Levi Strauss & Co 10-Q for FY2021 Q1

Levi Strauss & Co (LEVI)

10-Q 2021-04-08 For: 2021-02-28

Added on April 12, 2026

About this 10-Q

Levi Strauss & Co filed this 10-Q on April 8, 2021, covering the quarter ended February 28, 2021 (FY2021 Q1).

Headline figures

Quarter ended February 28, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.31B; down 13.3% from $1.51B a year earlier
Net income: $142.5M; down 6.7% from net income of $152.69M a year earlier
Diluted EPS: $0.35; down 5.4% from $0.37 a year earlier

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


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


		Page Number

PART I — FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (unaudited):
	Consolidated Balance Sheets as of February 28, 2021 and November 29, 2020	3
	Consolidated Statements of Inc ome for the Three Months Ended February 28, 2021 and February 23, 2020	4
	Consolidated Statements of Comprehensive Income for the Three Months Ended February 28, 2021 and February 23, 2020	5
	Consolidated Statements of Stockholders' Equity as of February 28, 2021 and February 23, 2020	6
	Consolidated Statements of Cash Flows for the Three Months Ended February 28, 2021 and February 23, 2020	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	46
Item 4.	Controls and Procedures	46

PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	68
Item 3.	Defaults Upon Senior Securities	69
Item 4.	Mine Safety Disclosures	69
Item 5.	Other Information	69
Item 6.	Exhibits	70
SIGNATURE		71


	(Unaudited)
	February 28, 2021		November 29, 2020

	(Dollars in thousands)
ASSETS
Current Assets:
Cash and cash equivalents	$	1,973,602	$	1,497,155
Short-term investments in marketable securities	94,273		96,531
Trade receivables, net	600,271		540,227
Inventories	835,357		817,692
Other current assets	192,092		174,636
Total current assets	3,695,595		3,126,241
Property, plant and equipment, net	440,857		454,532
Goodwill	267,072		264,768
Other intangible assets, net	47,274		47,426
Deferred tax assets, net	517,202		497,556
Operating lease right-of-use assets, net	1,006,107		988,801
Other non-current assets	262,087		261,917
Total assets	$	6,236,194	$	5,641,241

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Short-term debt	$	8,059	$	17,631
Current maturities of long-term debt	789,283		—
Accounts payable	420,616		375,450
Accrued salaries, wages and employee benefits	165,855		179,081
Restructuring liabilities	45,300		54,723
Accrued income taxes	29,206		21,986
Accrued sales returns and allowances	193,416		185,868
Short-term operating lease liabilities	254,676		237,142
Other accrued liabilities	417,321		477,001
Total current liabilities	2,323,732		1,548,882
Long-term debt	1,262,704		1,546,700
Postretirement medical benefits	58,992		60,249
Pension liabilities	168,549		168,721
Long-term employee related benefits	97,719		94,654
Long-term operating lease liabilities	856,103		858,293
Other long-term liabilities	61,411		64,267
Total liabilities	4,829,210		4,341,766

Commitments and contingencies



Stockholders’ Equity:
Levi Strauss & Co. stockholders’ equity
Common stock — $0.001 par value; 1,200,000,000 Class A shares authorized, 80,774,783 shares and 74,352,481 shares issued and outstanding as of February 28, 2021 and November 29, 2020, respectively; and 422,000,000 Class B shares authorized, 319,050,011 shares and 323,547,674 shares issued and outstanding, as of February 28, 2021 and November 29, 2020, respectively	400		398
Additional paid-in capital	609,068		626,243
Accumulated other comprehensive loss	(443,276)		(441,446)
Retained earnings	1,240,792		1,114,280


Total stockholders’ equity	1,406,984		1,299,475
Total liabilities and stockholders’ equity	$	6,236,194	$	5,641,241


	Three Months Ended
	February 28, 2021		February 23, 2020

	(Dollars in thousands, except per share amounts) (Unaudited)
Net revenues	$	1,305,602	$	1,506,126
Cost of goods sold	545,573		666,799
Gross profit	760,029		839,327
Selling, general and administrative expenses	582,906		660,545

Operating income	177,123		178,782
Interest expense	(23,310)		(16,654)


Other income, net	858		2,700
Income before income taxes	154,671		164,828
Income tax expense	12,167		12,139
Net income	$	142,504	$	152,689


Earnings per common share attributable to common stockholders:
Basic	$	0.36	$	0.39
Diluted	$	0.35	$	0.37
Weighted-average common shares outstanding:
Basic	399,541,735		396,216,057
Diluted	411,872,771		410,068,373


☑						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


	Three Months Ended February 28, 2021
	Levi Strauss & Co. Stockholders
	Class A & Class B Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total Stockholders' Equity

	(Dollars in thousands) (Unaudited)
Balance at November 29, 2020	$	398	$	626,243	$	1,114,280	$	(441,446)	$	—	$	1,299,475
Net income	—		—		142,504		—		—		142,504
Other comprehensive loss, net of tax	—		—		—		(1,830)		—		(1,830)
Stock-based compensation and dividends, net	2		6,714		—		—		—		6,716
Employee stock purchase plan	—		1,929		—		—		—		1,929

Shares surrendered for tax withholdings on equity awards	—		(25,818)		—		—		—		(25,818)


Cash dividends declared ($0.04 per share)	—		—		(15,992)		—		—		(15,992)
Balance at February 28, 2021	$	400	$	609,068	$	1,240,792	$	(443,276)	$	—	$	1,406,984


	Three Months Ended February 23, 2020
	Levi Strauss & Co. Stockholders
	Class A & Class B Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total Stockholders' Equity

	(Dollars in thousands) (Unaudited)
Balance at November 24, 2019	$	394	$	657,659	$	1,310,464	$	(404,986)	$	8,026	$	1,571,557
Net income	—		—		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 awards	—		(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


	February 28, 2021						November 29, 2020
			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	$	73,645	$	73,645	$	—	$	71,184	$	71,184	$	—
Short-term investments in marketable securities	94,273				94,273		96,531		—		96,531
Derivative instruments(3)	4,872		—		4,872		4,904		—		4,904
Total	$	172,790	$	73,645	$	99,145	$	172,619	$	71,184	$	101,435
Financial liabilities carried at fair value
Derivative instruments(3)	17,467		—		17,467		10,735		—		10,735
Total	$	17,467	$	—	$	17,467	$	10,735	$	—	$	10,735


	February 28, 2021				November 29, 2020
	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)(2)	$	1,003,271	$	1,024,236	$	990,280	$	1,016,169
3.375% senior notes due 2027(1)	581,579		601,627		564,312		583,227
3.50% senior notes due 2031(1)	493,170		494,401		—		—
Short-term borrowings	8,081		8,081		17,648		17,648
Total	$	2,086,101	$	2,128,345	$	1,572,240	$	1,617,044


	February 28, 2021							November 29, 2020
	Gross Amounts of Assets / (Liabilities) Presented in the Balance Sheet		Gross Amounts Not Offset in the Balance Sheet		Net Amounts of Assets / (Liabilities)		Gross Amounts of Assets / (Liabilities) Presented in the Balance Sheet	Gross Amounts Not Offset in the Balance Sheet		Net Amounts of Assets / (Liabilities)


	(Dollars in thousands)
Foreign exchange risk contracts and forward foreign exchange contracts
Financial assets	$	20,570	$	(6,671)	$	13,899		$	11,426	$	(6,578)	$	4,848
Financial liabilities	(33,165)		6,671		(26,494)			(17,257)		6,578		(10,679)
Total					$	(12,595)						$	(5,831)


	Amount of Gain (Loss) Recognized in AOCI (Effective Portion)				Amount of Gain (Loss) Reclassified from AOCI into Net Income(1)
	As of February 28, 2021		As of November 29, 2020		Three Months Ended
					February 28, 2021		February 23, 2020

	(Dollars in thousands)
Foreign exchange risk contracts	$	(17,002)	$	(11,896)	$	(1,878)	$	3,065
Realized forward foreign exchange swaps (2)	4,637		4,637		—		—
Yen-denominated Eurobonds	(19,811)		(19,811)		—		—
Euro-denominated senior notes	(90,944)		(78,736)		—		—
Cumulative income taxes	34,243		31,350		—		—
Total	$	(88,877)	$	(74,456)


	Three Months Ended February 28, 2021
	Liabilities		Net Charges (Reversals)			Payments		Foreign Currency Fluctuations		Liabilities
	November 29, 2020				February 28, 2021

	(Dollars in thousands)
Severance and employee-related benefits	$	60,604	$	(810)		$	(12,091)	$	331	$	48,034
Other	417		33			(51)		7		406
Total	$	61,021	$	(777)		$	(12,142)	$	338	$	48,440


	Three Months Ended February 28, 2021(1)
	Americas		Europe		Asia		Total

	(Dollars in thousands)
Net revenues by channel:
Wholesale	$	439,292	$	281,631	$	117,836	$	838,759
Direct-to-consumer	201,980		147,395		117,468		466,843
Total net revenues	$	641,272	$	429,026	$	235,304	$	1,305,602


Item 1.			CONSOLIDATED FINANCIAL STATEMENTS


	February 28, 2021						November 29, 2020
	Assets		(Liabilities)		Derivative Net Carrying Value		Assets		(Liabilities)		Derivative Net Carrying Value
	Carrying Value		Carrying Value				Carrying Value		Carrying Value

	(Dollars in thousands)
Derivatives designated as hedging instruments
Foreign exchange risk cash flow hedges(1)	$	3,390	$	—	$	3,390	$	1,489	$	—	$	1,489
Foreign exchange risk cash flow hedges(2)	—		(12,307)		(12,307)		—		(5,036)		(5,036)
Total	$	3,390	$	(12,307)			$	1,489	$	(5,036)
Derivatives not designated as hedging instruments
Forward foreign exchange contracts(1)	$	4,872	$	(3,390)	$	1,482	$	4,902	$	(1,487)	$	3,415
Forward foreign exchange contracts(2)	12,306		(17,466)		(5,160)		5,035		(10,734)		(5,699)
Total	$	17,178	$	(20,856)			$	9,937	$	(12,221)
Non-derivatives designated as hedging instruments
Euro senior notes	$	—	$	(578,028)			$	—	$	(565,820)


Item 2.			MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


	Three Months Ended
					% Increase (Decrease)
	February 28, 2021		February 23, 2020		As Reported		Constant Currency

	(Dollars in millions)
Net revenues:
Americas	$	641.3	$	745.6	(14.0)	%	(13.4)	%
Europe	429.0		512.9		(16.4)	%	(22.3)	%
Asia	235.3		247.6		(5.0)	%	(7.7)	%
Total net revenues	$	1,305.6	$	1,506.1	(13.3)	%	(15.6)	%


	Three Months Ended February 23, 2020(1)
	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 28, 2021(1)		February 23, 2020(1)

	(Dollars in thousands)
Net revenues:
Americas	$	641,272	$	745,580
Europe	429,026		512,943
Asia	235,304		247,603
Total net revenues	$	1,305,602	$	1,506,126
Operating income:
Americas	$	130,697	$	124,039
Europe	111,122		132,436
Asia	29,299		32,668
Regional operating income	271,118		289,143



Corporate expenses	93,995		110,361
Total operating income	177,123		178,782
Interest expense	(23,310)		(16,654)


Other income, net	858		2,700
Income before income taxes	$	154,671	$	164,828



	Three Months Ended						Twelve Months Ended
	February 28, 2021			February 23, 2020				February 28, 2021		February 23, 2020

	(Dollars in millions)
	(Unaudited)
Most comparable GAAP measure:
Net income (loss)	$	142.5		$	152.7			$	(137.3)	$	401.2

Non-GAAP measure:
Net income (loss)	$	142.5		$	152.7			$	(137.3)	$	401.2
Income tax expense (benefit)	12.2			12.1				(62.5)		59.4
Interest expense	23.3			16.7				88.8		65.4
Other (income) expense, net	(0.9)			(2.7)				24.2		(6.3)
Underwriter commission paid on behalf of selling stockholders	—			—				—		24.9
Impact of changes in fair value on cash-settled stock-based compensation(1)	0.9			4.9				3.1		33.7
COVID-19 related inventory costs and other charges (2)	(4.1)			—				155.5		—
Restructuring and restructuring related charges, severance and other, net(3)	0.1			5.6				94.0		15.3
Adjusted EBIT	$	174.0		$	189.3			$	165.8	$	593.6
Depreciation and amortization(4)	35.2			34.7				137.1		130.0
Adjusted EBITDA	$	209.2		$	224.0			$	302.9	$	723.6
Adjusted EBIT margin	13.3		%	12.6		%


Date:	April 8, 2021		LEVI STRAUSS & CO.
			(Registrant)


		By:	/s/ GAVIN BROCKETT
			Gavin Brockett Senior Vice President and Global Controller
			(Principal Accounting Officer and Duly Authorized Officer)


Executive’s Signature:						/s/ ELIZABETH O'NEILL

Date:						April 2, 2021


						/s/ CHARLES V. BERGH
						Charles V. Bergh
						President and Chief Executive Officer


						/s/ HARMIT SINGH
						Harmit Singh
						Executive Vice President and Chief Financial Officer