Levi Strauss & Co 10-Q for FY2020 Q1

Levi Strauss & Co (LEVI)

10-Q 2020-04-07 For: 2020-02-23

Added on April 12, 2026

About this 10-Q

Levi Strauss & Co filed this 10-Q on April 7, 2020, covering the quarter ended February 23, 2020 (FY2020 Q1).

Headline figures

Quarter ended February 23, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.51B; up 5.0% from $1.43B a year earlier
Net income: $152.69M; up 4.2% from net income of $146.58M a year earlier
Diluted EPS: $0.37; unchanged from $0.37 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →



DELAWARE		94-0905160
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)



Title of each class	Trading symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.001 par value per share	LEVI	New York Stock Exchange



Large accelerated filer ¨	Accelerated filer ¨	Emerging growth company ¨
Non-accelerated filer þ		Smaller reporting company ¨



		Page Number
PART I — FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (unaudited):
	Consolidated Balance Sheets as of February 23, 2020 and November 24, 2019	3
	Consolidated Statements of Income for the Three Months Ended February 23, 2020 and February 24, 2019	4
	Consolidated Statements of Comprehensive Income for the Three Months Ended February 23, 2020 and February 24, 2019	5
	Consolidated Statements of Stockholders' Equity as of February 23, 2020 and February 24, 2019	6
	Consolidated Statements of Cash Flows for the Three Months Ended February 23, 2020 and February 24, 2019	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 4.	Controls and Procedures	44

PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63
Item 3.	Defaults Upon Senior Securities	63
Item 4.	Mine Safety Disclosures	63
Item 5.	Other Information	63
Item 6.	Exhibits	64
SIGNATURE		65



	(Unaudited)
	February 23, 2020			November 24, 2019
	(Dollars in thousands)
ASSETS
Current Assets:
Cash and cash equivalents	$	873,564		$	934,237
Short-term investments in marketable securities	83,978			80,741
Trade receivables, net of allowance for doubtful accounts of $5,835 and $6,172	709,989			782,846
Inventories:
Raw materials	5,152			4,929
Work-in-process	3,683			3,319
Finished goods	845,866			875,944
Total inventories	854,701			884,192
Other current assets	222,767			188,170
Total current assets	2,744,999			2,870,186
Property, plant and equipment, net of accumulated depreciation of $1,073,020 and $1,054,267	460,679			529,558
Goodwill	259,534			235,788
Other intangible assets, net	50,761			42,782
Deferred tax assets, net	416,390			407,905
Operating lease right-of-use assets, net (Note 1)	1,026,486			—
Other non-current assets	156,394			146,199
Total assets	$	5,115,243		$	4,232,418

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Short-term debt	$	19,341		$	7,621
Accounts payable	304,207			360,324
Accrued salaries, wages and employee benefits	186,233			223,374
Accrued interest payable	15,911			5,350
Accrued income taxes	32,994			24,050
Accrued sales returns and allowances (Note 1)	185,830			171,113
Short-term operating lease liability (Note 1)	212,504			—
Other accrued liabilities (Note 1)	334,491			375,372
Total current liabilities	1,291,511			1,167,204
Long-term debt	994,392			1,006,745
Postretirement medical benefits	62,178			64,006
Pension liability	179,965			193,214
Long-term employee related benefits	94,597			84,957
Long-term income tax liabilities	10,823			10,486
Long-term operating lease liability (Note 1)	850,429			—
Other long-term liabilities	36,519			134,249
Total liabilities	3,520,414			2,660,861
Commitments and contingencies

Stockholders’ Equity:
Levi Strauss & Co. stockholders’ equity
Common stock — $.001 par value; 1,200,000,000 Class A shares authorized, 63,991,842 shares and 53,079,235 shares issued and outstanding as of February 23, 2020 and November 24, 2019, respectively; and 422,000,000 Class B shares authorized, 335,136,502 shares and 340,674,741 shares issued and outstanding, as of February 23, 2020 and November 24, 2019, respectively	399			394
Additional paid-in capital	601,976			657,659
Accumulated other comprehensive loss	(452,734		)	(404,986		)
Retained earnings	1,445,188			1,310,464
Total Levi Strauss & Co. stockholders’ equity	1,594,829			1,563,531
Noncontrolling interest	—			8,026
Total stockholders’ equity	1,594,829			1,571,557
Total liabilities and stockholders’ equity	$	5,115,243		$	4,232,418



þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


•	our Investor Relations page (https://levistrauss.com/investors/financial-news);


•	our company blog (https://www.levistrauss.com/unzipped-blog/);


•	our Facebook page (https://www.facebook.com/levistraussco/);


•	our LinkedIn page (https://www.linkedin.com/company/levi-strauss-&-co-);


•	our Instagram page (https://www.instagram.com/levistraussco/); and


•	our YouTube channel (https://www.youtube.com/user/levistraussvideo).



	Three Months Ended
	February 23, 2020			February 24, 2019
	(Dollars in thousands, except per share amounts) (Unaudited)
Net revenues	$	1,506,126		$	1,434,458
Cost of goods sold	666,799			651,650
Gross profit	839,327			782,808
Selling, general and administrative expenses	660,545			581,896
Operating income	178,782			200,912
Interest expense	(16,654		)	(17,544		)
Other income (expense), net	2,700			(1,646		)
Income before income taxes	164,828			181,722
Income tax expense	12,139			35,271
Net income	152,689			146,451
Net loss attributable to noncontrolling interest	—			126
Net income attributable to Levi Strauss & Co.	$	152,689		$	146,577
Earnings per common share attributable to common stockholders:
Basic	$	0.39		$	0.39
Diluted	$	0.37		$	0.37
Weighted-average common shares outstanding:
Basic	396,216,057			377,077,111
Diluted	410,068,373			393,234,825



	Levi Strauss & Co. Stockholders
	Class A & Class B Common Stock		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive (Loss)/Income			Noncontrolling Interest			Total Stockholders' Equity
	(Dollars in thousands) (Unaudited)
Balance at November 25, 2018	$	376	$	—		$	1,084,321		$	(424,584	)	$	7,346		$	667,459
Net income (loss)	—		—			146,577			—			(126		)	146,451
Other comprehensive income, net of tax	—		—			—			8,214			180			8,394
Stock-based compensation and dividends, net	—		1,497			—			—			—			1,497
Reclassification to temporary equity	—		(506		)	(23,339		)	—			—			(23,845		)
Repurchase of common stock	—		(165		)	(2,923		)	—			—			(3,088		)
Shares surrendered for tax withholdings on equity award exercises	—		(826		)	—			—			—			(826		)
Cash dividends declared ($0.29 per share)	—		—			(110,000		)	—			—			(110,000		)
Balance at February 24, 2019	$	376	$	—		$	1,094,636		$	(416,370	)	$	7,400		$	686,042

Balance at November 24, 2019	$	394	$	657,659		$	1,310,464		$	(404,986	)	$	8,026		$	1,571,557
Net income (loss)	—		—			152,689			—			—			152,689
Other comprehensive income, net of tax	—		—			—			6,696			—			6,696
Stock-based compensation and dividends, net	5		17,530			—			—			—			17,535
Employee stock purchase plan	—		2,030			—			—			—			2,030
Repurchase of common stock	—		—			(37,071		)	—			—			(37,071		)
Shares surrendered for tax withholdings on equity award exercises	—		(75,243		)	—			—			—			(75,243		)
Changes in ownership of noncontrolling interest	—		—			(8,672		)	—			(8,026		)	(16,698		)
Cumulative effect of the adoption of new accounting standards	—		—			59,708			(54,444		)	—			5,264
Cash dividends declared ($0.08 per share)	—		—			(31,930		)	—			—			(31,930		)
Balance at February 23, 2020	$	399	$	601,976		$	1,445,188		$	(452,734	)	$	—		$	1,594,829


•	our Twitter account (https://twitter.com/LeviStraussCo);



Item 1.	CONSOLIDATED FINANCIAL STATEMENTS



	Three Months Ended
	February 23, 2020			February 24, 2019
	(Dollars in thousands) (Unaudited)
Cash Flows from Operating Activities:
Net income	$	152,689		$	146,451
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	35,974			28,559
Unrealized foreign exchange (gains) losses	(2,629		)	9,046
Realized loss (gain) on settlement of forward foreign exchange contracts not designated for hedge accounting	1,988			(4,618		)
Employee benefit plans’ amortization from accumulated other comprehensive loss and settlement loss	3,591			3,422
Stock-based compensation	17,535			1,497
Other, net	2,320			(413		)
(Benefit from) provision for deferred income taxes	(15,818		)	(795		)
Change in operating assets and liabilities, net of effect of acquisition:
Trade receivables	67,767			69,672
Inventories	41,247			(48,120		)
Other current assets	(9,688		)	(6,162		)
Other non-current assets	(9,108		)	(2,251		)
Accounts payable, accrued liabilities, and operating leases, net of right-of-use assets	(51,290		)	(48,045		)
Income tax liabilities	9,115			19,496
Accrued salaries, wages and employee benefits and long-term employee related benefits	(40,527		)	(110,338		)
Other long-term liabilities	(5,283		)	(1,579		)
Net cash provided by operating activities	197,883			55,822
Cash Flows from Investing Activities:
Purchases of property, plant and equipment	(44,424		)	(36,149		)
Payments for business acquisition	(52,201		)	—
(Payments) proceeds on settlement of forward foreign exchange contracts not designated for hedge accounting	(19,326		)	55,818
Payments to acquire short-term investments	(30,121		)	(99,880		)
Proceeds from sale, maturity and collection of short-term investments	26,791			—
Net cash used for investing activities	(119,281		)	(80,211		)
Cash Flows from Financing Activities:
Proceeds from short-term credit facilities	3,419			13,442
Repayments of short-term credit facilities	(3,878		)	(12,556		)
Other short-term borrowings, net	12,480			(9,422		)
Proceeds from employee stock purchase plan	2,030			—
Repurchase of common stock	(30,074		)	(3,088		)
Repurchase of shares surrendered for tax withholdings on equity award exercises	(75,242		)	(826		)
Payments to noncontrolling interests	(14,825		)	—



	February 23, 2020						November 24, 2019
			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	$	51,495	$	51,495	$	—	$	49,207	$	49,207	$	—
Short-term investments in marketable securities	83,978				83,978		80,741		—		80,741
Derivative instruments⁽³⁾	22,293		—		22,293		16,323		—		16,323
Total	$	157,766	$	51,495	$	106,271	$	146,271	$	49,207	$	97,064
Financial liabilities carried at fair value
Derivative instruments⁽³⁾	10,848		—		10,848		8,123		—		8,123
Total	$	10,848	$	—	$	10,848	$	8,123	$	—	$	8,123


(1)	Fair values estimated using Level 1 inputs are inputs that 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.


(3)	The Company’s cash flow hedges are subject to International Swaps and Derivatives Association, Inc. master agreements. These agreements permit the net settlement of these contracts on a per-institution basis. Refer to Note 3 for more information.



	February 23, 2020				November 24, 2019
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
	(Dollars in thousands)
Financial liabilities carried at adjusted historical cost
5.00% senior notes due 2025⁽¹⁾	$	495,999	$	508,203	$	489,299	$	505,757
3.375% senior notes due 2027⁽¹⁾	514,032		545,039		522,524		556,266
Short-term borrowings	19,371		19,371		7,621		7,621
Total	$	1,029,402	$	1,072,613	$	1,019,444	$	1,069,644


(1)	Fair values are estimated using Level 1 inputs and incorporate mid-market price quotes. Level 1 inputs are inputs that consist of quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.


(1)	Included in "Other current assets" or "Other non-current assets" on the Company’s consolidated balance sheets.


(2)	Included in "Other accrued liabilities" or "Other long-term liabilities" on the Company’s consolidated balance sheets.



	February 23, 2020									November 24, 2019
	Gross Amounts of Assets / (Liabilities) Presented in the Balance Sheet			Gross Amounts Not Offset in the Balance Sheet			Net Amounts of Assets / (Liabilities)			Gross Amounts of Assets / (Liabilities) Presented in the Balance Sheet			Gross Amounts Not Offset in the Balance Sheet			Net Amounts of Assets / (Liabilities)
				Gross Amounts Not Offset in the Balance Sheet			Net Amounts of Assets / (Liabilities)						Gross Amounts Not Offset in the Balance Sheet			Net Amounts of Assets / (Liabilities)
	(Dollars in thousands)
Foreign exchange risk contracts and forward foreign exchange contracts
Financial assets	$	42,382		$	(10,685	)	$	31,697		$	21,839		$	(10,142	)	$	11,697
Financial liabilities	(30,937		)	10,685			(20,252		)	(16,290		)	10,142			(6,148		)
Total							$	11,445								$	5,549
Embedded derivative contracts
Financial assets	$	—		$	—		$	—		$	4,446		$	—		$	4,446
Financial liabilities	—			—			—			(1,795		)	—			(1,795		)
Total							$	—								$	2,651



	Amount of Gain (Loss) Recognized in OCI (Effective Portion)						Amount of Gain (Loss) Reclassified from AOCI into Net Income⁽¹⁾
	As of			As of			Three Months Ended
	February 23, 2020			November 24, 2019			February 23, 2020		February 24, 2019
	(Dollars in thousands)
Foreign exchange risk contracts	$	5,124		$	2,781		$	3,065	$	880
Realized forward foreign exchange swaps ⁽²⁾	4,637			4,637			—		—
Yen-denominated Eurobonds	(19,811		)	(19,811		)	—		—
Euro-denominated senior notes	(25,108		)	(38,171		)	—		—
Cumulative income taxes	14,335			25,606			—		—
Total	$	(20,823	)	$	(24,958	)


(2)	Prior to and during 2005, the Company used foreign exchange currency swaps to hedge the net investment in its foreign operations. For hedges that qualified for hedge accounting, the net gains were included in AOCI and are not reclassified to earnings until the related net investment position has been liquidated.



	February 23, 2020⁽¹⁾
	(Dollars in thousands)
2020	$	188,290
2021	216,259
2022	183,395
2023	147,155
2024	118,315
Thereafter	284,609
Total undiscounted future cash flows related to lease payments	1,138,023
Less: Interest	75,090
Present value of lease liabilities	$	1,062,933



	February 23, 2020
Weighted-average remaining lease term (years)	6.1
Weighted-average discount rate	2.38	%



	February 23, 2020
Cash paid for amounts included in the measurement of lease liabilities:	(Dollars in thousands)
Operating cash outflows from operating leases	$	53,378
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities⁽¹⁾	$	25,368


(1)	On January 9, 2020, Company completed an all cash tender offer for the acquisition of the remaining minority interest shares of Levi Strauss Japan K.K. Refer to Note 1 for additional information.



	Three Months Ended February 23, 2020
	Americas		Europe		Asia		Total
	(Dollars in thousands)
Net revenues by channel:
Wholesale	$	460,866	$	276,955	$	138,503	$	876,324
Direct-to-consumer	284,714		235,988		109,100		629,802
Total net revenues	$	745,580	$	512,943	$	247,603	$	1,506,126



	Three Months Ended February 24, 2019
	Americas		Europe		Asia		Total
	(Dollars in thousands)
Net revenues by channel:
Wholesale	$	483,801	$	252,933	$	132,575	$	869,309
Direct-to-consumer	233,463		211,743		119,943		565,149
Total net revenues	$	717,264	$	464,676	$	252,518	$	1,434,458


(1)	Gains and losses on forward foreign exchange contracts primarily resulted from currency fluctuations relative to negotiated contract rates. Losses in the three-month periods ended February 23, 2020 and February 24, 2019 were primarily due to unfavorable currency fluctuations relative to negotiated contract rates on positions to sell the Mexican Peso.


•	Temporary closure of a significant number of our owned and operated retail stores, which started in mainland China midway through the first fiscal quarter, and which has expanded globally;


•	Consumer confidence and consumer spending habits, including spending for the merchandise that we sell and negative trends in consumer purchasing patterns due to consumers’ disposable income, credit availability and debt levels;


•	Decreased discretionary DTC channel spending independent of store closures;


•	Decreased wholesale channel spending and increased likelihood of wholesale customer failure;