|
|
(914
|
)
|
|
604
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|
||||
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Foreign currency translation gains (losses)
|
5,877
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|
|
1,032
|
|
|
(1,698
|
)
|
|
(9,500
|
)
|
||||
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Unrealized gains (losses) on marketable securities
|
1,510
|
|
|
161
|
|
|
(319
|
)
|
|
274
|
|
||||
|
Total other comprehensive income, before related income taxes
|
10,872
|
|
|
5,984
|
|
|
4,386
|
|
|
313
|
|
||||
|
Income taxes related to items of other comprehensive income
|
(2,414
|
)
|
|
248
|
|
|
(3,638
|
)
|
|
(1,301
|
)
|
||||
|
Comprehensive income, net of income taxes
|
39,518
|
|
|
17,684
|
|
|
98,099
|
|
|
48,747
|
|
||||
|
Comprehensive (income) loss attributable to noncontrolling interest
|
(447
|
)
|
|
297
|
|
|
(1,121
|
)
|
|
429
|
|
||||
|
Comprehensive income attributable to Levi Strauss & Co.
|
$
|
39,071
|
|
|
$
|
17,981
|
|
|
$
|
96,978
|
|
|
$
|
49,176
|
|
|
|
Six Months Ended
|
||||||
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|
May 29,
2016 |
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May 31,
2015 |
||||
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(Dollars in thousands)
(Unaudited)
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||||||
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Cash Flows from Operating Activities:
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|
|
||||
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Net income
|
$
|
97,351
|
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$
|
49,735
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Adjustments to reconcile net income to net cash provided by operating activities:
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|
||||
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Depreciation and amortization
|
50,496
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50,471
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Asset impairments
|
680
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|
|
1,573
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Gain on disposal of assets
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(6,024
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)
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(8,617
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)
|
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Unrealized foreign exchange losses (gains)
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16,927
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(2,072
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)
|
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Realized (gain) loss on settlement of forward foreign exchange contracts not designated for hedge accounting
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(16,887
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)
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1,368
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|
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Employee benefit plans’ amortization from accumulated other comprehensive loss
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7,487
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|
|
8,548
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Employee benefit plans’ curtailment gain, net
|
—
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|
|
—
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|
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Noncash restructuring charges
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—
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|
|
387
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|
||
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Noncash loss on early extinguishment of debt
|
—
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|
|
3,448
|
|
||
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Amortization of premium, discount and debt issuance costs
|
1,256
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|
|
881
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|
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Stock-based compensation
|
1,976
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|
|
7,848
|
|
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Allowance for doubtful accounts
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2,209
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|
|
1,192
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|
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Change in operating assets and liabilities:
|
|
|
|
||||
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Trade receivables
|
157,291
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|
|
173,660
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|
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Inventories
|
(185,806
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)
|
|
18,582
|
|
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Other current assets
|
1,993
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|
|
(1,100
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)
|
||
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Other non-current assets
|
(4,163
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)
|
|
(1,368
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)
|
||
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Accounts payable and other accrued liabilities
|
41,392
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|
|
(85,738
|
)
|
||
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Restructuring liabilities
|
(10,691
|
)
|
|
(25,880
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)
|
||
|
Income tax liabilities
|
18,397
|
|
|
(5,414
|
)
|
||
|
Accrued salaries, wages and employee benefits and long-term employee related benefits
|
(73,463
|
)
|
|
(72,301
|
)
|
||
|
Other long-term liabilities
|
2,883
|
|
|
(13,853
|
)
|
||
|
Other, net
|
—
|
|
|
1,214
|
|
||
|
Net cash provided by operating activities
|
103,304
|
|
|
102,564
|
|
||
|
Cash Flows from Investing Activities:
|
|
|
|
||||
|
Purchases of property, plant and equipment
|
(47,231
|
)
|
|
(43,163
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)
|
||
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Proceeds from sales of assets
|
17,431
|
|
|
8,785
|
|
||
|
Proceeds (payments) on settlement of forward foreign exchange contracts not designated for hedge accounting
|
16,887
|
|
|
(1,368
|
)
|
||
|
Acquisitions, net of cash acquired
|
(47
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)
|
|
(251
|
)
|
||
|
Other
|
—
|
|
|
—
|
|
||
|
Net cash used for investing activities
|
(12,960
|
)
|
|
(35,997
|
)
|
||
|
Cash Flows from Financing Activities:
|
|
|
|
||||
|
Proceeds from issuance of long-term debt
|
—
|
|
|
500,000
|
|
||
|
Repayments of long-term debt and capital leases
|
(1,571
|
)
|
|
(526,490
|
)
|
||
|
Proceeds from senior revolving credit facility
|
180,000
|
|
|
265,000
|
|
||
|
Repayments of senior revolving credit facility
|
(174,000
|
)
|
|
(255,000
|
)
|
||
|
Proceeds from short-term credit facilities
|
14,216
|
|
|
11,884
|
|
||
|
Repayments of short-term credit facilities
|
(10,389
|
)
|
|
(8,407
|
)
|
||
|
Other short-term borrowings, net
|
593
|
|
|
310
|
|
||
|
Debt issuance costs
|
—
|
|
|
(3,937
|
)
|
||
|
Change in restricted cash, net
|
3,315
|
|
|
1,110
|
|
||
|
Repurchase of common stock
|
(1,393
|
)
|
|
(2,221
|
)
|
||
|
Excess tax benefits from stock-based compensation
|
179
|
|
|
347
|
|
||
|
Dividend to stockholders
|
(60,000
|
)
|
|
(50,000
|
)
|
||
|
Net cash used for financing activities
|
(49,050
|
)
|
|
(67,404
|
)
|
||
|
Effect of exchange rate changes on cash and cash equivalents
|
(325
|
)
|
|
(12,784
|
)
|
||
|
Net increase (decrease) in cash and cash equivalents
|
40,969
|
|
|
(13,621
|
)
|
||
|
Beginning cash and cash equivalents
|
318,571
|
|
|
298,255
|
|
||
|
Ending cash and cash equivalents
|
$
|
359,540
|
|
|
$
|
284,634
|
|
|
|
|
|
|
||||
|
Noncash Investing Activity:
|
|
|
|
||||
|
Purchases of property, plant and equipment not yet paid at end of period
|
$
|
22,911
|
|
|
$
|
10,035
|
|
|
|
|
|
|
||||
|
Supplemental disclosure of cash flow information:
|
|
|
|
||||
|
Cash paid for interest during the period
|
$
|
33,536
|
|
|
$
|
42,526
|
|
|
Cash paid for income taxes during the period, net of refunds
|
21,703
|
|
|
33,619
|
|
||
|
•
|
In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. ("ASU") 2016-06,
Derivatives and Hedging (Topic 815) – Contingent Put and Call Options in Debt Instruments
, which will reduce diversity of practice in identifying embedded derivatives in debt instruments. ASU 2016-06 clarifies that the nature of an exercise contingency is not subject to the “clearly and closely” criteria for purposes of assessing whether the call or put option must be separated from the debt instrument and accounted for separately as a derivative. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements and footnote disclosures.
|
|
•
|
In March 2016, the FASB issued ASU 2016-09,
Compensation – Stock Compensation (Topic 718)
. ASU 2016-09 identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements and footnote disclosures.
|
|
•
|
In March 2016, the FASB issued ASU 2016-04,
Liabilities – Extinguishment of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products
. ASU 2016-04 aligns recognition of the financial liabilities related to prepaid stored-value products (for example, prepaid gift cards), with Topic 606,
Revenues from Contracts with Customers,
for non-financial liabilities. In general, certain or these liabilities may be extinguished proportionally in earnings as redemptions occur, or when redemption is remote if issuers are not entitled to the unredeemed stored value. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements and footnote disclosures.
|
|
•
|
The FASB has issued several more amendments to the new revenue standard ASU 2014-09, as amended by ASU 2015-14:
|
|
◦
|
March 2016 - ASU 2016-08,
Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)
. ASU 2016-08 clarifies the implementation guidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to customers.
|
|
◦
|
April 2016 - ASU 2016-10,
Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.
ASU 2016-10 covers
two specific topics: performance obligations and licensing. This amendment includes guidance on immaterial promised goods or services, shipping or handling activities, separately identifiable performance obligations, functional or symbolic intellectual property licenses, sales-based and usage-based royalties, license restrictions (time, use, geographical) and licensing renewals.
|
|
◦
|
May 2016 - ASU 2016-12,
Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients
. ASU 2016-12 clarifies certain core recognition principles including collectability, sales tax presentation, noncash consideration, contract modifications and completed contracts at transition and disclosures no longer required if the full retrospective transition method is adopted.
|
|
•
|
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
. ASU 2016-02 requires the identification of arrangements that should be accounted for as leases by lessees. In general, for lease arrangements exceeding a twelve month term, these arrangements must now be recognized as assets and liabilities on the balance sheet of the lessee. Under ASU 2016-02, a right-of-use asset and lease obligation will be recorded for all leases, whether operating or financing, while the income statement will reflect lease expense for operating leases and amortization/interest expense for financing leases. The balance sheet amount recorded for existing leases at the date of adoption of ASU 2016-02 must be calculated using the applicable incremental borrowing rate at the date of adoption. In addition, ASU 2016-02 requires the use of the modified retrospective method, which will require adjustment to all comparative periods presented in the consolidated financial statements. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements and footnote disclosures.
|
|
•
|
In June 2016, the FASB issued ASU 2016-13,
Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
. ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses. ASU 2016-13 also applies to employee benefit plan accounting, with an effective date of the first quarter of fiscal 2022. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements, footnote disclosures and employee benefit plans’ accounting.
|
|
|
May 29, 2016
|
|
November 29, 2015
|
||||||||||||||||||||
|
|
|
|
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
|
$
|
26,402
|
|
|
$
|
26,402
|
|
|
$
|
—
|
|
|
$
|
26,013
|
|
|
$
|
26,013
|
|
|
$
|
—
|
|
|
Forward foreign exchange contracts, net
(3)
|
11,901
|
|
|
—
|
|
|
11,901
|
|
|
27,131
|
|
|
—
|
|
|
27,131
|
|
||||||
|
Total
|
$
|
38,303
|
|
|
$
|
26,402
|
|
|
$
|
11,901
|
|
|
$
|
53,144
|
|
|
$
|
26,013
|
|
|
$
|
27,131
|
|
|
Financial liabilities carried at fair value
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Forward foreign exchange contracts, net
(3)
|
$
|
7,236
|
|
|
$
|
—
|
|
|
$
|
7,236
|
|
|
$
|
7,809
|
|
|
$
|
—
|
|
|
$
|
7,809
|
|
|
(1)
|
Fair values estimated using Level 1 inputs are inputs which consist of quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Rabbi trust assets consist of a diversified portfolio of equity, fixed income and other securities.
|
|
(2)
|
Fair values estimated using Level 2 inputs are inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly and include among other things, quoted prices for similar assets or liabilities in markets that are active or inactive as well as inputs other than quoted prices that are observable. For forward foreign exchange contracts, inputs include foreign currency exchange and interest rates and, where applicable, credit default swap prices.
|
|
(3)
|
The Company’s over-the-counter forward foreign exchange contracts are subject to International Swaps and Derivatives Association, Inc. master agreements. These agreements permit the net settlement of these contracts on a per-institution basis.
|
|
|
May 29, 2016
|
|
November 29, 2015
|
||||||||||||
|
|
Carrying
Value
|
|
Estimated Fair Value
|
|
Carrying
Value
|
|
Estimated Fair Value
|
||||||||
|
|
(Dollars in thousands)
|
||||||||||||||
|
Financial liabilities carried at adjusted historical cost
|
|
|
|
|
|
|
|
||||||||
|
Senior revolving credit facility
|
$
|
105,128
|
|
|
105,128
|
|
|
$
|
99,020
|
|
|
$
|
99,020
|
|
|
|
4.25% Yen-denominated Eurobonds due 2016
(1)
|
36,565
|
|
|
37,111
|
|
|
32,736
|
|
|
33,593
|
|
||||
|
6.875% senior notes due 2022
(1)
|
527,488
|
|
|
562,242
|
|
|
527,715
|
|
|
570,355
|
|
||||
|
5.00% senior notes due 2025
(1)
|
482,998
|
|
|
482,998
|
|
|
482,145
|
|
|
480,945
|
|
||||
|
Short-term borrowings
|
19,377
|
|
|
19,377
|
|
|
15,996
|
|
|
15,996
|
|
||||
|
Total
|
$
|
1,171,556
|
|
|
$
|
1,206,856
|
|
|
$
|
1,157,612
|
|
|
$
|
1,199,909
|
|
|
(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 29, 2016
|
|
November 29, 2015
|
||||||||||||||||||||
|
|
Assets
|
|
(Liabilities)
|
|
Derivative Net Carrying Value
|
|
Assets
|
|
(Liabilities)
|
|
Derivative Net Carrying Value
|
||||||||||||
|
|
Carrying
Value
|
|
Carrying
Value
|
|
|
Carrying
Value
|
|
Carrying
Value
|
|
||||||||||||||
|
|
(Dollars in thousands)
|
||||||||||||||||||||||
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Forward foreign exchange contracts
(1)
|
$
|
17,669
|
|
|
$
|
(5,768
|
)
|
|
$
|
11,901
|
|
|
$
|
31,808
|
|
|
$
|
(4,677
|
)
|
|
$
|
27,131
|
|
|
Forward foreign exchange contracts
(2)
|
1,805
|
|
|
(9,041
|
)
|
|
(7,236
|
)
|
|
253
|
|
|
(8,062
|
)
|
|
(7,809
|
)
|
||||||
|
Total
|
$
|
19,474
|
|
|
$
|
(14,809
|
)
|
|
|
|
$
|
32,061
|
|
|
$
|
(12,739
|
)
|
|
|
||||
|
Non-derivatives designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Yen-denominated Eurobonds
|
$
|
—
|
|
|
$
|
(8,746
|
)
|
|
|
|
$
|
—
|
|
|
$
|
(7,832
|
)
|
|
|
||||
|
(1)
|
Included in “Other current assets” or “Other non-current assets” on the Company’s consolidated balance sheets.
|
|
(2)
|
Included in “Other accrued liabilities” on the Company’s consolidated balance sheets.
|
|
|
May 29, 2016
|
|
November 29, 2015
|
||||||||||||||||||||
|
|
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
|
$
|
17,273
|
|
|
$
|
(7,572
|
)
|
|
$
|
9,701
|
|
|
$
|
30,837
|
|
|
$
|
(4,930
|
)
|
|
$
|
25,907
|
|
|
Financial liabilities
|
(11,129
|
)
|
|
7,572
|
|
|
(3,557
|
)
|
|
(7,599
|
)
|
|
4,930
|
|
|
(2,669
|
)
|
||||||
|
Total
|
|
|
|
|
$
|
6,144
|
|
|
|
|
|
|
$
|
23,238
|
|
||||||||
|
Embedded derivative contracts
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Financial assets
|
$
|
2,200
|
|
|
$
|
—
|
|
|
$
|
2,200
|
|
|
$
|
1,224
|
|
|
$
|
—
|
|
|
$
|
1,224
|
|
|
Financial liabilities
|
(3,679
|
)
|
|
—
|
|
|
(3,679
|
)
|
|
(5,140
|
)
|
|
—
|
|
|
(5,140
|
)
|
||||||
|
Total
|
|
|
|
|
$
|
(1,479
|
)
|
|
|
|
|
|
$
|
(3,916
|
)
|
||||||||
|
|
Gain or (Loss)
Recognized in AOCI
(Effective Portion)
|
|
Gain or (Loss) Recognized in Other Income (Expense), net (Ineffective Portion and Amount Excluded from Effectiveness Testing)
|
||||||||||||||||||||
|
|
As of
|
|
As of
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||
|
May 29,
2016 |
November 29,
2015 |
May 29,
2016 |
|
May 31,
2015 |
|
May 29,
2016 |
|
May 31,
2015 |
|||||||||||||||
|
|
(Dollars in thousands)
|
||||||||||||||||||||||
|
Forward foreign exchange contracts
|
$
|
4,637
|
|
|
$
|
4,637
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Yen-denominated Eurobonds
|
(19,896
|
)
|
|
(18,982
|
)
|
|
$
|
(792
|
)
|
|
$
|
1,250
|
|
|
$
|
(2,895
|
)
|
|
$
|
1,596
|
|
||
|
Euro senior notes
|
(15,751
|
)
|
|
(15,751
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
Cumulative income taxes
|
12,200
|
|
|
11,849
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Total
|
$
|
(18,810
|
)
|
|
$
|
(18,247
|
)
|
|
|
|
|
|
|
|
|
||||||||
|
|
Gain or (Loss)
|
||||||||||||||
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
May 29,
2016 |
|
May 31,
2015 |
|
May 29,
2016 |
|
May 31,
2015 |
||||||||
|
|
(Dollars in thousands)
|
||||||||||||||
|
Forward foreign exchange contracts:
|
|
|
|
|
|
|
|
||||||||
|
Realized
|
$
|
3,920
|
|
|
$
|
2,592
|
|
|
$
|
16,887
|
|
|
$
|
(1,368
|
)
|
|
Unrealized
|
(5,038
|
)
|
|
11,355
|
|
|
(14,269
|
)
|
|
23,223
|
|
||||
|
Total
|
$
|
(1,118
|
)
|
|
$
|
13,947
|
|
|
$
|
2,618
|
|
|
$
|
21,855
|
|
|
|
May 29,
2016 |
|
November 29,
2015 |
||||
|
|
(Dollars in thousands)
|
||||||
|
Long-term debt
|
|
|
|
||||
|
Unsecured:
|
|
|
|
||||
|
6.875% senior notes due 2022
|
$
|
524,581
|
|
|
$
|
524,807
|
|
|
5.00% senior notes due 2025
|
480,984
|
|
|
480,131
|
|
||
|
Total unsecured long-term debt
|
$
|
1,005,565
|
|
|
$
|
1,004,938
|
|
|
Short-term debt and current maturities of long-term debt
|
|
|
|
||||
|
Secured:
|
|
|
|
||||
|
Senior revolving credit facility
|
$
|
105,000
|
|
|
$
|
99,000
|
|
|
Unsecured:
|
|
|
|
||||
|
Current maturities of 4.25% Yen-denominated Eurobonds due 2016
|
36,439
|
|
|
32,625
|
|
||
|
Short-term borrowings
|
19,247
|
|
|
15,978
|
|
||
|
Total short-term debt and current maturities of long-term debt
|
$
|
160,686
|
|
|
$
|
147,603
|
|
|
Total debt
|
$
|
1,166,251
|
|
|
$
|
1,152,541
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Pension Benefits
|
|
Postretirement Benefits
|
||||||||||||
|
|
Three Months Ended
|
|
Three Months Ended
|
||||||||||||
|
|
May 29,
2016 |
|
May 31,
2015 |
|
May 29,
2016 |
|
May 31,
2015 |
||||||||
|
|
(Dollars in thousands)
|
||||||||||||||
|
Net periodic benefit cost:
|
|
|
|
|
|
|
|
||||||||
|
Service cost
|
$
|
2,072
|
|
|
$
|
2,090
|
|
|
$
|
50
|
|
|
$
|
62
|
|
|
Interest cost
(1)
|
9,490
|
|
|
11,790
|
|
|
806
|
|
|
1,147
|
|
||||
|
Expected return on plan assets
|
(12,162
|
)
|
|
(12,716
|
)
|
|
—
|
|
|
—
|
|
||||
|
Amortization of prior service benefit
|
(16
|
)
|
|
(15
|
)
|
|
—
|
|
|
—
|
|
||||
|
Amortization of actuarial loss
|
3,028
|
|
|
3,163
|
|
|
741
|
|
|
1,128
|
|
||||
|
Curtailment loss
|
—
|
|
|
52
|
|
|
—
|
|
|
—
|
|
||||
|
Net periodic benefit cost
|
2,412
|
|
|
4,364
|
|
|
1,597
|
|
|
2,337
|
|
||||
|
Changes in accumulated other comprehensive loss:
|
|
|
|
|
|
|
|
||||||||
|
Actuarial loss
|
18
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
|
Amortization of prior service benefit
|
16
|
|
|
15
|
|
|
—
|
|
|
—
|
|
||||
|
Amortization of actuarial loss
|
(3,028
|
)
|
|
(3,163
|
)
|
|
(741
|
)
|
|
(1,128
|
)
|
||||
|
Curtailment loss
|
—
|
|
|
(52
|
)
|
|
—
|
|
|
—
|
|
||||
|
Total recognized in accumulated other comprehensive loss
|
(2,994
|
)
|
|
(3,200
|
)
|
|
(741
|
)
|
|
(1,128
|
)
|
||||
|
Total recognized in net periodic benefit cost and accumulated other comprehensive loss
|
$
|
(582
|
)
|
|
$
|
1,164
|
|
|
$
|
856
|
|
|
$
|
1,209
|
|
|
(1)
|
The decrease in interest cost is primarily due to the election made at the end of 2015 to adopt the spot-rate approach to determine the interest cost component of pension and postretirement expense.
|
|
|
Pension Benefits
|
|
Postretirement Benefits
|
||||||||||||
|
|
Six Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
May 29,
2016 |
|
May 31,
2015 |
|
May 29,
2016 |
|
May 31,
2015 |
||||||||
|
|
(Dollars in thousands)
|
||||||||||||||
|
Net periodic benefit cost:
|
|
|
|
|
|
|
|
||||||||
|
Service cost
|
$
|
4,130
|
|
|
$
|
4,218
|
|
|
$
|
100
|
|
|
$
|
125
|
|
|
Interest cost
(1)
|
18,962
|
|
|
23,630
|
|
|
1,612
|
|
|
2,294
|
|
||||
|
Expected return on plan assets
|
(24,296
|
)
|
|
(25,433
|
)
|
|
—
|
|
|
—
|
|
||||
|
Amortization of prior service benefit
|
(31
|
)
|
|
(31
|
)
|
|
—
|
|
|
—
|
|
||||
|
Amortization of actuarial loss
|
6,035
|
|
|
6,323
|
|
|
1,483
|
|
|
2,256
|
|
||||
|
Curtailment loss
|
—
|
|
|
387
|
|
|
—
|
|
|
—
|
|
||||
|
Net periodic benefit cost
|
4,800
|
|
|
9,094
|
|
|
3,195
|
|
|
4,675
|
|
||||
|
Changes in accumulated other comprehensive loss:
|
|
|
|
|
|
|
|
||||||||
|
Actuarial loss
|
170
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
|
Amortization of prior service benefit
|
31
|
|
|
31
|
|
|
—
|
|
|
—
|
|
||||
|
Amortization of actuarial loss
|
(6,035
|
)
|
|
(6,323
|
)
|
|
(1,483
|
)
|
|
(2,256
|
)
|
||||
|
Curtailment loss
|
—
|
|
|
(387
|
)
|
|
—
|
|
|
—
|
|
||||
|
Total recognized in accumulated other comprehensive loss
|
(5,834
|
)
|
|
(6,679
|
)
|
|
(1,483
|
)
|
|
(2,256
|
)
|
||||
|
Total recognized in net periodic benefit cost and accumulated other comprehensive loss
|
$
|
(1,034
|
)
|
|
$
|
2,415
|
|
|
$
|
1,712
|
|
|
$
|
2,419
|
|
|
(1)
|
The decrease in interest cost is primarily due to the election made at the end of 2015 to adopt the spot-rate approach to determine the interest cost component of pension and postretirement expense.
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
May 29,
2016 |
|
May 31,
2015 |
|
May 29,
2016 |
|
May 31,
2015 |
||||||||
|
|
(Dollars in thousands)
|
||||||||||||||
|
Restructuring, net:
|
|
|
|
|
|
|
|
||||||||
|
Severance and employee-related benefits
(1)
|
$
|
400
|
|
|
$
|
2,436
|
|
|
$
|
1,845
|
|
|
$
|
7,756
|
|
|
Adjustments to severance and employee-related benefits
|
(683
|
)
|
|
(514
|
)
|
|
(404
|
)
|
|
(1,763
|
)
|
||||
|
Other
(2)
|
92
|
|
|
965
|
|
|
216
|
|
|
1,379
|
|
||||
|
Adjustments to other
|
—
|
|
|
15
|
|
|
—
|
|
|
(467
|
)
|
||||
|
Noncash pension and postretirement curtailment losses, net
(3)
|
—
|
|
|
52
|
|
|
—
|
|
|
387
|
|
||||
|
Total
|
$
|
(191
|
)
|
|
$
|
2,954
|
|
|
$
|
1,657
|
|
|
$
|
7,292
|
|
|
(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 the execution of the restructuring initiative.
|
|
(3)
|
Noncash 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 benefits" on the Company's consolidated balance sheets.
|
|
|
Three Months Ended May 29, 2016
|
||||||||||||||||||||||
|
|
Liabilities
|
|
|
|
Adjustments
|
|
|
|
Foreign Currency Fluctuation
|
|
Liabilities
|
||||||||||||
|
|
February 28, 2016
|
|
Charges
|
|
|
Payments
|
|
|
May 29, 2016
|
||||||||||||||
|
|
(Dollars in thousands)
|
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Severance and employee-related benefits
|
$
|
15,674
|
|
|
$
|
400
|
|
|
$
|
(683
|
)
|
|
$
|
(3,829
|
)
|
|
$
|
206
|
|
|
$
|
11,768
|
|
|
Other
|
964
|
|
|
92
|
|
|
—
|
|
|
(1,056
|
)
|
|
—
|
|
|
—
|
|
||||||
|
Total
|
$
|
16,638
|
|
|
$
|
492
|
|
|
$
|
(683
|
)
|
|
$
|
(4,885
|
)
|
|
$
|
206
|
|
|
$
|
11,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Current portion
|
$
|
15,736
|
|
|
|
|
|
|
|
|
|
|
$
|
10,853
|
|
||||||||
|
Long-term portion
|
902
|
|
|
|
|
|
|
|
|
|
|
915
|
|
||||||||||
|
Total
|
$
|
16,638
|
|
|
|
|
|
|
|
|
|
|
$
|
11,768
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
Three Months Ended May 31, 2015
|
||||||||||||||||||||||
|
|
Liabilities
|
|
|
|
Adjustments
|
|
|
|
Foreign Currency Fluctuation
|
|
Liabilities
|
||||||||||||
|
|
March 1, 2015
|
|
Charges
|
|
|
Payments
|
|
|
May 31, 2015
|
||||||||||||||
|
|
(Dollars in thousands)
|
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Severance and employee-related benefits
|
$
|
43,615
|
|
|
$
|
2,436
|
|
|
$
|
(514
|
)
|
|
$
|
(11,792
|
)
|
|
$
|
(618
|
)
|
|
$
|
33,127
|
|
|
Other
|
1
|
|
|
965
|
|
|
15
|
|
|
(981
|
)
|
|
—
|
|
|
—
|
|
||||||
|
Total
|
$
|
43,616
|
|
|
$
|
3,401
|
|
|
$
|
(499
|
)
|
|
$
|
(12,773
|
)
|
|
$
|
(618
|
)
|
|
$
|
33,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Current portion
|
$
|
42,596
|
|
|
|
|
|
|
|
|
|
|
$
|
32,472
|
|
||||||||
|
Long-term portion
|
1,020
|
|
|
|
|
|
|
|
|
|
|
655
|
|
||||||||||
|
Total
|
$
|
43,616
|
|
|
|
|
|
|
|
|
|
|
$
|
33,127
|
|
||||||||
|
|
Six Months Ended May 29, 2016
|
||||||||||||||||||||||
|
|
Liabilities
|
|
|
|
Adjustments
|
|
|
|
Foreign Currency Fluctuation
|
|
Liabilities
|
||||||||||||
|
|
November 29, 2015
|
|
Charges
|
|
|
Payments
|
|
|
May 29, 2016
|
||||||||||||||
|
|
(Dollars in thousands)
|
||||||||||||||||||||||
|
Severance and employee-related benefits
|
$
|
20,774
|
|
|
$
|
1,845
|
|
|
$
|
(404
|
)
|
|
$
|
(11,168
|
)
|
|
$
|
721
|
|
|
$
|
11,768
|
|
|
Other
|
964
|
|
|
216
|
|
|
—
|
|
|
(1,180
|
)
|
|
—
|
|
|
—
|
|
||||||
|
Total
|
$
|
21,738
|
|
|
$
|
2,061
|
|
|
$
|
(404
|
)
|
|
$
|
(12,348
|
)
|
|
$
|
721
|
|
|
$
|
11,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Current portion
|
$
|
20,141
|
|
|
|
|
|
|
|
|
|
|
$
|
10,853
|
|
||||||||
|
Long-term portion
|
1,597
|
|
|
|
|
|
|
|
|
|
|
915
|
|
||||||||||
|
Total
|
$
|
21,738
|
|
|
|
|
|
|
|
|
|
|
$
|
11,768
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
Six Months Ended May 31, 2015
|
||||||||||||||||||||||
|
|
Liabilities
|
|
|
|
Adjustments
|
|
|
|
Foreign Currency Fluctuation
|
|
Liabilities
|
||||||||||||
|
|
November 30, 2014
|
|
Charges
|
|
|
Payments
|
|
|
May 31, 2015
|
||||||||||||||
|
|
(Dollars in thousands)
|
||||||||||||||||||||||
|
Severance and employee-related benefits
|
$
|
56,963
|
|
|
$
|
7,756
|
|
|
$
|
(1,763
|
)
|
|
$
|
(25,473
|
)
|
|
$
|
(4,356
|
)
|
|
$
|
33,127
|
|
|
Other
|
6,400
|
|
|
1,379
|
|
|
(467
|
)
|
|
(7,312
|
)
|
|
—
|
|
|
—
|
|
||||||
|
Total
|
$
|
63,363
|
|
|
$
|
9,135
|
|
|
$
|
(2,230
|
)
|
|
$
|
(32,785
|
)
|
|
$
|
(4,356
|
)
|
|
$
|
33,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Current portion
|
$
|
57,817
|
|
|
|
|
|
|
|
|
|
|
$
|
32,472
|
|
||||||||
|
Long-term portion
|
5,546
|
|
|
|
|
|
|
|
|
|
|
655
|
|
||||||||||
|
Total
|
$
|
63,363
|
|
|
|
|
|
|
|
|
|
|
$
|
33,127
|
|
||||||||
|
|
May 29,
2016 |
|
November 29,
2015 |
||||
|
|
(Dollars in thousands)
|
||||||
|
Pension and postretirement benefits
|
$
|
(231,842
|
)
|
|
$
|
(236,340
|
)
|
|
Net investment hedge losses
|
(18,810
|
)
|
|
(18,247
|
)
|
||
|
Foreign currency translation losses
|
(120,383
|
)
|
|
(117,394
|
)
|
||
|
Unrealized gains on marketable securities
|
1,684
|
|
|
1,880
|
|
||
|
Accumulated other comprehensive loss
|
(369,351
|
)
|
|
(370,101
|
)
|
||
|
Accumulated other comprehensive income attributable to noncontrolling interest
|
9,296
|
|
|
8,965
|
|
||
|
Accumulated other comprehensive loss attributable to Levi Strauss & Co.
|
$
|
(378,647
|
)
|
|
$
|
(379,066
|
)
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
May 29,
2016 |
|
May 31,
2015 |
|
May 29,
2016 |
|
May 31,
2015 |
||||||||
|
|
(Dollars in thousands)
|
||||||||||||||
|
Foreign exchange management (losses) gains
(1)
|
$
|
(1,118
|
)
|
|
$
|
13,947
|
|
|
$
|
2,618
|
|
|
$
|
21,855
|
|
|
Foreign currency transaction gains (losses)
(2)
|
4,398
|
|
|
(7,325
|
)
|
|
(3,806
|
)
|
|
(43,284
|
)
|
||||
|
Interest income
|
281
|
|
|
199
|
|
|
490
|
|
|
659
|
|
||||
|
Investment income
|
—
|
|
|
—
|
|
|
708
|
|
|
439
|
|
||||
|
Other
|
734
|
|
|
818
|
|
|
2,066
|
|
|
1,942
|
|
||||
|
Total other income (expense), net
|
$
|
4,295
|
|
|
$
|
7,639
|
|
|
$
|
2,076
|
|
|
$
|
(18,389
|
)
|
|
(1)
|
Gains and losses on forward foreign exchange contracts primarily result from currency fluctuations relative to negotiated contract rates. Gains in the six-month period ended May 29, 2016 and May 31, 2015 were primarily due to favorable currency fluctuations relative to negotiated contract rates on positions to sell the Mexican Peso, partially offset by unfavorable currency fluctuations relative to negotiated contract rates on positions to sell the Euro.
|
|
(2)
|
Foreign currency transaction gains and losses reflect the impact of foreign currency fluctuation on the Company's foreign currency denominated balances. Losses in 2015 were primarily due to the weakening of various foreign currencies, particularly the Euro, against the U.S. Dollar.
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
May 29,
2016 |
|
May 31,
2015 |
|
May 29,
2016 |
|
May 31,
2015 |
||||||||
|
|
(Dollars in thousands)
|
||||||||||||||
|
Net revenues:
|
|
|
|
|
|
|
|
||||||||
|
Americas
|
$
|
589,311
|
|
|
$
|
621,776
|
|
|
$
|
1,160,496
|
|
|
$
|
1,195,863
|
|
|
Europe
|
240,626
|
|
|
222,150
|
|
|
517,112
|
|
|
499,638
|
|
||||
|
Asia
|
181,650
|
|
|
168,254
|
|
|
390,479
|
|
|
371,754
|
|
||||
|
Total net revenues
|
$
|
1,011,587
|
|
|
$
|
1,012,180
|
|
|
$
|
2,068,087
|
|
|
$
|
2,067,255
|
|
|
Operating income:
|
|
|
|
|
|
|
|
||||||||
|
Americas
|
$
|
89,286
|
|
|
$
|
103,326
|
|
|
$
|
171,035
|
|
|
$
|
205,618
|
|
|
Europe
(1)
|
37,633
|
|
|
33,482
|
|
|
99,342
|
|
|
91,671
|
|
||||
|
Asia
|
15,874
|
|
|
15,031
|
|
|
62,479
|
|
|
62,371
|
|
||||
|
Regional operating income
|
142,793
|
|
|
151,839
|
|
|
332,856
|
|
|
359,660
|
|
||||
|
Corporate:
|
|
|
|
|
|
|
|
||||||||
|
Restructuring, net
|
(191
|
)
|
|
2,954
|
|
|
1,657
|
|
|
7,292
|
|
||||
|
Restructuring-related charges
|
3,034
|
|
|
12,366
|
|
|
4,531
|
|
|
20,373
|
|
||||
|
Other corporate staff costs and expenses
|
81,912
|
|
|
88,904
|
|
|
152,043
|
|
|
176,935
|
|
||||
|
Corporate expenses
|
84,755
|
|
|
104,224
|
|
|
158,231
|
|
|
204,600
|
|
||||
|
Total operating income
|
58,038
|
|
|
47,615
|
|
|
174,625
|
|
|
155,060
|
|
||||
|
Interest expense
|
(20,411
|
)
|
|
(21,913
|
)
|
|
(35,313
|
)
|
|
(45,225
|
)
|
||||
|
Loss on early extinguishment of debt
|
—
|
|
|
(14,002
|
)
|
|
—
|
|
|
(14,002
|
)
|
||||
|
Other income (expense), net
|
4,295
|
|
|
7,639
|
|
|
2,076
|
|
|
(18,389
|
)
|
||||
|
Income before income taxes
|
$
|
41,922
|
|
|
$
|
19,339
|
|
|
$
|
141,388
|
|
|
$
|
77,444
|
|
|
(1)
|
Included in Europe's operating income for the three- and six-month periods ended May 29, 2016 is a gain of
$6.1 million
related to the sale-leaseback of the Company's distribution center in the United Kingdom in the second quarter of 2016. Included in Europe's operating income for the three- and six-month periods ended May 31, 2015 is a gain of
$7.5 million
related to the sale of the Company's finishing and distribution facility in Turkey in the second quarter of 2015.
|
|
Item 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
|
|
•
|
Net revenues.
Compared to the
second
quarter of
2015
, consolidated net revenues was flat on a reported basis and increased
1%
on a constant-currency basis. Higher retail revenues from improved performance and expansion of our retail network in Europe and Asia were mostly offset by lower sales at wholesale in the United States.
|
|
•
|
Operating income
. Compared to the
second
quarter of
2015
, consolidated operating income increased by approximately
22%
and operating margin improved to
6%
, primarily reflecting an improvement in our gross margin and higher constant-currency revenues, partially offset by increased investments in retail and advertising and the effects of currency.
|
|
•
|
Cash flows.
Cash flows provided by operating activities were
$103.3 million
for the
six-month period
in
2016
as compared to
$102.6 million
for the same period in
2015
; the slight increase reflected higher trade receivable collections and lower payments to vendors, offset by increased investment in inventory levels.
|
|
•
|
Net revenues is primarily comprised of sales of products to wholesale customers, including franchised stores, and direct sales to consumers at our company-operated ecommerce sites and 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, as well as costs associated with our ecommerce operations.
|
|
•
|
We reflect substantially all distribution costs in selling, general and administrative expenses, including costs related to receiving and inspection at distribution centers, warehousing, shipping to our customers, handling, and certain other activities associated with our distribution network.
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||||||||||||
|
|
May 29,
2016 |
|
May 31,
2015 |
|
%
Increase
(Decrease)
|
|
May 29,
2016 |
|
May 31,
2015 |
|
May 29,
2016 |
|
May 31,
2015 |
|
%
Increase
(Decrease)
|
|
May 29,
2016 |
|
May 31,
2015 |
||||||||||||||
|
|
|
|
% of Net
Revenues
|
|
% of Net
Revenues
|
|
|
|
% of Net
Revenues
|
|
% of Net
Revenues
|
||||||||||||||||||||||
|
|
(Dollars in millions)
|
||||||||||||||||||||||||||||||||
|
Net revenues
|
$
|
1,011.6
|
|
|
$
|
1,012.2
|
|
|
(0.1
|
)%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
$
|
2,068.1
|
|
|
$
|
2,067.3
|
|
|
—
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
Cost of goods sold
|
494.4
|
|
|
512.0
|
|
|
(3.4
|
)%
|
|
48.9
|
%
|
|
50.6
|
%
|
|
991.3
|
|
|
1,030.0
|
|
|
(3.8
|
)%
|
|
47.9
|
%
|
|
49.8
|
%
|
||||
|
Gross profit
|
517.2
|
|
|
500.2
|
|
|
3.4
|
%
|
|
51.1
|
%
|
|
49.4
|
%
|
|
1,076.8
|
|
|
1,037.3
|
|
|
3.8
|
%
|
|
52.1
|
%
|
|
50.2
|
%
|
||||
|
Selling, general and administrative expenses
|
459.4
|
|
|
449.6
|
|
|
2.2
|
%
|
|
45.4
|
%
|
|
44.4
|
%
|
|
900.5
|
|
|
874.9
|
|
|
2.9
|
%
|
|
43.5
|
%
|
|
42.3
|
%
|
||||
|
Restructuring, net
|
(0.2
|
)
|
|
3.0
|
|
|
(106.5
|
)%
|
|
—
|
|
|
0.3
|
%
|
|
1.7
|
|
|
7.3
|
|
|
(77.3
|
)%
|
|
0.1
|
%
|
|
0.4
|
%
|
||||
|
Operating income
|
58.0
|
|
|
47.6
|
|
|
21.9
|
%
|
|
5.7
|
%
|
|
4.7
|
%
|
|
174.6
|
|
|
155.1
|
|
|
12.6
|
%
|
|
8.4
|
%
|
|
7.5
|
%
|
||||
|
Interest expense
|
(20.4
|
)
|
|
(21.9
|
)
|
|
(6.9
|
)%
|
|
(2.0
|
)%
|
|
(2.2
|
)%
|
|
(35.3
|
)
|
|
(45.3
|
)
|
|
(21.9
|
)%
|
|
(1.7
|
)%
|
|
(2.2
|
)%
|
||||
|
Loss on early extinguishment of debt
|
—
|
|
|
(14.0
|
)
|
|
(100.0
|
)%
|
|
—
|
|
|
(1.4
|
)%
|
|
—
|
|
|
(14.0
|
)
|
|
(100.0
|
)%
|
|
—
|
|
|
(0.7
|
)%
|
||||
|
Other income (expense), net
|
4.3
|
|
|
7.6
|
|
|
(43.8
|
)%
|
|
0.4
|
%
|
|
0.8
|
%
|
|
2.1
|
|
|
(18.4
|
)
|
|
(111.3
|
)%
|
|
0.1
|
%
|
|
(0.9
|
)%
|
||||
|
Income before income taxes
|
41.9
|
|
|
19.3
|
|
|
116.8
|
%
|
|
4.1
|
%
|
|
1.9
|
%
|
|
141.4
|
|
|
77.4
|
|
|
82.6
|
%
|
|
6.8
|
%
|
|
3.7
|
%
|
||||
|
Income tax expense
|
10.9
|
|
|
7.8
|
|
|
37.7
|
%
|
|
1.1
|
%
|
|
0.8
|
%
|
|
44.0
|
|
|
27.7
|
|
|
58.9
|
%
|
|
2.1
|
%
|
|
1.3
|
%
|
||||
|
Net income
|
31.0
|
|
|
11.5
|
|
|
171.2
|
%
|
|
3.1
|
%
|
|
1.1
|
%
|
|
97.4
|
|
|
49.7
|
|
|
95.7
|
%
|
|
4.7
|
%
|
|
2.4
|
%
|
||||
|
Net (income) loss attributable to noncontrolling interest
|
(0.3
|
)
|
|
0.2
|
|
|
(240.2
|
)%
|
|
—
|
|
|
—
|
|
|
(0.8
|
)
|
|
0.4
|
|
|
(327.0
|
)%
|
|
—
|
|
|
—
|
|
||||
|
Net income attributable to Levi Strauss & Co.
|
$
|
30.7
|
|
|
$
|
11.7
|
|
|
162.8
|
%
|
|
3.0
|
%
|
|
1.2
|
%
|
|
$
|
96.6
|
|
|
$
|
50.1
|
|
|
92.8
|
%
|
|
4.7
|
%
|
|
2.4
|
%
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||||||
|
|
|
|
|
|
% Increase
(Decrease)
|
|
|
|
|
|
% Increase
(Decrease)
|
||||||||||||||||
|
|
May 29,
2016 |
|
May 31,
2015 |
|
As
Reported
|
|
Constant
Currency
|
|
May 29,
2016 |
|
May 31,
2015 |
|
As
Reported
|
|
Constant
Currency
|
||||||||||||
|
|
(Dollars in millions)
|
||||||||||||||||||||||||||
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Americas
|
$
|
589.3
|
|
|
$
|
621.8
|
|
|
(5.2
|
)%
|
|
(4.0
|
)%
|
|
$
|
1,160.5
|
|
|
$
|
1,195.9
|
|
|
(3.0
|
)%
|
|
(1.4
|
)%
|
|
Europe
|
240.6
|
|
|
222.1
|
|
|
8.3
|
%
|
|
8.2
|
%
|
|
517.1
|
|
|
499.6
|
|
|
3.5
|
%
|
|
8.2
|
%
|
||||
|
Asia
|
181.7
|
|
|
168.3
|
|
|
8.0
|
%
|
|
12.1
|
%
|
|
390.5
|
|
|
371.8
|
|
|
5.0
|
%
|
|
10.8
|
%
|
||||
|
Total net revenues
|
$
|
1,011.6
|
|
|
$
|
1,012.2
|
|
|
(0.1
|
)%
|
|
1.3
|
%
|
|
$
|
2,068.1
|
|
|
$
|
2,067.3
|
|
|
—
|
|
|
3.0
|
%
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||
|
|
May 29,
2016 |
|
May 31,
2015 |
|
%
Increase (Decrease) |
|
May 29,
2016 |
|
May 31,
2015 |
|
%
Increase
(Decrease)
|
||||||||||
|
|
(Dollars in millions)
|
||||||||||||||||||||
|
Net revenues
|
$
|
1,011.6
|
|
|
$
|
1,012.2
|
|
|
(0.1
|
)%
|
|
$
|
2,068.1
|
|
|
$
|
2,067.3
|
|
|
—
|
|
|
Cost of goods sold
|
494.4
|
|
|
512.0
|
|
|
(3.4
|
)%
|
|
991.3
|
|
|
1,030.0
|
|
|
(3.8
|
)%
|
||||
|
Gross profit
|
$
|
517.2
|
|
|
$
|
500.2
|
|
|
3.4
|
%
|
|
$
|
1,076.8
|
|
|
$
|
1,037.3
|
|
|
3.8
|
%
|
|
Gross margin
|
51.1
|
%
|
|
49.4
|
%
|
|
|
|
52.1
|
%
|
|
50.2
|
%
|
|
|
||||||
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||||||||||||
|
|
May 29,
2016 |
|
May 31,
2015 |
|
%
Increase
(Decrease)
|
|
May 29,
2016 |
|
May 31,
2015 |
|
May 29,
2016 |
|
May 31,
2015 |
|
%
Increase
(Decrease)
|
|
May 29,
2016 |
|
May 31,
2015 |
||||||||||||||
|
|
|
|
% of Net
Revenues
|
|
% of Net
Revenues
|
|
|
|
% of Net
Revenues
|
|
% of Net
Revenues
|
||||||||||||||||||||||
|
|
(Dollars in millions)
|
||||||||||||||||||||||||||||||||
|
Selling
|
$
|
188.2
|
|
|
$
|
179.2
|
|
|
5.0
|
%
|
|
18.6
|
%
|
|
17.7
|
%
|
|
$
|
377.6
|
|
|
$
|
360.1
|
|
|
4.8
|
%
|
|
18.3
|
%
|
|
17.4
|
%
|
|
Advertising and promotion
|
70.5
|
|
|
63.5
|
|
|
10.9
|
%
|
|
7.0
|
%
|
|
6.3
|
%
|
|
128.0
|
|
|
113.8
|
|
|
12.5
|
%
|
|
6.2
|
%
|
|
5.5
|
%
|
||||
|
Administration
|
91.9
|
|
|
97.8
|
|
|
(6.1
|
)%
|
|
9.1
|
%
|
|
9.7
|
%
|
|
176.2
|
|
|
181.4
|
|
|
(2.8
|
)%
|
|
8.5
|
%
|
|
8.8
|
%
|
||||
|
Other
|
105.8
|
|
|
96.7
|
|
|
9.4
|
%
|
|
10.5
|
%
|
|
9.6
|
%
|
|
214.2
|
|
|
199.2
|
|
|
7.5
|
%
|
|
10.4
|
%
|
|
9.6
|
%
|
||||
|
Restructuring-related charges
|
3.0
|
|
|
12.4
|
|
|
(75.5
|
)%
|
|
0.3
|
%
|
|
1.2
|
%
|
|
4.5
|
|
|
20.4
|
|
|
(77.8
|
)%
|
|
0.2
|
%
|
|
1.0
|
%
|
||||
|
Total SG&A
|
$
|
459.4
|
|
|
$
|
449.6
|
|
|
2.2
|
%
|
|
45.4
|
%
|
|
44.4
|
%
|
|
$
|
900.5
|
|
|
$
|
874.9
|
|
|
2.9
|
%
|
|
43.5
|
%
|
|
42.3
|
%
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
|
May 29,
2016 |
|
May 31,
2015 |
|
%
Increase
(Decrease)
|
|
May 29,
2016 |
|
May 31,
2015 |
|
May 29,
2016 |
|
May 31,
2015 |
|
%
Increase
(Decrease)
|
|
May 29,
2016 |
|
May 31,
2015 |
|
||||||||||||||
|
|
|
|
% of Net
Revenues
|
|
% of Net
Revenues
|
|
|
|
% of Net
Revenues
|
|
% of Net
Revenues
|
|
||||||||||||||||||||||
|
|
(Dollars in millions)
|
|||||||||||||||||||||||||||||||||
|
Operating income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Americas
|
$
|
89.3
|
|
|
$
|
103.3
|
|
|
(13.6
|
)%
|
|
15.2
|
%
|
|
16.6
|
%
|
|
$
|
171.0
|
|
|
$
|
205.6
|
|
|
(16.8
|
)%
|
|
14.7
|
%
|
|
17.2
|
%
|
|
|
Europe
|
37.6
|
|
|
33.5
|
|
|
12.3
|
%
|
|
15.6
|
%
|
|
15.1
|
%
|
|
99.3
|
|
|
91.7
|
|
|
8.4
|
%
|
|
19.2
|
%
|
|
18.3
|
%
|
|
||||
|
Asia
|
15.9
|
|
|
15.0
|
|
|
5.8
|
%
|
|
8.8
|
%
|
|
8.9
|
%
|
|
62.5
|
|
|
62.4
|
|
|
0.2
|
%
|
|
16.0
|
%
|
|
16.8
|
%
|
|
||||
|
Total regional operating income
|
142.8
|
|
|
151.8
|
|
|
(6.0
|
)%
|
|
14.1
|
%
|
*
|
15.0
|
%
|
*
|
332.8
|
|
|
359.7
|
|
|
(7.5
|
)%
|
|
16.1
|
%
|
*
|
17.4
|
%
|
*
|
||||
|
Corporate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Restructuring, net
|
(0.2
|
)
|
|
3.0
|
|
|
(106.5
|
)%
|
|
—
|
|
*
|
0.3
|
%
|
*
|
1.7
|
|
|
7.3
|
|
|
(77.3
|
)%
|
|
0.1
|
%
|
*
|
0.4
|
%
|
*
|
||||
|
Restructuring-related charges
|
3.0
|
|
|
12.4
|
|
|
(75.7
|
)%
|
|
0.3
|
%
|
*
|
1.2
|
%
|
*
|
4.5
|
|
|
20.4
|
|
|
(77.8
|
)%
|
|
0.2
|
%
|
*
|
1.0
|
%
|
*
|
||||
|
Other corporate staff costs and expenses
|
81.9
|
|
|
88.8
|
|
|
(7.8
|
)%
|
|
8.1
|
%
|
*
|
8.8
|
%
|
*
|
152.0
|
|
|
176.9
|
|
|
(14.1
|
)%
|
|
7.4
|
%
|
*
|
8.6
|
%
|
*
|
||||
|
Corporate expenses
|
84.7
|
|
|
104.2
|
|
|
(18.7
|
)%
|
|
8.4
|
%
|
*
|
10.3
|
%
|
*
|
158.2
|
|
|
204.6
|
|
|
(22.7
|
)%
|
|
7.6
|
%
|
*
|
9.9
|
%
|
*
|
||||
|
Total operating income
|
$
|
58.1
|
|
|
$
|
47.6
|
|
|
22.1
|
%
|
|
5.7
|
%
|
*
|
4.7
|
%
|
*
|
$
|
174.6
|
|
|
$
|
155.1
|
|
|
12.6
|
%
|
|
8.4
|
%
|
*
|
7.5
|
%
|
*
|
|
Operating margin
|
5.7
|
%
|
|
4.7
|
%
|
|
|
|
|
|
|
|
8.4
|
%
|
|
7.5
|
%
|
|
|
|
|
|
|
|
||||||||||
|
•
|
Americas
. Currency translation
unfavorably
affected operating income in the region by approximately
$1 million
and
$3 million
for the
three- and six-month period
ended
May 29, 2016
, respectively. For both periods ended
May 29, 2016
, the decline in operating income is primarily due to lower net revenues in the region and higher advertising expenses. For the three months, these results were partially offset by an improvement in the region's gross margin.
|
|
•
|
Europe
. Currency translation
favorably
affected operating income in the region by approximately
$1 million
and unfavorably affected operating income in the region by approximately
$3 million
for the
three- and six-month period
ended
May 29, 2016
, respectively. Excluding the effect of currency, operating income and operating margin increased in both periods due to the region's higher net revenues and an improvement in the region's gross margin, partially offset by an increased investment in retail and advertising in the region.
|
|
•
|
Asia
. Currency translation
unfavorably
affected operating income in the region by approximately
$1 million
and
$5 million
for the
three- and six-month period
ended
May 29, 2016
, respectively. Excluding the effect of currency, operating income increased due to the region's higher net revenues, partially offset by increased investment in retail in the region.
|
|
|
|
Six Months Ended
|
|
||||||
|
|
|
May 29,
2016 |
|
May 31,
2015 |
|
||||
|
|
|
(Dollars in millions)
|
|
||||||
|
|
Cash provided by operating activities
|
$
|
103.3
|
|
|
$
|
102.6
|
|
|
|
|
Cash used for investing activities
|
(13.0
|
)
|
|
(36.0
|
)
|
|
||
|
|
Cash used for financing activities
|
(49.1
|
)
|
|
(67.4
|
)
|
|
||
|
|
Cash and cash equivalents
|
359.5
|
|
|
284.6
|
|
|
||
|
•
|
changes in general economic and financial conditions, and the resulting impact on the level of discretionary consumer spending for apparel and pricing trends fluctuations, and our ability to plan for and respond to the impact of those changes;
|
|
•
|
our ability to timely and effectively implement our global productivity initiative as planned, which is 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 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;
|
|
•
|
changes in or application of trade and tax laws; 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
|
|
Item 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
|
Item 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
|
Item 4.
|
MINE SAFETY DISCLOSURES
|
|
Item 5.
|
OTHER INFORMATION
|
|
Item 6.
|
EXHIBITS
|
|
10.1
|
|
Separation Agreement and General Release between Anne Rohosy and the Company, effective as of March 4, 2016. Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the Commission on March 10, 2016.*
|
|
|
|
|
|
10.2
|
|
Levi Strauss & Co. 2016 Equity Incentive Plan, as amended and restated effective April 13, 2016. Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the Commission on April 19, 2016.*
|
|
|
|
|
|
10.3
|
|
Agreement with Roy Bagattini, effective as of May 2, 2016. Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the Commission on May 6, 2016.*
|
|
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
|
|
|
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
|
|
|
|
|
|
32
|
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document. 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.
|
|
|
|
|
|
|
|
* Management contract, compensatory plan or arrangement.
|
|
Date:
|
July 11, 2016
|
|
LEVI STRAUSS & Co.
|
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ W
ADE
W. W
EBSTER
|
|
|
|
|
Wade W. Webster
Senior Vice President and Controller
(Principal Accounting Officer)
|
|
10.1
|
|
Separation Agreement and General Release between Anne Rohosy and the Company, effective as of March 4, 2016. Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the Commission on March 10, 2016.*
|
|
|
|
|
|
10.2
|
|
Levi Strauss & Co. 2016 Equity Incentive Plan, as amended and restated effective April 13, 2016. Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the Commission on April 19, 2016.*
|
|
|
|
|
|
10.3
|
|
Agreement with Roy Bagattini, effective as of May 2, 2016. Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the Commission on May 6, 2016.*
|
|
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
|
|
|
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
|
|
|
|
|
|
32
|
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document. 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.
|
|
|
|
|
|
|
|
* Management contract, compensatory plan or arrangement.
|
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
| FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
|---|
| DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
|---|
No information found
Customers
| Customer name | Ticker |
|---|---|
| The Gap, Inc. | GPS |
| Nordstrom, Inc. | JWN |
| Ross Stores, Inc. | ROST |
| The TJX Companies, Inc. | TJX |
Suppliers
| Supplier name | Ticker |
|---|---|
| Expeditors International of Washington, Inc. | EXPD |
| Eastman Chemical Company | EMN |
| Matson, Inc. | MATX |
Price
Yield
| Owner | Position | Direct Shares | Indirect Shares |
|---|