UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended February 23, 2003
or
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number: 333-36234
LEVI STRAUSS & CO.
(Exact Name of Registrant as Specified in Its Charter)
| DELAWARE |
94-0905160 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
1155 Battery Street, San Francisco, California 94111
(Address of Principal Executive Offices)
(415) 501-6000
(Registrant’s Telephone Number, Including Area Code)
None
(Former Name, Former Address, and Former Fiscal Year, if Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).
Yes ¨ No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock $.01 par value ——— 37,278,238 shares outstanding on April 1, 2003
LEVI STRAUSS & CO.
FEBRUARY 23, 2003
| PAGE NUMBER | ||||
| PART I – FINANCIAL INFORMATION |
||||
| Item 1. |
Financial Statements (unaudited): |
|||
| Consolidated Balance Sheets as of February 23, 2003 and November 24, 2002 |
3 | |||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
21 | ||
| Item 3. |
33 | |||
| Item 4. |
35 | |||
| PART II – OTHER INFORMATION |
||||
| Item 6. |
36 | |||
| 39 | ||||
| 40 | ||||
2
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LEVI STRAUSS & CO. AND SUBSIDIARIES
(Dollars in Thousands)
(Unaudited)
| February 23, 2003 |
November 24, 2002 |
|||||||
| ASSETS |
||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ |
381,434 |
|
$ |
96,478 |
| ||
| Restricted cash |
|
244,272 |
|
|
— |
| ||
| Trade receivables, net of allowance for doubtful accounts of $22,630 in 2003 and $24,857 in 2002 |
|
547,286 |
|
|
660,516 |
| ||
| Inventories: |
||||||||
| Raw materials |
|
95,968 |
|
|
98,987 |
| ||
| Work-in-process |
|
76,699 |
|
|
74,048 |
| ||
| Finished goods |
|
494,913 |
|
|
418,679 |
| ||
| Total inventories |
|
667,580 |
|
|
591,714 |
| ||
| Deferred tax assets |
|
248,770 |
|
|
221,574 |
| ||
| Other current assets |
|
101,376 |
|
|
88,611 |
| ||
| Total current assets |
|
2,190,718 |
|
|
1,658,893 |
| ||
| Property, plant and equipment, net of accumulated depreciation of $470,027 in 2003 and $478,447 in 2002 |
|
492,138 |
|
|
482,446 |
| ||
| Goodwill |
|
199,905 |
|
|
199,905 |
| ||
| Other intangible assets |
|
44,934 |
|
|
43,505 |
| ||
| Non-current deferred tax assets |
|
563,951 |
|
|
573,844 |
| ||
| Other assets |
|
89,236 |
|
|
58,691 |
| ||
| Total Assets |
$ |
3,580,882 |
|
$ |
3,017,284 |
| ||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT |
||||||||
| Current Liabilities: |
||||||||
| Current maturities of long-term debt and short-term borrowings |
$ |
93,759 |
|
$ |
95,225 |
| ||
| Accounts payable |
|
243,300 |
|
|
292,383 |
| ||
| Restructuring reserves |
|
39,919 |
|
|
65,576 |
| ||
| Accrued liabilities |
|
234,153 |
|
|
211,834 |
| ||
| Accrued salaries, wages and employee benefits |
|
300,884 |
|
|
314,385 |
| ||
| Accrued taxes |
|
87,895 |
|
|
105,387 |
| ||
| Total current liabilities |
|
999,910 |
|
|
1,084,790 |
| ||
| Long-term debt, less current maturities |
|
2,468,727 |
|
|
1,751,752 |
| ||
| Postretirement medical benefits |
|
554,753 |
|
|
548,930 |
| ||
| Long-term employee related benefits |
|
450,957 |
|
|
527,418 |
| ||
| Long-term tax liability |
|
66,879 |
|
|
66,879 |
| ||
| Other long-term liabilities |
|
33,772 |
|
|
11,558 |
| ||
| Minority interest |
|
23,794 |
|
|
21,541 |
| ||
| Total liabilities |
|
4,598,792 |
|
|
4,012,868 |
| ||
| Stockholders’ Deficit: |
||||||||
| Common stock—$.01 par value; 270,000,000 shares authorized; 37,278,238 shares issued and outstanding |
|
373 |
|
|
373 |
| ||
| Additional paid-in capital |
|
88,808 |
|
|
88,808 |
| ||
| Accumulated deficit |
|
(1,020,371 |
) |
|
(995,881 |
) | ||
| Accumulated other comprehensive (loss) |
|
(86,720 |
) |
|
(88,884 |
) | ||
| Total stockholders’ deficit |
|
(1,017,910 |
) |
|
(995,584 |
) | ||
| Total Liabilities and Stockholders’ Deficit |
$ |
3,580,882 |
|
$ |
3,017,284 |
| ||
The accompanying notes are an integral part of these financial statements.
3
LEVI STRAUSS & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Share Data)
(Unaudited)
| Three Months Ended |
||||||||
| February 23, 2003 |
February 24, 2002 |
|||||||
| Net sales |
$ |
875,088 |
|
$ |
935,285 |
| ||
| Cost of goods sold |
|
515,641 |
|
|
536,701 |
| ||
| Gross profit |
|
359,447 |
|
|
398,584 |
| ||
| Marketing, general and administrative expenses |
|
323,533 |
|
|
298,935 |
| ||
| Other operating (income) |
|
(7,316 |
) |
|
(6,113 |
) | ||
| Restructuring charges, net of reversals |
|
(4,210 |
) |
|
— |
| ||
| Operating income |
|
47,440 |
|
|
105,762 |
| ||
| Interest expense |
|
59,679 |
|
|
48,023 |
| ||
| Other (income) expense, net |
|
27,909 |
|
|
(9,677 |
) | ||
| Income (loss) before taxes |
|
(40,148 |
) |
|
67,416 |
| ||
| Income tax expense (benefit) |
|
(15,658 |
) |
|
24,944 |
| ||
| Net income (loss) |
$ |
(24,490 |
) |
$ |
42,472 |
| ||
| Earnings (loss) per share—basic and diluted |
$ |
(0.66 |
) |
$ |
1.14 |
| ||
| Weighted-average common shares outstanding |
|
37,278,238 |
|
|
37,278,238 |
| ||
The accompanying notes are an integral part of these financial statements.
4
LEVI STRAUSS & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
| Three Months Ended |
||||||||
| February 23, 2003 |
February 24, 2002 |
|||||||
| Cash Flows from Operating Activities: |
||||||||
| Net income (loss) |
$ |
(24,490 |
) |
$ |
42,472 |
| ||
| Adjustments to reconcile net cash provided by (used for) operating activities: |
||||||||
| Depreciation and amortization |
|
14,908 |
|
|
18,228 |
| ||
| (Gain) loss on dispositions of property, plant and equipment |
|
(4,159 |
) |
|
204 |
| ||
| Unrealized foreign exchange losses (gains) |
|
11,290 |
|
|
(15,412 |
) | ||
| Decrease in trade receivables |
|
125,842 |
|
|
42,530 |
| ||
| (Increase) decrease in inventories |
|
(20,084 |
) |
|
2,075 |
| ||
| (Increase) decrease in other current assets |
|
(12,007 |
) |
|
8,006 |
| ||
| (Increase) decrease in other long-term assets |
|
(27,856 |
) |
|
520 |
| ||
| (Increase) decrease in net deferred tax assets |
|
(14,454 |
) |
|
21,770 |
| ||
| (Decrease) in accounts payable and accrued liabilities |
|
(63,141 |
) |
|
(70,247 |
) | ||
| (Decrease) in restructuring reserves |
|
(25,657 |
) |
|
(8,431 |
) | ||
| (Decrease) in accrued salaries, wages and employee benefits |
|
(47,520 |
) |
|
(8,754 |
) | ||
| (Decrease) increase in accrued taxes |
|
(13,157 |
) |
|
61,473 |
| ||
| (Decrease) increase in long-term employee benefits |
&nb | |||||||