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Registration No. 333-167687
all outstanding unregistered 73/4% Senior Notes due 2018
(€300,000,000 aggregate principal amount outstanding)
for
73/4% Senior Notes due 2018
(€300,000,000 aggregate principal amount)
which have been registered under the Securities Act of 1933
and
all outstanding unregistered 75/8% Senior Notes due 2020
($525,000,000 aggregate principal amount outstanding)
for
75/8% Senior Notes due 2020
($525,000,000 aggregate principal amount)
which have been registered under the Securities Act of 1933
• | Expires 5:00 p.m., New York City time on August 2, 2010, unless extended. | |
• | Not conditional upon any minimum principal amount of outstanding unregistered 73/4% Senior Notes due 2018 (the “old Euro Notes”) and unregistered 75/8% Senior Notes due 2020 (the “old Dollar Notes,” and together with the old Euro Notes, the “old notes”) being tendered for exchange. | |
• | All outstanding old notes that are validly tendered and not validly withdrawn will be exchanged. | |
• | Tenders of outstanding old notes may be withdrawn any time prior to 5:00 p.m., New York City time on the date of the expiration of the exchange offer. | |
• | The exchange of old notes will generally not be a taxable exchange for U.S. federal income tax purposes. | |
• | We will not receive any proceeds from the exchange offer. |
• | The terms of the exchange notes to be issued in the exchange offer for the old Euro Notes (the “Euro Exchange Notes”) are substantially similar to the old Euro Notes and the terms of the exchange notes to be issued in the exchange offer for old Dollar Notes (the “Dollar Exchange Notes,” and together with the Euro Exchange Notes, the “exchange notes”) are substantially similar to the old Dollar Notes, except, in each case, for transfer restrictions and registration rights relating to the old notes. |
• | We intend to list the Euro Exchange Notes on the Luxembourg Stock Exchange and have the Euro Exchange Notes traded on the Euro MTF Market. We do not intend to apply for listing or quotation of the exchange notes on any U.S. securities exchange or for quotation through any U.S. automated dealer quotation system. | |
• | The existing market for the Euro Exchange Notes is limited, and there is currently no public market for the Dollar Exchange Notes. |
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1155 Battery Street
San Francisco, California 94111
Attention: Treasurer
Telephone:(415) 501-3869 or(415) 501-6000
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• | changes in the level of consumer spending for apparel in view of general economic conditions, and our ability to plan for and withstand the impact of those changes; | |
• | consequences of impacts to the businesses of our wholesale customers caused by factors such as lower consumer spending, general economic conditions, changing consumer preferences and consolidations through mergers and acquisitions; | |
• | our ability to increase the number of dedicated stores for our products, including through opening and profitably operating company-operated stores; | |
• | our ability to revitalize our Dockers® brand and to introduce our mass-channel offering in new wholesale customers and markets; | |
• | our wholesale customers’ decision to modify their strategies and adjust their product mix; | |
• | our effectiveness in increasing productivity and efficiency in our operations; | |
• | our ability to implement, stabilize and optimize our ERP system throughout our business without disruption or to mitigate such disruptions; | |
• | 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 and shopping experiences; | |
• | our ability to withstand the impacts of foreign currency exchange rate fluctuations; | |
• | our dependence on key distribution channels, customers and suppliers; | |
• | our ability to respond to price, innovation and other competitive pressures in the apparel industry and on our key customers; | |
• | 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 or economic instability in countries where we do business. |
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Registration Rights Agreement | In connection with the issuance of the €300.0 million of old Euro Notes and the $525.0 million of old Dollar Notes on May 6, 2010, we entered into a registration rights agreement with the initial purchasers with respect to each series of old notes in which we agreed, among other things, to complete an exchange offer. | |
You may exchange your old notes for the applicable exchange notes, which have substantially similar terms to your old notes. The exchange offer satisfies your rights and our obligations under the registration rights agreement. After the exchange offer is over, you will not be entitled to any exchange or registration rights with respect to your old notes. | ||
The Exchange Offer | We are offering to exchange: | |
• up to €300.0 million aggregate principal amount of old Euro Notes for up to €300.0 million aggregate principal amount of Euro Exchange Notes; and | ||
• up to $525.0 million aggregate principal amount of old Dollar Notes for up to $525.0 million aggregate principal amount of Dollar Exchange Notes. | ||
You may exchange old Euro Notes only in integral multiples of €50,000 principal amount and integral multiples of €1,000 in excess thereof and old Dollar Notes only in a minimum denomination of $100,000 and integral multiples of $1,000 principal amount in excess thereof. | ||
Purpose and Effect | The purpose of the exchange offer is to give you the opportunity to exchange your old notes for exchange notes that have been registered under the Securities Act. After the exchange offer, we will be subject to the informational requirements of the Exchange Act and will file reports and other information with the SEC to which each holder of old notes, if any are outstanding after the exchange offer, and exchange notes will have access. | |
Resale | Except as indicated in this prospectus, we believe that the exchange notes may be offered for resale, resold and otherwise transferred without compliance with the registration and prospectus delivery requirements of the Securities Act provided that: | |
• you are acquiring the exchange notes in the ordinary course of your business; | ||
• you are not participating, do not intend to participate and have no arrangement or understanding with any person to participate in the distribution of the exchange notes; |
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• you are not a broker-dealer who purchased the old notes directly from us for resale pursuant to Rule 144A or any other available exemption under the Securities Act; and | ||
• you are not our “affiliate,” as defined in Rule 405 under the Securities Act. | ||
Our belief is based on existing interpretations of the Securities Act by the staff of the SEC set forth in several no-action letters to third parties. We do not intend to seek a no-action letter, and there is no assurance that the staff of the SEC would make a similar determination with respect to the exchange notes. If this interpretation is inapplicable, and you transfer any exchange notes without delivering a prospectus meeting the requirements of the Securities Act or without an exemption from such requirements, you may incur liability under the Securities Act. We do not assume, or indemnify holders against, such liability. | ||
Each broker-dealer that is issued exchange notes for its own account in exchange for old notes that were acquired by the broker-dealer as a result of market-making activities or other trading activities must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of the exchange notes. To the extent described in “Plan of Distribution,” a broker-dealer may use this prospectus for an offer to resell, resale or other retransfer of the exchange notes. | ||
Expiration of the Exchange Offer; Withdrawal of Tender | The exchange offer will expire at 5:00 p.m., New York City time, on August 2, 2010, or a later date and time to which we may extend it. We do not currently intend to extend the expiration of the exchange offer. You may withdraw your tender of old notes pursuant to the exchange offer at any time before expiration of the exchange offer. Any old notes not accepted for exchange for any reason will be returned without expense to you promptly after the expiration or termination of the exchange offer. | |
Conditions to the Exchange Offer | We will not be required to accept old notes for exchange: | |
• if the exchange offer would be unlawful or would violate any interpretation of the SEC staff; or | ||
• if any legal action has been instituted or threatened that would impair our ability to proceed with the exchange offer. | ||
The exchange offer is not conditioned on any minimum aggregate principal amount of old notes being tendered. Please read “The Exchange Offer — Conditions” for more information about the conditions to the exchange offer. | ||
Procedures for Tendering Old Notes | We have forwarded to you, along with this prospectus, a letter of transmittal relating to this exchange offer. Because all of the old notes are held in book-entry accounts maintained by the exchange agent at DTC, Euroclear or Clearstream, Luxembourg, a holder need not submit a letter of transmittal. However, all holders who exchange their old notes for exchange notes in accordance with the procedures outlined below will be deemed to have acknowledged receipt of, and |
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agreed to be bound by, and to have made all of the representations and warranties contained in the letter of transmittal. | ||
Holders of old Dollar Notes hold their notes through DTC. Holders of old Euro Notes hold their Euro Notes through Euroclear or Clearstream, Luxembourg, which are participants in DTC. | ||
To tender in the exchange offer, a holder must comply with the following procedures, as applicable: | ||
Holders of old notes through DTC: If you wish to exchange your old notes and either you or your registered holder hold your old notes (either old Euro Notes or old Dollar Notes) in book-entry form directly through DTC, you must submit an instruction and follow the procedures for book-entry transfer as provided under “The Exchange Offer — Book-Entry Transfer.” | ||
Holders of old notes through Euroclear or Clearstream, Luxembourg: If you wish to exchange your old notes and either you or your registered holder hold your old notes (either old Euro Notes or old Dollar Notes) in book-entry form directly through Euroclear or Clearstream, Luxembourg, you should be aware that pursuant to their internal guidelines, Euroclear and Clearstream, Luxembourg will automatically exchange your old notes for exchange notes.If you do not wish to participate in the exchange offer, you must instruct Euroclear or Clearstream, Luxembourg, as the case may be, to “Take No Action”; otherwise your old notes will automatically be tendered in the exchange offer, and you will be deemed to have agreed to be bound by the terms of the letter of transmittal. | ||
Only a registered holder of record of old notes may tender old notes in the exchange offer. If you are a beneficial owner of old notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, you may request your respective broker, dealer, commercial bank, trust company or other nominee to effect the above transactions for you. Alternatively, if you are a beneficial owner and you wish to act on your own behalf in connection with the exchange offer, you must either make appropriate arrangements to register ownership of the old notes in your name or obtain a properly completed bond power from the registered holder. | ||
By signing or agreeing to be bound by the letter of transmittal, you will represent to us that, among other things: | ||
• any exchange notes that you receive will be acquired in the ordinary course of your business; | ||
• you have no arrangement or understanding with any person to participate in the distribution of the old notes or the exchange notes; | ||
• you are not our affiliate; | ||
• if you are not a broker-dealer, you are not engaged in and do not intend to engage in the distribution of the exchange notes; and | ||
• if you are a broker-dealer that will receive exchange notes for your own account in exchange for old notes that you acquired as a result of market-making activities or other trading activities, you will |
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deliver a prospectus in connection with any resale of such exchange notes. | ||
Effect on Holders of Old Notes | If you are a holder of old notes and you do not tender your old notes in the exchange offer, you will continue to hold your old notes and will be entitled to all the rights and subject to all the limitations applicable to the old notes in the indentures. | |
The trading market for old notes could be adversely affected if some but not all of the old notes are tendered and accepted in the exchange offer. | ||
Consequences of Failure to Exchange | All untendered old notes will remain subject to the restrictions on transfer provided for in the old notes and in the indentures. Generally, the old notes that are not exchanged for exchange notes pursuant to the exchange offer will remain restricted securities and may not be offered or sold unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than in connection with the exchange offer, we do not currently anticipate that we will register the old notes under the Securities Act. | |
Important Federal Income Tax Considerations | The exchange of old notes for exchange notes in the exchange offer will generally not be a taxable exchange for U.S. federal income tax purposes. See the caption “Important U.S. Federal Income Tax Considerations” for a more detailed description of the tax consequences of the exchange. | |
Use of Proceeds | We will not receive any cash proceeds from the issuance of exchange notes pursuant to the exchange offer. | |
Exchange Agent | Citibank, N.A. is the exchange agent for the exchange offer. The address and telephone number of the exchange agent are set forth under the caption “The Exchange Offer — Exchange Agent.” |
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Issuer | Levi Strauss & Co., a Delaware corporation. | |
Securities Offered | €300.0 million aggregate principal amount of 73/4% Euro Exchange Notes due 2018 and registered under the Securities Act. | |
$525.0 million aggregate principal amount of 75/8% Dollar Exchange Notes due 2020 and registered under the Securities Act. | ||
Maturity | For the Euro Exchange Notes: May 15, 2018. | |
For the Dollar Exchange Notes: May 15, 2020. | ||
Interest Payment Dates | For the Euro Exchange Notes offered by this prospectus: Semi-annually on May 15 and November 15 of each year, commencing on November 15, 2010. | |
For the Dollar Exchange Notes offered by this prospectus: Semi-annually on May 15 and November 15 of each year, commencing on November 15, 2010. | ||
Ranking | The exchange notes will be general senior obligations of Levi Strauss & Co. and will: | |
• rank equally in right of payment to all our existing and future senior unsecured debt; | ||
• rank senior in right of payment to our future debt that is expressly subordinated in right of payment to the exchange notes; | ||
• be effectively subordinated to our secured indebtedness, including indebtedness under our existing credit facilities, to the extent of the value of the collateral securing such indebtedness; and | ||
• be structurally subordinated to all of the existing and future liabilities, including trade payables, of our subsidiaries. | ||
At February 28, 2010, on an as adjusted basis to give effect to the issuance of €300.0 million of our old Euro Notes and $525.0 million of our old Dollar Notes and the application of the proceeds of such notes to the payment of our 85/8% senior notes due 2013 and our 93/4% senior notes due 2015, and the purchase of ¥10,883,500,000 of our 41/4% Eurobonds due November 22, 2016, we would have had approximately $108.3 million of secured indebtedness under the trademark tranche of our senior secured revolving credit facility and no outstanding borrowings under the revolving tranche. As of February 28, 2010, unused availability under the revolving tranche was $193.4 million, as our total availability of $273.6 million, based on collateral levels as defined by the agreement, was reduced by $80.2 million of other credit-related instruments, such as documentary and standby letters of credit allocated under the facility. In addition, our subsidiaries would have had approximately $518.3 million of liabilities, including trade payables, but excluding intercompany obligations. |
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Optional Redemption | On or after May 15, 2014, we may redeem some or all of the Euro Exchange Notes at any time at the redemption prices described in the section “Description of Exchange Notes — Optional Redemption.” On or after May 15, 2015, we may redeem some or all of the Dollar Exchange Notes at any time at the redemption prices described in the section “Description of Exchange Notes — Optional Redemption.” Prior to such dates, we may redeem some or all of the exchange notes at a redemption price of 100% of the principal amount plus accrued and unpaid interest, if any, to the redemption date, plus a “make-whole” premium. In addition, we may redeem up to 35% of the aggregate principal amount of the Euro Exchange Notes before May 15, 2013 with the proceeds of certain equity offerings at a redemption price of 107.750% of the principal amount plus accrued and unpaid interest, if any, to the redemption date, and we may redeem up to 35% of the aggregate principal amount of the Dollar Exchange Notes before May 15, 2013 with the proceeds of certain equity offerings at a redemption price of 107.625% of the principal amount plus accrued and unpaid interest, if any, to the redemption date. | |
Change in Control | If we experience certain kinds of changes of control, we must offer to purchase the exchange notes at 101% of their principal amount, plus accrued and unpaid interest. For more details, see the section “Description of Exchange Notes” under the heading “Repurchase at the Option of Holders Upon a Change of Control.” | |
Additional Amounts | Any payments made by us with respect to the Euro Exchange Notes and the old Euro Notes will be made without withholding or deduction for taxes imposed by any relevant taxing jurisdiction unless required by law. If we are required by law to withhold or deduct for taxes with respect to a payment to the holders of Euro Exchange Notes and the old Euro Notes, we will pay additional amounts necessary so that the net amount received by the holders of Euro Exchange Notes and old Euro Notes after the withholding is not less than the amount that they would have received in the absence of the withholding. See “Description of Exchange Notes — Payment of Additional Amounts.” | |
Redemption for Taxation Reasons | In the event that we become obligated to pay additional amounts (as described above) to holders of the Euro Exchange Notes as a result of changes affecting withholding taxes applicable to payments on the Euro Exchange Notes, we may redeem the Euro Exchange Notes in whole but not in part at any time at 100% of the principal amount of the Euro Exchange Notes plus accrued interest to the date of redemption. See “Description of Exchange Notes — Redemption for Tax Reasons.” | |
Certain Covenants | The indenture contains covenants that limit, among other things, our ability and the ability of some of our subsidiaries to: | |
• incur additional debt; | ||
• pay dividends or make other restricted payments; | ||
• consummate specified asset sales; | ||
• enter into transactions with affiliates; | ||
• incur liens; |
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• impose restrictions on the ability of a subsidiary to pay dividends or make payments to us and our restricted subsidiaries; | ||
• merge or consolidate with any other person; and | ||
• sell, assign, transfer, lease convey or otherwise dispose of all or substantially all of our assets or the assets of our restricted subsidiaries. | ||
If a series of exchange notes receives and maintains an investment grade rating by both Standard & Poor’s Ratings Service and Moody’s Investors Service and we and our restricted subsidiaries are and remain in compliance with the indenture governing such series of exchange notes, we and our restricted subsidiaries will not be required to comply with particular covenants contained in the indenture. For more detailed description on covenants contained in the indenture, see “Description of Exchange Notes — Certain Covenants.” | ||
Listing; Absence of Established Market for the Exchange Notes | Application will be made to list the Euro Exchange Notes on the Official List of the Luxembourg Stock Exchange and for trading on the Euro MTF Market. See “General Information.” The Euro Exchange Notes offered hereby are expected to be eligible for trading on the Luxembourg Stock Exchange on a fungible basis with the registered outstanding Euro Exchange Notes. | |
The Dollar Exchange Notes will be a new class of securities for which there is currently no established trading market. For more detailed information, see “Plan of Distribution.” |
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• | make it more difficult for us to satisfy our financial obligations, including those relating to the exchange notes, our senior term loan, our senior secured revolving credit facility and our remaining outstanding 2016 notes; | |
• | require us to dedicate a substantial portion of any cash flow from operations to the payment of interest and principal due under our debt, including the exchange notes, which will reduce funds available for other business purposes; | |
• | increase our vulnerability to general adverse economic and industry conditions; | |
• | limit our flexibility in planning for or reacting to changes in our business and industry; | |
• | place us at a competitive disadvantage compared to some of our competitors that have less debt; and | |
• | limit our ability to obtain additional financing required to fund working capital and capital expenditures and for other general corporate purposes. |
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• | require us to introduce lower-priced products or provide new or enhanced products at the same prices; | |
• | require us to reduce wholesale prices on existing products; | |
• | result in reduced gross margins across our product lines; | |
• | increase retailer demands for allowances, incentives and other forms of economic support; and | |
• | increase pressure on us to reduce our production costs and our operating expenses. |
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• | The retailers in these channels maintain — and seek to grow — substantial private-label and exclusive offerings as they strive to differentiate the brands and products they offer from those of their competitors. | |
• | These retailers may also change their apparel strategies and reduce fixture spaces and purchases of brands misaligned with their strategic requirements. | |
• | Other channels, including vertically integrated specialty stores, account for a substantial portion of jeanswear and casual wear sales. In some of our mature markets, these stores have already placed competitive pressure on our primary distribution channels, and many of these stores are now looking to our developing markets to grow their business. |
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• | currency fluctuations, which have impacted our results of operations significantly in recent years; | |
• | changes in tariffs and taxes; | |
• | regulatory restrictions on repatriating foreign funds back to the United States; | |
• | less protective foreign laws relating to intellectual property; and | |
• | political, economic and social instability. |
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• | file and cause to become effective a registration statement with respect to an offer to exchange the old notes for the exchange notes; or | |
• | in certain circumstances file and cause to become effective a shelf registration statement with respect to the resale of the old notes. |
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• | will be registered under the Securities Act; and | |
• | will not bear legends restricting their transfer. |
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• | the exchange notes to be received will not be tradeable by the holder, without restriction under the Securities Act and the Exchange Act and without material restrictions under the blue sky or securities laws of substantially all of the states of the United States; | |
• | the exchange offer, or the making of any exchange by a holder of old notes, would violate applicable law or any applicable interpretation of the staff of the SEC; or | |
• | any action or proceeding has been instituted or threatened in any court or by or before any governmental agency with respect to the exchange offer that would reasonably be expected to impair our ability to proceed with the exchange offer. |
• | the representations described under the caption “— Resale of Exchange Notes”; and | |
• | any other representations that may be reasonably necessary under applicable SEC rules, regulations or interpretations to make available to us an appropriate form for registration of the exchange notes under the Securities Act. |
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• | Holders of old notes through DTC: If you wish to exchange your old notes and either you or your registered holder hold your old notes (either old Dollar Notes or old Euro Notes) in book-entry form directly through DTC, you must submit an instruction and follow the procedures for book-entry transfer as provided under “— Book-Entry Transfer.” | |
• | Holders of old notes through Euroclear or Clearstream, Luxembourg: If you wish to exchange your old notes and either you or your registered holder hold your old notes (either old Dollar Notes or old Euro Notes) in book-entry form directly through Euroclear or Clearstream, Luxembourg, you should be aware that pursuant to their internal guidelines, Euroclear and Clearstream, Luxembourg will automatically exchange your old notes for exchange notes.If you do not wish to participate in the exchange offer, you must instruct Euroclear or Clearstream, Luxembourg, as the case may be, to “Take No Action”; otherwise your old notes will automatically be tendered in the exchange offer, and you will be deemed to have agreed to be bound by the terms of the letter of transmittal. |
• | by a registered holder who has not completed the box entitled “Special Registration Instructions” or “Special Delivery Instructions” on the letter of transmittal; or | |
• | for the account of an eligible institution. |
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• | any exchange notes that the holder receives will be acquired in the ordinary course of its business; |
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• | the holder has no arrangement or understanding with any person or entity to participate in the distribution of the exchange notes; | |
• | if the holder is not a broker-dealer, that it is not engaged in and does not intend to engage in the distribution of the exchange notes; | |
• | if the holder is a broker-dealer that will receive exchange notes for its own account in exchange for old notes that were acquired as a result of market-making activities or other trading activities, that it will deliver a prospectus, as required by law, in connection with any resale of those exchange notes (see the caption “Plan of Distribution”); and | |
• | the holder is not an “affiliate” of ours, as defined in Rule 405 of the Securities Act. |
• | specify the name of the person who tendered the old notes to be withdrawn; | |
• | identify the old notes to be withdrawn, including the certificate number or numbers and principal amount of the old notes to be withdrawn; | |
• | be signed by the person who tendered the old notes in the same manner as the original signature on the letter of transmittal, including any required signature guarantees; and | |
• | specify the name in which the old notes are to be re-registered, if different from that of the withdrawing holder. |
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To Confirm by Telephone or for Information Call:+44(0) 20-7508-3866
• | SEC registration fees; | |
• | fees and expenses of the exchange agent and trustee; | |
• | our accounting and legal fees; and | |
• | our printing and mailing costs. |
• | certificates representing old notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of old notes tendered; | |
• | exchange notes are to be delivered to, or issued in the name of, any person other than the registered holder of the old notes; |
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• | tendered old notes are registered in the name of any person other than the person signing the letter of transmittal; or | |
• | a transfer tax is imposed for any reason other than the exchange of old notes under the exchange offer. |
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As of February 28, 2010 | ||||||||
Actual | As Adjusted(1) | |||||||
(Dollars in thousands) | ||||||||
Cash and cash equivalents | $ | 315,369 | $ | 312,451 | ||||
Long-term debt: | ||||||||
Secured: | ||||||||
Senior revolving credit facility(2) | $ | 108,250 | $ | 108,250 | ||||
Total secured | 108,250 | 108,250 | ||||||
Unsecured: | ||||||||
Senior term loan due 2014 | 323,421 | 323,421 | ||||||
85/8% Euro senior notes due 2013(3) | 341,589 | — | ||||||
93/4% senior notes due 2015 | 446,210 | — | ||||||
87/8% senior notes due 2016 | 350,000 | 350,000 | ||||||
41/4% Yen-denominated Eurobonds due 2016(4) | 223,964 | 102,088 | ||||||
73/4% Euro senior notes due 2018(3) | — | 407,400 | ||||||
75/8% senior notes due 2020 | — | 525,000 | ||||||
Total unsecured | 1,685,184 | 1,707,909 | ||||||
Less: current maturities | — | — | ||||||
Total long-term debt | $ | 1,793,434 | $ | 1,816,159 | ||||
Short-term debt: | ||||||||
Short-term borrowings | $ | 27,759 | $ | 27,759 | ||||
Current maturities of long-term debt | — | — | ||||||
Total short-term debt | $ | 27,759 | $ | 27,759 | ||||
Total long-term and short-term debt | $ | 1,821,193 | $ | 1,843,918 | ||||
Total Levi Strauss & Co. stockholders’ deficit | (282,097 | ) | (293,034 | ) | ||||
Total capitalization | $ | 1,539,096 | $ | 1,550,884 | ||||
(1) | Represents the application of all of the $932.4 million gross proceeds from the offering of the old notes to (a) tender or redeem all outstanding amounts under the 85/8% Euro denominated notes due 2013 and the 93/4% senior notes due 2015, including principal of $785.6 million as of February 28, 2010; (b) pay premiums of $31.1 million in connection with prepayment of the 2013 notes and 2015 notes; (c) pay the fees and expenses for the offering of the old notes and the tender offer of $18.6 million; and (d) purchase ¥10,883,500,000 of our 41/4% Yen-denominated Eurobonds due 2016. We will amortize the fees and expenses for the offering over the life of the notes. | |
(2) | Consists of a $750.0 million revolving credit facility with a floating rate of interest that matures on October 11, 2012. See “Description of Other Indebtedness — Senior Revolving Credit Facility.” As of February 28, 2010, unused availability under the revolving credit facility was approximately $193.4 million, as our total availability of $273.6 million, based on collateral levels as defined by the agreement, was reduced by $80.2 million of other credit-related instruments, such as documentary and standby letters of credit allocated under the facility. | |
(3) | Based on a USD/Euro exchange rate of 1.358 to 1 as of February 28, 2010. | |
(4) | Based on a USD/Yen exchange rate of 1 to 89.3 as of February 28, 2010. |
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Three Months Ended | Year Ended(1) | |||||||||||||||||||||||||||
February 28, | March 1, | November 29, | November 30, | November 25, | November 26, | November 27, | ||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||
Statements of Income Data: | ||||||||||||||||||||||||||||
Net sales | $ | 1,016,007 | $ | 931,254 | $ | 4,022,854 | $ | 4,303,075 | $ | 4,266,108 | $ | 4,106,572 | $ | 4,150,931 | ||||||||||||||
Licensing revenue | 19,199 | 20,210 | 82,912 | 97,839 | 94,821 | 86,375 | 73,879 | |||||||||||||||||||||
Net revenues | 1,035,206 | 951,464 | 4,105,766 | 4,400,914 | 4,360,929 | 4,192,947 | 4,224,810 | |||||||||||||||||||||
Cost of goods sold | 502,278 | 506,343 | 2,132,361 | 2,261,112 | 2,318,883 | 2,216,562 | 2,236,962 | |||||||||||||||||||||
Gross profit | 532,928 | 445,121 | 1,973,405 | 2,139,802 | 2,042,046 | 1,976,385 | 1,987,848 | |||||||||||||||||||||
Selling, general and administrative expenses | 425,677 | 339,081 | 1,590,093 | 1,606,482 | 1,386,547 | 1,348,577 | 1,381,955 | |||||||||||||||||||||
Restructuring charges, net | — | — | 5,224 | 8,248 | 14,458 | 14,149 | 16,633 | |||||||||||||||||||||
Operating income | 107,251 | 106,040 | 378,088 | 525,072 | 641,041 | 613,659 | 589,260 | |||||||||||||||||||||
Interest expense | (34,173 | ) | (34,690 | ) | (148,718 | ) | (154,086 | ) | (215,715 | ) | (250,637 | ) | (263,650 | ) | ||||||||||||||
Loss on early extinguishment of debt | — | — | — | (1,417 | ) | (63,838 | ) | (40,278 | ) | (66,066 | ) | |||||||||||||||||
Other income (expense), net | 12,463 | 2,989 | (39,445 | ) | (303 | ) | 15,047 | 24,136 | 26,213 | |||||||||||||||||||
Income before taxes | 85,541 | 74,339 | 189,925 | 369,266 | 376,535 | 346,880 | 285,757 | |||||||||||||||||||||
Income tax expense (benefit)(2) | 29,672 | 26,349 | 39,213 | 138,884 | (84,759 | ) | 106,159 | 126,654 | ||||||||||||||||||||
Net income | 55,869 | 47,990 | 150,712 | 230,382 | 461,294 | 240,721 | 159,103 | |||||||||||||||||||||
Net loss (income) attributable to noncontrolling interest | 485 | 79 | 1,163 | (1,097 | ) | (909 | ) | (1,718 | ) | (3,156 | ) | |||||||||||||||||
Net income attributable to Levi Strauss & Co. | $ | 56,354 | $ | 48,069 | $ | 151,875 | $ | 229,285 | $ | 460,385 | $ | 239,003 | $ | 155,947 | ||||||||||||||
Statements of Cash Flow Data: | ||||||||||||||||||||||||||||
Net cash flow provided by (used for): | ||||||||||||||||||||||||||||
Operating activities | $ | 75,527 | $ | 9,659 | $ | 388,783 | $ | 224,809 | $ | 302,271 | $ | 261,880 | $ | (43,777 | ) | |||||||||||||
Investing activities(3) | (37,929 | ) | (14,677 | ) | (233,029 | ) | (26,815 | ) | (107,277 | ) | (69,597 | ) | (34,657 | ) | ||||||||||||||
Financing activities(4) | 8,398 | (17,563 | ) | (97,155 | ) | (135,460 | ) | (325,534 | ) | (155,228 | ) | 23,072 |
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Three Months Ended | Year Ended(1) | |||||||||||||||||||||||||||
February 28, | March 1, | November 29, | November 30, | November 25, | November 26, | November 27, | ||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||
Balance Sheet Data (at period end): | ||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 315,369 | $ | 186,093 | $ | 270,804 | $ | 210,812 | $ | 155,914 | $ | 279,501 | $ | 239,584 | ||||||||||||||
Working capital | 810,094 | 740,136 | 778,888 | 713,644 | 647,256 | 805,976 | 657,374 | |||||||||||||||||||||
Total assets | 2,921,417 | 2,690,195 | 2,989,381 | 2,776,875 | 2,850,666 | 2,804,065 | 2,804,134 | |||||||||||||||||||||
Total debt, excluding capital leases | 1,821,193 | 1,827,175 | 1,852,900 | 1,853,207 | 1,960,406 | 2,217,412 | 2,326,699 | |||||||||||||||||||||
Total capital leases | 6,287 | 7,224 | 7,365 | 7,806 | 8,177 | 4,694 | 5,587 | |||||||||||||||||||||
Total Levi Strauss & Co. stockholders’ deficit(5) | (282,097 | ) | (315,567 | ) | (333,119 | ) | (349,517 | ) | (398,029 | ) | (994,047 | ) | (1,222,085 | ) | ||||||||||||||
Other Financial Data: | ||||||||||||||||||||||||||||
Depreciation and amortization | 25,524 | 17,799 | 84,603 | 77,983 | 67,514 | 62,249 | 59,423 | |||||||||||||||||||||
Capital expenditures | 36,365 | 14,687 | 82,938 | 80,350 | 92,519 | 77,080 | 41,868 | |||||||||||||||||||||
Dividends paid(6) | — | — | 20,001 | 49,953 | — | — | — | |||||||||||||||||||||
Ratio of earnings to fixed charges(7) | 2.8 | x | 2.6 | x | 2.0 | x | 2.9 | x | 2.5 | x | 2.2 | x | 2.0x |
(1) | The data set forth in this table reflects our adoption in 2010 of Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51,” codified in 2009 by the FASB under ASC Subtopic810-10, and subsequently amended to require retrospective application of the presentation and disclosure requirements for noncontrolling (minority) interests (“ASC Subtopic810-10”). The financial data reported in our filings onForm 10-K, including our filing onForm 10-K for the fiscal year ended November 29, 2009, which we filed with the SEC on February 9, 2010, do not reflect our adoption of ASC Subtopic810-10. | |
(2) | In 2007, as a result of improvements in business performance and positive developments in an ongoing IRS examination, we reversed valuation allowances against our deferred tax assets for foreign tax credit carryforwards, as we believed that it was more likely than not that these credits would be utilized prior to their expiration. | |
(3) | Cash used for investing activities in 2009 reflects business acquisitions in our Americas and Europe regions. For more information, see note 3 to our audited consolidated financial statements included in this prospectus. | |
(4) | Cash used for financing activities in 2007 reflects our refinancing actions, including the redemption of all of our floating rate notes due 2012 as well as the repurchase of over 95% of our outstanding 121/4% senior notes due 2012. For more information, see note 6 to our audited consolidated financial statements included in this prospectus. | |
(5) | Stockholders’ deficit resulted primarily from a 1996 recapitalization transaction in which our stockholders created new long-term governance arrangements for us, including the voting trust and stockholders’ agreement. Funding for cash payments in the recapitalization was provided in part by cash on hand and in part from approximately $3.3 billion in borrowings under bank credit facilities. | |
(6) | We will continue to review our ability to pay cash dividends at least annually, and we may elect to declare and pay cash dividends in the future at the discretion of our board of directors and depending upon, among other factors, our financial condition and compliance with the terms of our debt agreements. | |
(7) | For the purpose of computing the ratio of earnings to fixed charges, earnings are defined as income from continuing operations before income taxes, plus fixed charges and amortization of capitalized interest. Fixed charges are defined as the sum of interest on all indebtedness, amortization of debt issuance costs, capitalized interest and that portion of rental expense which we believe to be representative of an interest factor. |
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AND RESULTS OF OPERATIONS
• | Continuing pressures in the U.S. and global economy related to the global economic downturn, access to credit, volatility in investment returns, real estate market and employment concerns, and other similar elements that impact consumer discretionary spending, are creating a challenging retail environment for us and our customers. We and our customers are responding by adjusting business practices such as tightly managing inventories. | |
• | Wholesaler/retailer dynamics are changing as the wholesale channels continue to consolidate and many of our wholesale customers face slowed growth prospects. As a result, many of our customers are building competitive exclusive or private-label offerings and desire increased returns on investment through increased margins and inventory turns. In response, many apparel wholesalers, including us, seek to strengthen relationships with customers through efforts such as investment in new products, marketing programs, fixtures and collaborative planning systems. |
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• | Many apparel companies, including us, that have traditionally relied on wholesale distribution channels continue to invest in expanding their own retail store distribution network, which has raised competitiveness in the retail market. We have increased our investment in our retail network, and will continue to do so, which while benefiting revenue and gross profit, will likely increase selling expense and capital expenditures. | |
• | Apparel markets have matured in certain geographic locations such as the United States, Japan, Western Europe and Canada, due in part to demographic shifts and the existence of appealing discretionary purchase alternatives and the increasing availability of on-trend lower-priced apparel offerings. Opportunities for major brands are increasing in rapidly growing developing markets such as India, China, Brazil and Russia. | |
• | More competitors are seeking growth globally and are raising the competitiveness of the international markets in which we already have an established presence. | |
• | The global nature of our business exposes us to earnings volatility resulting from exchange rate fluctuations. | |
• | Brand and product proliferation continues around the world as we and other companies compete through differentiated brands and products targeted for specific consumers, price-points and retail segments. In addition, the ways of marketing these brands are changing to new mediums, challenging the effectiveness of more mass-market approaches such as television advertising. | |
• | Quality low-cost sourcing alternatives continue to emerge around the world, resulting in pricing pressure and minimal barriers to entry for new competitors. This proliferation of low-cost sourcing alternatives enables competitors to attract consumers with a constant flow of competitively-priced new products that reflect the newest styles, bringing additional pressure on us and other wholesalers and retailers to shorten lead-times and reduce costs. In response, we must continue to seek efficiencies throughout our global supply chain. |
• | Net revenues. Our consolidated net revenues increased by 9% compared to the first quarter of 2009, an increase of 4% on a constant-currency basis. Increased net revenues were driven by our acquisitions in 2009 and continued growth in revenues associated with our Levi’s® brand in the Americas, while declines continued in the wholesale channel in certain markets. | |
• | Operating income. Our operating income was stable and operating margin declined slightly compared to the first quarter of 2009, as a higher gross margin, the favorable impact of currency, and the increase in our constant-currency net revenues were offset by investments in the continued expansion of our dedicated store network and advertising in support of our brands, as well as an increase in corporate expenses. | |
• | Cash flows. Cash flows provided by operating activities were $76 million for the three-month period in 2010 as compared to $10 million for the same period in 2009, reflecting our operating results and our focus on inventory management. |
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• | Net revenues. Our consolidated net revenues decreased by 7% compared to 2008, a decrease of 3% on a constant-currency basis. Increased sales from new company-operated and franchised stores, as well as growth in revenues associated with the Levi’s® brand, were more than offset by wholesale channel declines in Europe and declines in the net revenues of our Dockers® brand in the Americas. | |
• | Operating income. Our operating income decreased by $147 million, and our consolidated operating margin in 2009 declined to 9% as compared to 12% in 2008, driven by declines in our Europe region, primarily reflecting the unfavorable impact of currency, the wholesale channel declines and our continued investment in retail expansion. These declines were partially offset by our cost management initiatives as well as lower costs associated with our conversion to an enterprise resource planning (“ERP”) system in the United States. | |
• | Cash flows. Cash flows provided by operating activities were $389 million in 2009 as compared to $225 million in 2008. The impact on our operating cash flows from the decline in our net revenues was more than offset by our inventory management initiatives and lower operating expenses. Increased cash used for investing activities in 2009 reflects our business acquisitions in the Americas and Europe as well as our foreign exchange management activities. |
• | Net sales is primarily comprised of sales of products to wholesale customers, including franchised stores, and direct sales to consumers at our company-operated and online stores and at our company-operatedshop-in-shops located within department stores. It includes discounts, allowances for estimated returns and incentives. | |
• | Licensing revenue consists of 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. |
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• | Selling costs include, among other things, all occupancy costs associated with our company-operated stores and our company-operatedshop-in-shops. | |
• | We reflect substantially all distribution costs in selling, general and administrative expenses, including costs related to receiving and inspection at distribution centers, warehousing, shipping to our customers, handling, and certain other activities associated with our distribution network. |
�� | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
February 28, | March 1, | |||||||||||||||||||
% | 2010 | 2009 | ||||||||||||||||||
February 28, | March 1, | Increase | % of Net | % of Net | ||||||||||||||||
2010 | 2009 | (Decrease) | Revenues | Revenues | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Net sales | $ | 1,016.0 | $ | 931.2 | 9.1 | % | 98.1 | % | 97.9 | % | ||||||||||
Licensing revenue | 19.2 | 20.2 | (5.0 | )% | 1.9 | % | 2.1 | % | ||||||||||||
Net revenues | 1,035.2 | 951.4 | 8.8 | % | 100.0 | % | 100.0 | % | ||||||||||||
Cost of goods sold | 502.3 | 506.3 | (0.8 | )% | 48.5 | % | 53.2 | % | ||||||||||||
Gross profit | 532.9 | 445.1 | 19.7 | % | 51.5 | % | 46.8 | % | ||||||||||||
Selling, general and administrative expenses | 425.6 | 339.1 | 25.5 | % | 41.1 | % | 35.6 | % | ||||||||||||
Operating income | 107.3 | 106.0 | 1.1 | % | 10.4 | % | 11.1 | % | ||||||||||||
Interest expense | (34.2 | ) | (34.7 | ) | (1.5 | )% | (3.3 | )% | (3.6 | )% | ||||||||||
Other income, net | 12.4 | 3.0 | 317.0 | % | 1.2 | % | 0.3 | % | ||||||||||||
Income before income taxes | 85.5 | 74.3 | 15.1 | % | 8.3 | % | 7.8 | % | ||||||||||||
Income tax expense | 29.6 | 26.3 | 12.6 | % | 2.9 | % | 2.8 | % | ||||||||||||
Net income | 55.9 | 48.0 | 16.4 | % | 5.4 | % | 5.0 | % | ||||||||||||
Net loss attributable to noncontrolling interest | 0.5 | 0.1 | 513.9 | % | — | — | ||||||||||||||
Net income attributable to Levi Strauss & Co. | $ | 56.4 | $ | 48.1 | 17.2 | % | 5.4 | % | 5.1 | % | ||||||||||
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Three Months Ended | ||||||||||||||||
% Increase (Decrease) | ||||||||||||||||
February 28, | March 1, | As | Constant | |||||||||||||
2010 | 2009 | Reported | Currency | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Net revenues: | ||||||||||||||||
Americas | $ | 545.3 | $ | 503.8 | 8.2 | % | 7.0 | % | ||||||||
Europe | 306.1 | 267.3 | 14.5 | % | 6.0 | % | ||||||||||
Asia Pacific | 183.8 | 180.3 | 2.0 | % | (4.6 | )% | ||||||||||
Total net revenues | $ | 1,035.2 | $ | 951.4 | 8.8 | % | 4.4 | % | ||||||||
Three Months Ended | ||||||||||||
% | ||||||||||||
February 28, | March 1, | Increase | ||||||||||
2010 | 2009 | (Decrease) | ||||||||||
(Dollars in millions) | ||||||||||||
Net revenues | $ | 1,035.2 | $ | 951.4 | 8.8 | % | ||||||
Cost of goods sold | 502.3 | 506.3 | (0.8 | )% | ||||||||
Gross profit | $ | 532.9 | $ | 445.1 | 19.7 | % | ||||||
Gross margin | 51.5 | % | 46.8 | % |
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Three Months Ended | ||||||||||||||||||||
February 28, | March 1, | |||||||||||||||||||
% | 2010 | 2009 | ||||||||||||||||||
February 28, | March 1, | Increase | % of Net | % of Net | ||||||||||||||||
2010 | 2009 | (Decrease) | Revenues | Revenues | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Selling | $ | 156.3 | $ | 105.9 | 47.6 | % | 15.1 | % | 11.1 | % | ||||||||||
Advertising and promotion | 58.4 | 38.2 | 53.1 | % | 5.6 | % | 4.0 | % | ||||||||||||
Administration | 94.8 | 85.1 | 11.5 | % | 9.2 | % | 8.9 | % | ||||||||||||
Other | 116.1 | 109.9 | 5.7 | % | 11.2 | % | 11.6 | % | ||||||||||||
Total SG&A | $ | 425.6 | $ | 339.1 | 25.5 | % | 41.1 | % | 35.6 | % | ||||||||||
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Three Months Ended | ||||||||||||||||||||
February 28, | March 1, | |||||||||||||||||||
% | 2010 | 2009 | ||||||||||||||||||
February 28, | March 1, | Increase | % of Net | % of Net | ||||||||||||||||
2010 | 2009 | (Decrease) | Revenues | Revenues | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Operating income: | ||||||||||||||||||||
Americas | $ | 76.1 | $ | 54.2 | 40.3 | % | 14.0 | % | 10.8 | % | ||||||||||
Europe | 66.4 | 58.3 | 13.9 | % | 21.7 | % | 21.8 | % | ||||||||||||
Asia Pacific | 30.6 | 31.7 | (3.4 | )% | 16.7 | % | 17.6 | % | ||||||||||||
Total regional operating income | 173.1 | 144.2 | 20.0 | % | 16.7 | %* | 15.2 | %* | ||||||||||||
Corporate expenses | 65.8 | 38.2 | 72.4 | % | 6.4 | %* | 4.0 | %* | ||||||||||||
Total operating income | $ | 107.3 | $ | 106.0 | 1.1 | % | 10.4 | %* | 11.1 | %* | ||||||||||
Operating margin | 10.4 | % | 11.1 | % |
* | Percentage of consolidated net revenues |
• | Americas. The region’s higher operating margin and operating income were primarily driven by the improvement in gross margin, the effects of which were partially offset by the increased selling and advertising expenses in the region. | |
• | Europe. The increase in the region’s operating income was primarily due to the favorable impact of currency. The region’s operating margin was relatively consistent with the prior year as the region’s net revenue growth and gross margin improvement were offset by higher expenses, reflecting our company-operated store expansion and 2009 footwear acquisition. | |
• | Asia Pacific. The favorable impact of currency to the region’s operating income was more than offset by the sales declines in Japan. |
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Year Ended | ||||||||||||||||||||
November 29, | November 30, | |||||||||||||||||||
% | 2009 | 2008 | ||||||||||||||||||
November 29, | November 30, | Increase | % of Net | % of Net | ||||||||||||||||
2009 | 2008 | (Decrease) | Revenues | Revenues | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Net sales | $ | 4,022.9 | $ | 4,303.1 | (6.5 | )% | 98.0 | % | 97.8 | % | ||||||||||
Licensing revenue | 82.9 | 97.8 | (15.3 | )% | 2.0 | % | 2.2 | % | ||||||||||||
Net revenues | 4,105.8 | 4,400.9 | (6.7 | )% | 100.0 | % | 100.0 | % | ||||||||||||
Cost of goods sold | 2,132.4 | 2,261.1 | (5.7 | )% | 51.9 | % | 51.4 | % | ||||||||||||
Gross profit | 1,973.4 | 2,139.8 | (7.8 | )% | 48.1 | % | 48.6 | % | ||||||||||||
Selling, general and administrative expenses | 1,590.1 | 1,606.5 | (1.0 | )% | 38.7 | % | 36.5 | % | ||||||||||||
Restructuring charges, net | 5.2 | 8.2 | (36.7 | )% | 0.1 | % | 0.2 | % | ||||||||||||
Operating income | 378.1 | 525.1 | (28.0 | )% | 9.2 | % | 11.9 | % | ||||||||||||
Interest expense | (148.7 | ) | (154.1 | ) | (3.5 | )% | (3.6 | )% | (3.5 | )% | ||||||||||
Loss on early extinguishment of debt | — | (1.4 | ) | (100.0 | )% | — | — | |||||||||||||
Other expense, net | (38.3 | ) | (1.4 | ) | 2634.4 | % | (0.9 | )% | — | |||||||||||
Income before income taxes | 191.1 | 368.2 | (48.1 | )% | 4.7 | % | 8.4 | % | ||||||||||||
Income tax expense | 39.2 | 138.9 | (71.8 | )% | 1.0 | % | 3.2 | % | ||||||||||||
Net income | $ | 151.9 | $ | 229.3 | (33.8 | )% | 3.7 | % | 5.2 | % | ||||||||||
Year Ended | ||||||||||||||||
% Increase (Decrease) | ||||||||||||||||
November 29, | November 30, | As | Constant | |||||||||||||
2009 | 2008 | Reported | Currency | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Net revenues: | ||||||||||||||||
Americas | $ | 2,357.7 | $ | 2,476.4 | (4.8 | )% | (3.2 | )% | ||||||||
Europe | 1,042.1 | 1,195.6 | (12.8 | )% | (3.3 | )% | ||||||||||
Asia Pacific | 706.0 | 728.9 | (3.2 | )% | (0.9 | )% | ||||||||||
Total net revenues | $ | 4,105.8 | $ | 4,400.9 | (6.7 | )% | (2.9 | )% | ||||||||
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Year Ended | ||||||||||||
% | ||||||||||||
November 29, | November 30, | Increase | ||||||||||
2009 | 2008 | (Decrease) | ||||||||||
(Dollars in millions) | ||||||||||||
Net revenues | $ | 4,105.8 | $ | 4,400.9 | (6.7 | )% | ||||||
Cost of goods sold | 2,132.4 | 2,261.1 | (5.7 | )% | ||||||||
Gross profit | $ | 1,973.4 | $ | 2,139.8 | (7.8 | )% | ||||||
Gross margin | 48.1 | % | 48.6 | % |
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Year Ended | ||||||||||||||||||||
November 29, | November 30, | |||||||||||||||||||
% | 2009 | 2008 | ||||||||||||||||||
November 29, | November 30, | Increase | % of Net | % of Net | ||||||||||||||||
2009 | 2008 | (Decrease) | Revenues | Revenues | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Selling | $ | 498.9 | $ | 438.9 | 13.6 | % | 12.1 | % | 10.0 | % | ||||||||||
Advertising and promotion | 266.1 | 297.9 | (10.6 | )% | 6.5 | % | 6.8 | % | ||||||||||||
Administration | 366.6 | 364.3 | 0.7 | % | 8.9 | % | 8.3 | % | ||||||||||||
Other | 458.5 | 505.4 | (9.3 | )% | 11.2 | % | 11.5 | % | ||||||||||||
Total SG&A | $ | 1,590.1 | $ | 1,606.5 | (1.0 | )% | 38.7 | % | 36.5 | % | ||||||||||
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Year Ended | ||||||||||||||||||||
November 29, | November 30, | |||||||||||||||||||
% | 2009 | 2008 | ||||||||||||||||||
November 29, | November 30, | Increase | % of Net | % of Net | ||||||||||||||||
2009 | 2008 | (Decrease) | Revenues | Revenues | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Operating income: | ||||||||||||||||||||
Americas | $ | 346.3 | $ | 346.9 | (0.2 | )% | 14.7 | % | 14.0 | % | ||||||||||
Europe | 154.8 | 257.9 | (40.0 | )% | 14.9 | % | 21.6 | % | ||||||||||||
Asia Pacific | 91.0 | 99.5 | (8.6 | )% | 12.9 | % | 13.7 | % | ||||||||||||
Total regional operating income | 592.1 | 704.3 | (15.9 | )% | 14.4 | %* | 16.0 | %* | ||||||||||||
Corporate: | ||||||||||||||||||||
Restructuring charges, net | 5.2 | 8.2 | (36.7 | )% | 0.1 | %* | 0.2 | %* | ||||||||||||
Other corporate staff costs and expenses | 208.8 | 171.0 | 22.1 | % | 5.1 | %* | 3.9 | %* | ||||||||||||
Corporate expenses | 214.0 | 179.2 | 19.4 | % | 5.2 | %* | 4.1 | %* | ||||||||||||
Total operating income | $ | 378.1 | $ | 525.1 | (28.0 | )% | 9.2 | %* | 11.9 | %* | ||||||||||
Operating margin | 9.2 | % | 11.9 | % |
* | Percentage of consolidated net revenues |
• | Americas. Operating income decreased due to the unfavorable impact of currency. Excluding currency, operating income increased due to an improved operating margin, driven by the improved gross margin and lower SG&A expenses in the region. | |
• | Europe. The decrease in the region’s operating income was due to the unfavorable impact of currency, as well as a decline in operating margin. The decline in operating margin is due to the sales decline in our wholesale channel and higher expenses from our retail network, which reflects our increasing investment in company-operated store expansion and acquisitions in 2009. | |
• | Asia Pacific. Operating income decreased due to the unfavorable impact of currency, as the decline in Japan’s operating income was substantially offset by the revenue growth and lower SG&A expenses in most other markets in the region. |
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Year Ended | ||||||||||||||||||||
November 30, | November 25, | |||||||||||||||||||
% | 2008 | 2007 | ||||||||||||||||||
November 30, | November 25, | Increase | % of Net | % of Net | ||||||||||||||||
2008 | 2007 | (Decrease) | Revenues | Revenues | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Net sales | $ | 4,303.1 | $ | 4,266.1 | 0.9 | % | 97.8 | % | 97.8 | % | ||||||||||
Licensing revenue | 97.8 | 94.8 | 3.2 | % | 2.2 | % | 2.2 | % | ||||||||||||
Net revenues | 4,400.9 | 4,360.9 | 0.9 | % | 100.0 | % | 100.0 | % | ||||||||||||
Cost of goods sold | 2,261.1 | 2,318.9 | (2.5 | )% | 51.4 | % | 53.2 | % | ||||||||||||
Gross profit | 2,139.8 | 2,042.0 | 4.8 | % | 48.6 | % | 46.8 | % | ||||||||||||
Selling, general and administrative expenses | 1,606.5 | 1,386.5 | 15.9 | % | 36.5 | % | 31.8 | % | ||||||||||||
Restructuring charges, net | 8.2 | 14.5 | (43.0 | )% | 0.2 | % | 0.3 | % | ||||||||||||
Operating income | 525.1 | 641.0 | (18.1 | )% | 11.9 | % | 14.7 | % | ||||||||||||
Interest expense | (154.1 | ) | (215.7 | ) | (28.6 | )% | (3.5 | )% | (4.9 | )% | ||||||||||
Loss on early extinguishment of debt | (1.4 | ) | (63.8 | ) | (97.8 | )% | — | (1.5 | )% | |||||||||||
Other income (expense), net | (1.4 | ) | 14.1 | (109.9 | )% | — | 0.3 | % | ||||||||||||
Income before income taxes | 368.2 | 375.6 | (2.0 | )% | 8.4 | % | 8.6 | % | ||||||||||||
Income tax (benefit) expense | 138.9 | (84.8 | ) | (263.9 | )% | 3.2 | % | (1.9 | )% | |||||||||||
Net income | $ | 229.3 | $ | 460.4 | (50.2 | )% | 5.2 | % | 10.6 | % | ||||||||||
Year Ended | ||||||||||||||||
% Increase (Decrease) | ||||||||||||||||
November 30, | November 25, | As | Constant | |||||||||||||
2008 | 2007 | Reported | Currency | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Net revenues: | ||||||||||||||||
Americas | $ | 2,476.4 | $ | 2,581.3 | (4.1 | )% | (4.2 | )% | ||||||||
Europe | 1,195.6 | 1,099.7 | 8.7 | % | 0.9 | % | ||||||||||
Asia Pacific | 728.9 | 681.1 | 7.0 | % | 4.9 | % | ||||||||||
Corporate | — | (1.2 | ) | — | — | |||||||||||
Total net revenues | $ | 4,400.9 | $ | 4,360.9 | 0.9 | % | (1.4 | )% | ||||||||
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Year Ended | ||||||||||||
% | ||||||||||||
November 30, | November 25, | Increase | ||||||||||
2008 | 2007 | (Decrease) | ||||||||||
(Dollars in millions) | ||||||||||||
Net revenues | $ | 4,400.9 | $ | 4,360.9 | 0.9 | % | ||||||
Cost of goods sold | 2,261.1 | 2,318.9 | (2.5 | )% | ||||||||
Gross profit | $ | 2,139.8 | $ | 2,042.0 | 4.8 | % | ||||||
Gross margin | 48.6 | % | 46.8 | % |
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Year Ended | ||||||||||||||||||||
November 30, | November 25, | |||||||||||||||||||
% | 2008 | 2007 | ||||||||||||||||||
November 30, | November 25, | Increase | % of Net | % of Net | ||||||||||||||||
2008 | 2007 | (Decrease) | Revenues | Revenues | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Selling | $ | 438.9 | $ | 370.6 | 18.4 | % | 10.0 | % | 8.5 | % | ||||||||||
Advertising and promotion | 297.9 | 277.0 | 7.5 | % | 6.8 | % | 6.4 | % | ||||||||||||
Administration | 370.2 | 302.0 | 22.6 | % | 8.4 | % | 6.9 | % | ||||||||||||
Postretirement benefit plan curtailment gains | (5.9 | ) | (52.8 | ) | (88.7 | )% | (0.1 | )% | (1.2 | )% | ||||||||||
Other | 505.4 | 489.7 | 3.2 | % | 11.5 | % | 11.2 | % | ||||||||||||
Total SG&A | $ | 1,606.5 | $ | 1,386.5 | 15.9 | % | 36.5 | % | 31.8 | % | ||||||||||
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Year Ended | ||||||||||||||||||||
November 30, | November 25, | |||||||||||||||||||
% | 2008 | 2007 | ||||||||||||||||||
November 30, | November 25, | Increase | As % of Net | As % of Net | ||||||||||||||||
2008 | 2007 | (Decrease) | Revenues | Revenues | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Operating income: | ||||||||||||||||||||
Americas | $ | 346.9 | $ | 403.2 | (14.0 | )% | 14.0 | % | 15.6 | % | ||||||||||
Europe | 257.9 | 236.9 | 8.9 | % | 21.6 | % | 21.5 | % | ||||||||||||
Asia Pacific | 99.5 | 95.3 | 4.5 | % | 13.7 | % | 14.0 | % | ||||||||||||
Total regional operating income | 704.3 | 735.4 | (4.2 | )% | 16.0 | %* | 16.9 | %* | ||||||||||||
Corporate: | ||||||||||||||||||||
Restructuring charges, net | 8.2 | 14.5 | (43.0 | )% | 0.2 | %* | 0.3 | %* | ||||||||||||
Postretirement benefit plan curtailment gains | (5.9 | ) | (52.8 | ) | (88.7 | )% | (0.1 | )%* | (1.2 | )% | ||||||||||
Other corporate staff costs and expenses | 176.9 | 132.7 | 33.4 | % | 4.0 | %* | 3.0 | %* | ||||||||||||
Total corporate | 179.2 | 94.4 | 89.9 | % | 4.1 | %* | 2.2 | %* | ||||||||||||
Total operating income | $ | 525.1 | $ | 641.0 | (18.1 | )% | 11.9 | %* | 14.7 | %* | ||||||||||
Operating Margin | 11.9 | % | 14.7 | % |
* | Percentage of consolidated net revenues |
• | Americas. Operating income decreased primarily due to a decline in operating margin, as well as the decline in net revenues. Operating margin decreased as the region’s gross margin improvement was more than offset by the increase in SG&A expenses, reflecting our continued investment in retail expansion, our U.S. ERP implementation and stabilization efforts, and increased advertising and promotion expenses. | |
• | Europe. The increase in the region’s operating income was due to the favorable impact of currency. The region’s net sales increase was offset by an increase in SG&A expenses, primarily reflecting our continued investment in retail expansion. | |
• | Asia Pacific. The region’s net sales increase and the favorable impact of currency drove the slight increase in operating income. These increases were partially offset by a slight decline in operating margin, reflecting the region’s continued investment in retail and infrastructure, particularly within our developing markets, and increased advertising and promotion expenses. |
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Projected | ||||||||
Cash Used in | Cash Uses in | |||||||
2009 | 2010 | |||||||
(Dollars in millions) | ||||||||
Interest | $ | 136 | $ | 130 | ||||
Federal, foreign and state taxes (net of refunds) | 57 | 68 | ||||||
Postretirement health benefit plans | 19 | 22 | ||||||
Capital expenditures(1) | 83 | 166 | ||||||
Pension plans | 18 | 42 | ||||||
Business acquisitions | 100 | — | ||||||
Dividend(2) | 20 | 20 | ||||||
Total selected cash requirements | $ | 433 | $ | 448 | ||||
(1) | Capital expenditures for 2009 consisted primarily of investment in company-operated retail stores in the Americas and Europe that were not a part of the business acquisitions as well as costs associated with information technology systems. | |
The increase in projected capital expenditures in 2010 primarily reflects costs associated with information technology systems and costs associated with improvement of the Company’s headquarters. Our projection excludes approximately $16 million of tenant improvement allowances that will be paid directly by the landlord. | ||
(2) | Cash used reflects dividend paid in the second quarter of 2009. Amount projected in 2010 reflects management’s current estimate; however, the declaration, amount and payment of dividends are at the discretion of our board of directors and are dependent upon, among other factors, our financial condition and compliance with the terms of our debt agreements. |
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Payments Due or Projected by Period | ||||||||||||||||||||||||||||
Total | 2010 | 2011 | 2012 | 2013 | 2014 | Thereafter | ||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||
Contractual and Long-term Liabilities: | ||||||||||||||||||||||||||||
Short-term and long-term debt obligations(1) | $ | 1,853 | $ | 19 | $ | — | $ | 108 | $ | 375 | $ | 323 | $ | 1,028 | ||||||||||||||
Interest(2) | 653 | 130 | 129 | 129 | 110 | 86 | 69 | |||||||||||||||||||||
Capital lease obligations | 8 | 2 | 2 | 3 | 1 | — | — | |||||||||||||||||||||
Operating leases(3) | 784 | 133 | 129 | 112 | 86 | 69 | 255 | |||||||||||||||||||||
Purchase obligations(4) | 319 | 311 | 8 | — | — | — | — | |||||||||||||||||||||
Postretirement obligations(5) | 192 | 22 | 22 | 21 | 21 | 20 | 86 | |||||||||||||||||||||
Pension obligations(6) | 478 | 42 | 140 | 56 | 51 | 51 | 138 | |||||||||||||||||||||
Long-term employee related benefits(7) | 94 | 14 | 12 | 12 | 12 | 12 | 32 | |||||||||||||||||||||
Total | $ | 4,381 | $ | 673 | $ | 442 | $ | 441 | $ | 656 | $ | 561 | $ | 1,608 | ||||||||||||||
(1) | The terms of the trademark tranche of our credit facility require payments of the remaining balance at maturity in 2012. Additionally, the 2010 amount includes short-term borrowings. | |
(2) | Interest obligations are computed using constant interest rates until maturity. The LIBOR rate as of November 29, 2009, was used for variable-rate debt. | |
(3) | Amounts reflect contractual obligations relating to our existing leased facilities as of November 29, 2009, and therefore do not reflect our planned future openings of company-operated retail stores. For more information, see “Business — Properties.” | |
(4) | Amounts reflect estimated commitments of $279 million for inventory purchases and $40 million for human resources, advertising, information technology and other professional services. | |
(5) | The amounts presented in the table represent an estimate for the next ten years of our projected payments, based on information provided by our plans’ actuaries, and have not been reduced by estimated Medicare subsidy receipts. Our policy is to fund postretirement benefits as claims and premiums are paid. For more information, see Note 8 to our audited consolidated financial statements included in this prospectus. | |
(6) | The amounts presented in the table represent an estimate of our projected contributions to the plans for the next ten years based on information provided by our plans’ actuaries. For U.S qualified plans, these estimates comply with minimum funded status and minimum required contributions under the Pension Protection Act. The expected increase in 2011 and 2012 is primarily due to the reduction of the fair value of plan assets in the Company’s U.S. pension plans at November 29, 2009, as compared to the related plan obligations, however actual contributions may differ from those presented based on factors including changes in discount rates and the valuation of pension assets. For more information, see Note 8 to our audited consolidated financial statements included in this prospectus. | |
(7) | Long-term employee-related benefits relate to the current and non-current portion of deferred compensation arrangements and workers’ compensation. We estimated these payments based on prior experience and forecasted activity for these items. For more information, see Note 12 to our audited consolidated financial statements included in this prospectus. |
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Three Months Ended | Year Ended | |||||||||||||||||||
February 28, | March 1, | November 29, | November 30, | November 25, | ||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Cash provided by operating activities | $ | 75.5 | $ | 9.7 | $ | 388.8 | $ | 224.8 | $ | 302.3 | ||||||||||
Cash used for investing activities | (37.9 | ) | (14.7 | ) | (233.0 | ) | (26.8 | ) | (107.3 | ) | ||||||||||
Cash provided by (used for) financing activities | 8.4 | (17.6 | ) | (97.2 | ) | (135.5 | ) | (325.5 | ) | |||||||||||
Cash and cash equivalents | 315.4 | 186.1 | 270.8 | 210.8 | 155.9 |
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As of November 29, 2009 | As of November 30, 2008 | |||||||||||||||||||||||
Average Forward | Notional | Fair | Average Forward | Notional | Fair | |||||||||||||||||||
Exchange Rate | Amount | Value | Exchange Rate | Amount | Value | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Currency | ||||||||||||||||||||||||
Australian Dollar | 0.84 | $ | 53,061 | $ | (2,420 | ) | 0.65 | $ | 37,576 | $ | (231 | ) | ||||||||||||
Brazilian Real | 1.96 | 626 | (23 | ) | — | — | — | |||||||||||||||||
Canadian Dollar | 1.09 | 52,946 | (1,972 | ) | 1.18 | 63,065 | 2,352 | |||||||||||||||||
Swiss Franc | 1.00 | (15,246 | ) | (125 | ) | 1.20 | (6,010 | ) | (4 | ) | ||||||||||||||
Czech Koruna | 17.36 | 2,689 | 62 | 19.86 | 1,849 | (26 | ) | |||||||||||||||||
Danish Krona | 0.20 | 26,684 | 245 | 5.81 | 21,586 | (53 | ) | |||||||||||||||||
Euro(1) | 1.46 | 70,472 | (1,192 | ) | 1.31 | 209,976 | 4,255 | |||||||||||||||||
British Pound | 0.62 | 34,414 | (497 | ) | 1.63 | 4,305 | 2,289 | |||||||||||||||||
Hong Kong Dollar | 7.75 | (14 | ) | — | 7.75 | 173 | — | |||||||||||||||||
Hungarian Forint | 200.87 | (5,887 | ) | (392 | ) | 202.76 | (32,589 | ) | (970 | ) | ||||||||||||||
Japanese Yen | 93.67 | 37,704 | (3,228 | ) | 97.97 | 2,828 | (3,134 | ) | ||||||||||||||||
Korean Won | 1,224.91 | 16,745 | (824 | ) | 1,107.22 | (5,123 | ) | (1,799 | ) | |||||||||||||||
Mexican Peso | 13.94 | 30,588 | (1,623 | ) | 13.10 | 12,054 | 945 | |||||||||||||||||
Norwegian Krona | 0.17 | 8,878 | (464 | ) | 6.84 | 20,422 | 329 | |||||||||||||||||
New Zealand Dollar | 1.38 | (9,581 | ) | (270 | ) | 0.54 | (6,968 | ) | 180 | |||||||||||||||
Polish Zloty | 2.85 | (52,830 | ) | 224 | 2.85 | (22,137 | ) | (638 | ) | |||||||||||||||
Swedish Krona | 6.97 | 73,272 | 635 | 7.89 | 63,710 | 1,086 | ||||||||||||||||||
Singapore Dollar | 1.40 | (28,734 | ) | 167 | 1.46 | (29,847 | ) | (758 | ) | |||||||||||||||
Taiwan Dollar | 31.70 | 29,678 | 487 | 32.45 | 21,484 | 453 | ||||||||||||||||||
South African Rand | 8.50 | 22,961 | (2,588 | ) | 8.77 | 5,473 | 710 | |||||||||||||||||
Total | $ | 348,426 | $ | (13,798 | ) | $ | 361,827 | $ | 4,986 | |||||||||||||||
(1) | The decrease in the notional amount of Euro contracts outstanding as compared to prior year reflects our reduced exposure under management due to our 2009 prepayment of royalties related to our operations in Europe. For more information see Notes 5 and 18 to our audited consolidated financial statements included in this prospectus. |
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As of November 29, 2009 | As of | |||||||||||||||||||||||||||||||
Expected Maturity Date | Fair | November 30, | ||||||||||||||||||||||||||||||
2010(1)- | Value | 2008 | ||||||||||||||||||||||||||||||
2011 | 2012 | 2013 | 2014 | Thereafter | Total | 2009 | Total | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Debt Instruments | ||||||||||||||||||||||||||||||||
Fixed Rate (US$) | $ | — | $ | — | $ | — | $ | — | $ | 796,210 | $ | 796,210 | $ | 852,067 | $ | 796,210 | ||||||||||||||||
Average Interest Rate | — | — | — | — | 9.37 | % | 9.37 | % | ||||||||||||||||||||||||
Fixed Rate (Yen 20 billion) | — | — | — | — | 231,709 | 231,709 | 197,448 | 209,886 | ||||||||||||||||||||||||
Average Interest Rate | — | — | — | — | 4.25 | % | 4.25 | % | ||||||||||||||||||||||||
Fixed Rate (Euro 250 million) | — | — | 372,325 | — | — | 372,325 | 379,935 | 321,625 | ||||||||||||||||||||||||
Average Interest Rate | — | — | 8.63 | % | — | — | 8.63 | % | ||||||||||||||||||||||||
Variable Rate (US$) | — | 108,250 | — | 325,000 | — | 433,250 | 394,781 | 504,125 | ||||||||||||||||||||||||
Average Interest Rate(2) | — | 2.74 | % | — | 2.50 | % | — | 2.56 | % | |||||||||||||||||||||||
Total Principal (face amount) of our debt instruments | $ | — | $ | 108,250 | $ | 372,325 | $ | 325,000 | $ | 1,027,919 | $ | 1,833,494 | $ | 1,824,231 | $ | 1,831,846 |
(1) | Excludes short-term borrowings. | |
(2) | Assumes no change in short-term interest rates. Expected maturities due 2012 relate to the trademark tranche of our senior revolving credit facility. Amounts maturing thereafter relate to our Senior Term Loan due 2014. |
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• | Build upon our brands’ leadership in jeans and khakis. We intend to build upon our brand equity and our design and marketing expertise to expand the reach and appeal of our brands globally. We believe that our insights, innovation and market responsiveness enable us to create trend-right and trend-leading products and marketing programs that appeal to our existing consumer base, while also providing a solid foundation to enhance our appeal to under-served consumer segments such as women’s. We also seek to further extend our brands’ leadership in jeans and khakis into product and pricing categories that we believe offer attractive opportunities for growth. | |
• | Diversify and transform our wholesale business. We intend to develop new wholesale opportunities based on targeted consumer segments while strengthening our relationship with existing wholesale customers. We focus on generating competitive economics and engaging in collaborative volume, inventory and marketing planning to achieve mutual commercial success with our customers. Our goal is to be central to our wholesale customers’ success by using our brands and our strengths in product development and marketing to drive consumer traffic and demand to their stores. | |
• | Accelerate growth through dedicated retail stores. We continue to strategically expand our dedicated store presence around the world. We believe dedicated full-price and outlet stores represent an attractive opportunity to establish incremental distribution and sales as well as to showcase the full breadth of our product offerings and to enhance our brands’ appeal. We aim to provide a compelling and brand-elevating consumer experience in our dedicated retail stores. | |
• | Drive productivity to enable investment in initiatives intended to deliver sustained, incremental growth. We are focused on deriving greater efficiencies in our operations by increasing cost effectiveness across our regions and support functions and undertaking projects to transform our supply chain and information systems. We intend to invest the benefits of these efforts into our businesses to drive growth and to continue to build sustainability and social responsibility into all aspects of our operations, including our global sourcing arrangements. | |
• | Capitalize upon our global footprint. Our global footprint is a key factor in the success of the above strategies. We intend to leverage our expansive global presence and local-market talent to drive growth globally. We will focus on those markets that offer us the best opportunities for profitable growth, including an emphasis on fast-growing developing markets and their emerging middle-class consumers. We aim to identify global consumer trends, adapt successes from one market to another and drive growth across our brand portfolio, balancing the power of our global reach with local-market insight. |
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• | Levi’s®Red TabtmProducts. These products are the foundation of the brand. They encompass a wide range of jeans and jeanswear offered in a variety of fits, fabrics, finishes, styles and price points intended to appeal to a broad spectrum of consumers. The line is anchored by the flagship 501® jean, the original and best-selling five-pocket jean in history. The Red Tabtm line also incorporates a full range of jeanswear fits and styles designed specifically for women. Sales of Red Tabtm products represented the majority of our Levi’s® brand net sales in all three of our regions in fiscal years 2009, 2008 and 2007. | |
• | Premium Products. In addition to Levi’s® Red Tabtm premium products available around the world, we offer an expanded range of high-end products. In 2009, we consolidated the management of our most premium Levi’s® jeanswear product lines under a new division based in Amsterdam. This division will oversee the marketing and development of two global product lines: our existing Levi’s® Vintage Clothing line, which showcases our most premium products by offering detailed replicas of our historical products, and Levi’s® Made & Crafted, a recently-launched line of premium apparel. |
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• | We require all third-party contractors and subcontractors who manufacture or finish products for us to comply with our code of conduct relating to supplier working conditions as well as environmental and employment practices. We also require our licensees to ensure that their manufacturers comply with our requirements. | |
• | Our code of conduct covers employment practices such as wages and benefits, working hours, health and safety, working age and discriminatory practices, environmental matters such as wastewater treatment and solid waste disposal, and ethical and legal conduct. | |
• | We regularly assess manufacturing and finishing facilities through periodicon-site facility inspections and improvement activities, including use of independent monitors to supplement our internal staff. We integrate review and performance results into our sourcing decisions. |
• | developing products with relevant fits, finishes, fabrics, style and performance features; | |
• | maintaining favorable brand recognition and appeal through strong and effective marketing; | |
• | anticipating and responding to changing consumer demands in a timely manner; | |
• | providing sufficient retail distribution, visibility and availability, and presenting products effectively at retail; | |
• | delivering compelling value for the price; and | |
• | generating competitive economics for wholesale customers, including retailers, franchisees, and distributors. |
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Location | Primary Use | Leased/Owned | ||
Americas | ||||
Hebron, KY | Distribution | Owned | ||
Canton, MS | Distribution | Owned | ||
Henderson, NV | Distribution | Owned | ||
Westlake, TX | Data Center | Leased | ||
Etobicoke, Canada | Distribution | Owned | ||
Naucalpan, Mexico | Distribution | Leased | ||
Europe | ||||
Plock, Poland | Manufacturing and Finishing | Leased(1) | ||
Northhampton, U.K | Distribution | Owned | ||
Sabadell, Spain | Distribution | Leased | ||
Corlu, Turkey | Manufacturing, Finishing and Distribution | Owned | ||
Asia Pacific | ||||
Adelaide, Australia | Distribution | Leased | ||
Cape Town, South Africa | Manufacturing, Finishing and Distribution | Leased | ||
Hiratsuka Kanagawa, Japan | Distribution | Owned(2) |
(1) | Building and improvements are owned but subject to a ground lease. | |
(2) | Owned by our 84%-owned Japanese subsidiary. |
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Name | Age | Position | ||||
Richard L. Kauffman(2)(3) | 55 | Chairman of the Board of Directors | ||||
R. John Anderson | 58 | Director, President and Chief Executive Officer | ||||
Robert D. Haas(1)(2)(4) | 67 | Director, Chairman Emeritus | ||||
Vanessa J. Castagna(1)(4) | 60 | Director | ||||
Robert A. Eckert | 55 | Director | ||||
Peter A. Georgescu(3)(4) | 70 | Director | ||||
Peter E. Haas Jr.(1)(4) | 62 | Director | ||||
Leon J. Level(2)(3) | 69 | Director | ||||
Stephen C. Neal(2)(4) | 60 | Director | ||||
Patricia Salas Pineda(1)(4) | 58 | Director | ||||
Beng (Aaron) Keong Boey | 49 | Senior Vice President and President, Levi Strauss Asia Pacific | ||||
Armin Broger | 49 | Senior Vice President and President, Levi Strauss Europe | ||||
Robert L. Hanson | 47 | Senior Vice President and President, Levi Strauss Americas | ||||
Blake Jorgensen | 50 | Executive Vice President and Chief Financial Officer | ||||
Jaime Cohen Szulc | 47 | Senior Vice President and Chief Marketing Officer |
(1) | Member, Human Resources Committee. | |
(2) | Member, Finance Committee. | |
(3) | Member, Audit Committee. | |
(4) | Member, Nominating and Governance Committee. |
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Fees Earned | ||||||||||||||||
or Paid in | Stock | All Other | ||||||||||||||
Name | Cash | Awards(1) | Compensation | Total | ||||||||||||
T. Gary Rogers(2) | $ | 202,500 | $ | 208,532 | $ | 60,659 | $ | 471,691 | ||||||||
Robert D. Haas(3) | 100,000 | 100,504 | 217,366 | 417,870 | ||||||||||||
Vanessa J. Castagna | 100,000 | 117,580 | — | 217,580 | ||||||||||||
Martin Coles(4) | 83,334 | 68,789 | — | 152,123 | ||||||||||||
Peter A. Georgescu(5) | 110,000 | 98,554 | — | 208,554 | ||||||||||||
Peter E. Haas, Jr. | 100,000 | 98,554 | — | 198,554 | ||||||||||||
Richard Kauffman | 107,500 | 94,415 | — | 201,915 | ||||||||||||
Leon J. Level | 120,000 | 98,554 | — | 218,554 | ||||||||||||
Stephen C. Neal(6) | 100,000 | 117,580 | — | 217,580 | ||||||||||||
Patricia Salas Pineda(7) | 120,000 | 98,554 | — | 218,554 |
(1) | These amounts, from RSUs granted under the EIP in and prior to 2009, reflect the dollar amount recognized for financial statement reporting purposes for the fiscal year ended November 29, 2009. The amounts are calculated using the same valuation methodology used for financial reporting purposes and as such do not reflect the amount of compensation actually received by the director during the fiscal year. For a description of the assumptions used in the calculation of this amount for the fiscal year ended November 29, 2009, see Notes 1 and 11 of the audited consolidated financial statements included elsewhere in this prospectus. Because dividend equivalents that are issued to RSU holders upon the payment of a dividend by the Company are not expensed in the same manner as the initial RSU grant on which the dividend equivalent is based, dividend equivalents are not reflected in these amounts. The amounts shown here reflect all other RSUs granted to the director, regardless of whether such RSU has vested and been converted to a voting trust certificate representing shares of common stock. In 2009, the following issuance and vesting activities took place with respect to our directors: Mr. Rogers was issued 7,988 RSUs, 145 of which were issued as dividend equivalents, and 1,856 of his RSUs vested and were converted to a voting trust certificate representing those shares of common stock. Ms. Castagna, Mr. P.E. Haas, Mr. Level and Mr. Neal were each issued 4,005 RSUs, 83 of which were issued as dividend equivalents, and 784 of their respective RSUs vested and were converted to a voting trust certificate representing those shares of common stock. Mr. Coles was issued 5,643 RSUs, 37 of which were issued as dividend equivalents. Mr. Georgescu was issued 4,005 RSUs, 83 of |
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which were issued as dividend equivalents. Mr. R.D. Haas was issued 3,972 RSUs, 50 of which were issued as dividend equivalents. Mr. Kauffman was issued 7,018 RSUs, 66 of which were issued as dividend equivalents. Ms. Pineda was issued 4,005 RSUs, 83 of which were issued as dividend equivalents. | ||
(2) | Includes administrative support services valued at $42,266 and use of an office valued at $18,393, for his services as Chairman. Mr. Rogers retired from the Board on December 3, 2009, following the 2009 fiscal year. | |
(3) | Includes administrative support services valued at $169,064, a leased car at a value of $23,136, use of an office valued at $19,214, parking, and home security coverage for his services as Chairman Emeritus. | |
(4) | Mr. Coles resigned from the Board on January 11, 2010, following the 2009 fiscal year. | |
(5) | Per agreement with Mr. Georgescu, his spouse’s travel expenses are paid by LS&Co. when she accompanies Mr. Georgescu when he travels to LS&Co. Board meetings. | |
(6) | Mr. Neal elected to defer $75,000 under the Deferred Compensation Plan. | |
(7) | Ms. Pineda elected to defer $22,500 under the Deferred Compensation Plan. |
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• | Attract, motivate and retain high performing talent in an extremely competitive marketplace | |
• | Our ability to achieve our strategic business plans and compete effectively in the marketplace is based on our ability to attract, motivate and retain exceptional leadership talent in a highly competitive talent market. | |
• | Deliver competitive compensation for competitive results | |
• | The Company provides competitive total compensation opportunities that are intended to attract, motivate and retain a highly capable and results-driven executive team, with the majority of compensation based on the achievements of performance results. | |
• | Align the interests of our executives with those of our stockholders | |
• | LS&Co. programs offer compensation incentives designed to motivate executives to enhance total stockholder return. These programs align certain elements of compensation with our achievement of corporate growth objectives (including defined financial targets and increases in stockholder value) as well as individual performance. |
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Company Name | ||
Abercrombie & Fitch Co. | LVMH Moët Hennessy Louis Vuitton Inc | |
Alberto-Culver Company | Mattel, Inc. | |
AnnTaylor Stores Corporation | The Neiman-Marcus Group, Inc. | |
Avon Products, Inc. | NIKE, Inc. | |
The Bon-Ton Stores, Inc. | Nordstrom, Inc. | |
Charming Shoppes, Inc. | Pacific Sunwear of California, Inc. | |
The Clorox Company | J.C. Penney Company, Inc. | |
Colgate-Palmolive Company | Phillips-Van Heusen Corporation | |
Eddie Bauer Holdings, Inc. | Retail Ventures, Inc. | |
The Gap, Inc. | Revlon Inc. | |
General Mills, Inc. | Sara Lee Corporation | |
Hasbro, Inc. | The Timberland Company | |
Kellogg Company | Whirlpool Corporation | |
Kimberly-Clark Corporation | Williams-Sonoma, Inc. | |
Kohl’s Corporation | Yum! Brands Inc. | |
Limited Brands, Inc. |
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• | Base Salary | |
• | Annual Incentive Awards | |
• | Long-Term Incentive Awards | |
• | Retirement Savings and Insurance Benefits | |
• | Perquisites |
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• | Earnings before interest and taxes (“EBIT”), a non-GAAP measure that is determined by deducting from operating income, as determined under generally accepted accounting principles in the United States (“GAAP”), the following: restructuring expense, net curtailment gains from our post retirement medical plan in the United States and pension plans worldwide, and certain management-defined unusual, non-recurring SG&A expense/income items, | |
• | Days in working capital, a non-GAAP measure defined as the average days in net trade receivables, plus the average days in inventories, minus the average days in accounts payable, where averages are calculated based on ending balances over the past thirteen months, and | |
• | Net revenuesas determined under GAAP. |
• | At the beginning of 2009, when the goals for the three measures were being established, the Company considered the potential impact of the global economic challenges, anticipated to continue through 2009. These challenges were reflected in the 2009 annual business goals. As a result, the 2009 AIP funding was set |
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at a level where the payout under the AIP would be at a rate of only 80% of the employee target if the EBIT, working capital and net revenue goals were fully achieved. |
• | Actual EBIT performance compared to our EBIT goals determines initial EBIT AIP funding. | |
• | Actual days in working capital performance compared to our days in working capital goals results in a working capital modifier, which increases or decreases the initial EBIT AIP funding. | |
• | Actual net revenue performance compared to our net revenue goals determines Net Revenue AIP funding. To ensure that any incremental net revenue meets profitability goals, actual EBIT must meet or exceed our EBIT goals in order for net revenue funding to be in excess of 100%. | |
• | EBIT funding and Net Revenue funding are multiplied by the respective incentive pool funding weight and are totaled to determine the AIP funding. |
Days in | ||||||||||||||||
Working | Actual AIP | |||||||||||||||
EBIT | Capital | Net Revenue | Funding | |||||||||||||
Goal | Goal | Goal | Level* | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Total Company | $ | 400 | 84 | $ | 4,000 | 97.0 | % | |||||||||
Americas | 330 | 82 | 2,300 | 102.0 | % | |||||||||||
Europe | 190 | 104 | 1,014 | 78.0 | % | |||||||||||
Asia Pacific | 97 | 57 | 736 | 70.0 | % |
* | The funding results exclude the impacts of foreign currency exchange rate fluctuations on our business results. |
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2009 AIP | 2009 Target | 2009 AIP Actual | Payment as % | |||||||||||||
Name | Participation Rate | Amount | Award Payment | of Target | ||||||||||||
John Anderson | 110 | % | $ | 1,402,500 | $ | 1,600,000 | 114 | % | ||||||||
Blake Jorgensen(1) | 75 | % | 487,500 | 472,875 | 97 | % | ||||||||||
Armin Broger(2) | 65 | % | 723,907 | 217,172 | 30 | % | ||||||||||
Robert Hanson | 70 | % | 499,800 | 674,730 | 135 | % | ||||||||||
Aaron Boey(3) | 60 | % | 305,765 | 183,459 | 60 | % | ||||||||||
Heidi Manes(4) | 50 | % | 279,167 | 270,792 | 97 | % |
(1) | Mr. Jorgensen’s AIP target assumes full-year employment, based on the terms of his employment agreement. | |
(2) | Mr. Broger is paid in Euros. For purposes of the table, this amount was converted into U.S. Dollars using an exchange rate of 1.4914, which was the average exchange rate for the last month of the 2009 fiscal year. | |
(3) | Mr. Boey is paid in Singapore Dollars (SGD). For purposes of the table, this amount was converted into U.S. Dollars using an exchange rate of 1.3893, which was the average exchange rate for the last month of the 2009 fiscal year. | |
(4) | For the purposes of calculating Ms. Manes’ AIP target amount, her base salary includes the monthly cash bonuses paid to her in recognition for her serving as the interim CFO for the duration of the interim assignment. |
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Change in | ||||||||||||||||||||||||||||||||
Pension | ||||||||||||||||||||||||||||||||
Value and | ||||||||||||||||||||||||||||||||
Nonqualified | ||||||||||||||||||||||||||||||||
Non-Equity | Deferred | |||||||||||||||||||||||||||||||
Name and | Option | Incentive Plan | Compensation | All Other | ||||||||||||||||||||||||||||
Principal Position | Year | Salary | Bonus(2) | Awards(3) | Compensation(4) | Earnings(5) | Compensation(6) | Total | ||||||||||||||||||||||||
John Anderson | 2009 | $ | 1,275,000 | $ | — | $ | 3,468,287 | $ | 1,600,000 | $ | 121,279 | $ | 1,295,424 | $ | 7,759,990 | |||||||||||||||||
President and Chief | 2008 | 1,270,192 | — | 2,868,398 | 561,000 | — | 1,211,550 | 5,911,140 | ||||||||||||||||||||||||
Executive Officer | 2007 | 1,250,000 | — | 2,298,664 | 1,031,250 | 36,341 | 2,166,438 | 6,782,693 | ||||||||||||||||||||||||
Blake Jorgensen | 2009 | 257,500 | 250,000 | 79,029 | 472,875 | — | 1,974 | 1,061,378 | ||||||||||||||||||||||||
Chief Financial Officer | ||||||||||||||||||||||||||||||||
Armin Broger(1) | 2009 | 1,113,703 | — | 475,536 | 217,172 | — | 676,991 | 2,483,402 | ||||||||||||||||||||||||
Senior Vice President and | 2008 | 950,837 | — | 357,386 | 216,315 | — | 401,951 | 1,926,489 | ||||||||||||||||||||||||
President Levi Strauss Europe | 2007 | 812,556 | 804,430 | 218,011 | 808,398 | — | 583,619 | 3,227,014 | ||||||||||||||||||||||||
Robert Hanson | 2009 | 714,000 | — | 919,025 | 674,730 | — | 113,580 | 2,421,335 | ||||||||||||||||||||||||
Senior Vice President and | 2008 | 711,846 | — | 766,801 | 249,900 | 12,234 | 111,359 | 1,852,140 | ||||||||||||||||||||||||
President Levi Strauss Americas | 2007 | 700,769 | — | 635,597 | 400,776 | — | 128,595 | 1,865,737 | ||||||||||||||||||||||||
Aaron Boey(1) | 2009 | 483,460 | — | 34,503 | 183,459 | — | 88,534 | 789,956 | ||||||||||||||||||||||||
Senior Vice President and President Levi Strauss Asia | ||||||||||||||||||||||||||||||||
Heidi Manes | 2009 | 307,061 | — | — | 270,792 | — | 323,534 | 901,387 | ||||||||||||||||||||||||
Chief Financial Officer (Interim) | 2008 | 282,048 | — | — | 171,188 | — | 122,412 | 575,648 |
(1) | Mr. Broger is paid in Euros. For purposes of the table, his 2009 payments were converted into U.S. Dollars using an exchange rate of 1.4914, for 2008, an exchange rate of 1.2733 and for 2007, an exchange rate of 1.4626. | |
Mr. Boey is paid in Singapore Dollars. For purposes of the table, his 2009 payments were converted into U.S. Dollars using an exchange rate of 1.3893. | ||
These rates were the average exchange rates for the last month of the 2009, 2008 and 2007 fiscal years, respectively. | ||
(2) | For Mr. Jorgensen, the 2009 amount reflects a sign-on bonus of $250,000, per his employment contract. For Mr. Broger, the 2007 amount reflects a sign-on bonus of $804,430 per his employment contract. | |
(3) | These amounts reflect the dollar amount recognized for financial statement reporting purposes for the fiscal years ended November 29, 2009, November 30, 2008 and November 25, 2007 for awards granted under the EIP. The amounts are calculated using the same valuation methodology used for financial reporting purposes and as such, do not reflect the amount of compensation actually received by the named executive officer during the fiscal year. For a description of the assumptions used in the calculation of these amounts, see Notes 1 and 11 of the audited consolidated financial statements included elsewhere in this prospectus. | |
(4) | These amounts reflect the AIP awards made to the named executive officers. | |
For Mr. Broger, the 2007 amount reflects an AIP payment of $808,398 which was based on a guaranteed AIP target of 100%, per his employment contract, prorated for the number of months Mr. Broger was employed during the fiscal year. | ||
(5) | For Mr. Anderson, the 2009 amount reflects the change in his Australian pension benefits value from November 30, 2008, to November 29, 2009. | |
For Ms. Manes and Mr. Hanson, the 2009 change in U.S. pension value is due solely to changes in actuarial assumptions used in determining the present value of the benefits. These assumptions, such as discount rates, age-rating and mortality assumptions, may vary fromyear-to-year. Effective November 28, 2004, we froze our U.S. pension plan for all salaried employees. Only positive changes in pension value have been reported. | ||
For Mr. Broger, in 2008, the approach to providing a company-managed retirement plan, under the terms of his employment contract, was still in the process of being finalized at the time of reporting. It was assumed he would participate in the existing Dutch defined benefit plan, and therefore, an estimated change in pension value of $12,310 was reported in 2008. However, no actual contributions were made. In 2009, it was determined that Mr. Broger would participate in a deferred compensation/defined contribution plan, not the Dutch defined benefit plan. As a result, a plan was established and contributions retroactive to his hire date were deposited into the plan. These contributions are reflected under All Other Compensation for 2009. | ||
For Mr. Hanson, in 2007 no positive change in pension value was reported because the value of the Home Office Pension Plan declined from the 2006 pension plan measurement date to the 2007 pension plan measurement date. The decline was due to the actuarial assumptions used to determine the present value of his benefits. |
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(6) | For Mr. Anderson, the 2009 amount reflects a payment of $1,000,000, the final installment of the total amount to assist with his relocation from Singapore to San Francisco, per his employment agreement, a company 401(k) match of $17,250, a 401(k) excess plan match of $80,058, a company match of $40,392 on deferred compensation, and an executive allowance of $39,325, $19,291 of which was toward the provision of a car and $15,000 of which was for legal, financial or other similar expenses. In addition, the amount reflects a payment of $60,914 for ongoing home leave benefits and $53,719 taxgross-up of those benefits, per his employment contract. | |
For Mr. Broger, the 2009 amount reflects items provided under his employment contract using the foreign exchange rates noted above. The 2009 amount reflects $14,203 for tax administration and legal fees, $63,534 as a housing allowance, $59,334 for children’s schooling, a car provided for Mr. Broger’s use valued at $35,943, $289,226 for the purchase of individual pension insurance, a company contribution of $41,318 to his retirement savings plan and a tax protection benefit of $173,434 based on his Netherlands tax rate. | ||
For Mr. Hanson, the 2009 amount reflects a company 401(k) match of $17,250, an excess 401(k) plan match of $55,043, an executive allowance of $28,784, $23,750 of which was for legal, financial or other similar expenses, and a payment of $12,503 to reimburse the cost of cancelling a personal vacation due to company business needs. | ||
For Mr. Boey, the 2009 amount reflects a payment of $30,890 which was a bonus for his interim assignment as president of the Asia Pacific Division. The amount also reflects an executive allowance of $15,475 and $31,234 toward the provision of a car. These amounts are based on the foreign exchange rates noted above. | ||
For Ms. Manes, the 2009 amount reflects a bonus of $300,000 for her interim assignment as the Chief Financial Officer, a company 401(k) match of $11,500 and an executive allowance of $12,034. |
Estimated Future Payouts | ||||||||||||||||||||||||||||
Under Non-Equity | ||||||||||||||||||||||||||||
Incentive Plan Awards | All Other Option Awards | |||||||||||||||||||||||||||
Number of | ||||||||||||||||||||||||||||
Securities | Exercise or Base | |||||||||||||||||||||||||||
Underlying | Price of Option | Full Grant Date | ||||||||||||||||||||||||||
Name | Grant Date | Threshold | Target | Maximum | Options(1) | Awards(2) | Fair Value(3) | |||||||||||||||||||||
John Anderson | 2009 | $ | — | $ | 1,402,500 | $ | 2,805,000 | $ | 150,000 | $ | 24.75 | $ | 350,568 | |||||||||||||||
Blake Jorgensen | 2009 | — | 487,500 | 975,000 | 82,264 | 25.50 | 79,029 | |||||||||||||||||||||
Armin Broger | 2009 | — | 723,907 | 1,447,814 | 14,763 | 24.75 | 34,503 | |||||||||||||||||||||
Robert Hanson | 2009 | — | 499,800 | 999,600 | 36,908 | 24.75 | 86,258 | |||||||||||||||||||||
Aaron Boey | 2009 | — | 305,765 | 611,530 | 14,763 | 24.75 | 34,503 | |||||||||||||||||||||
Heidi Manes | 2009 | — | 279,167 | 558,334 | — | — | — |
(1) | Reflects SARs granted in 2009 under the EIP. | |
(2) | The exercise price is based on the fair market value of the Company’s common stock as of the grant date established by the independent share valuation process. | |
(3) | These amounts reflect the dollar amount recognized for financial statement reporting purposes for the fiscal year ended November 29, 2009, for awards granted under the EIP. |
Number of | ||||||||||||||||
Name | Grant Date | TSRP Units | Strike Price(1) | Payment Date | ||||||||||||
Heidi Manes | 2/5/2009 | 10,150 | $ | 24.75 | Feb. 2012 |
(1) | The exercise price is based on the fair market value of the Company’s common stock as of the grant date established by the independent share valuation process. |
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SAR Awards | ||||||||||||||||
Number of | Number of | |||||||||||||||
Securities | Securities | |||||||||||||||
Underlying | Underlying | SAR | SAR | |||||||||||||
Unexercised SARs | Unexercised SARs | Exercise | Expiration | |||||||||||||
Name | Exercisable | Unexercisable(1) | Price(2) | Date | ||||||||||||
John Anderson | 443,417 | 19,279 | $ | 42.00 | 12/31/2012 | |||||||||||
72,599 | 51,856 | 68.00 | 8/1/2017 | |||||||||||||
— | 150,000 | 24.75 | 2/5/2016 | |||||||||||||
Blake Jorgensen | — | 82,264 | 25.50 | 7/8/2016 | ||||||||||||
Armin Broger | 22,653 | 31,715 | 53.25 | 2/26/2013 | ||||||||||||
9,900 | 7,071 | 68.00 | 8/1/2017 | |||||||||||||
— | 14,763 | 24.75 | 2/5/2016 | |||||||||||||
Robert Hanson | 121,940 | 5,302 | 42.00 | 12/31/2012 | ||||||||||||
18,150 | 12,964 | 68.00 | 8/1/2017 | |||||||||||||
— | 36,908 | 24.75 | 2/5/2016 | |||||||||||||
Aaron Boey | — | 14,763 | 24.75 | 2/5/2016 |
(1) | SAR Vesting Schedule |
Grant Date | Exercise Price | Vesting Schedule | ||||
7/13/2006 | $ | 42.00 | 1/24th monthly vesting beginning 1/1/08 | |||
2/8/2007 | $ | 52.25 | 1/24th monthly vesting beginning 2/8/08 | |||
2/26/2007 | $ | 53.25 | 1/24th monthly vesting beginning 2/26/09 | |||
8/1/2007 | $ | 68.00 | 25% vested on 7/31/08; monthly vesting over remaining 36 months | |||
2/5/2009 | $ | 24.75 | 25% vested on 2/4/10; monthly vesting over remaining 36 months | |||
7/8/2009 | $ | 25.50 | 25% vested on 7/7/10; monthly vesting over remaining 36 months |
The named executive officers may only exercise vested SARs during certain times of the year under the terms of the EIP. | ||
(2) | The SAR exercise prices reflect the fair market value of the Company’s common stock as of the grant date as established by the independent share valuation process. Upon the vesting and exercise of a SAR, the recipient will receive shares of common stock (or, during the period of time that the Voting Trust Agreement is effective, a voting trust certificate representing shares of common stock) in an amount equal to the product of (i) the excess of the per share fair market value of the Company’s common stock on the date of exercise over the exercise price, multiplied by (ii) the number of shares of common stock with respect to which the SAR is exercised. |
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Present Value of | ||||||||||||||
Number of Years | Accumulated | Payments | ||||||||||||
Credited Service as | Benefits as of | During Last | ||||||||||||
Name | Plan Name | of 11/29/2009 | 11/29/2009 | Fiscal Year | ||||||||||
Robert Hanson | U.S. Home Office Pension Plan (qualified plan) | 16.8 | $ | 219,846 | $ | — | ||||||||
U.S. Supplemental Benefit Restoration Plan (non-qualified plan) | 16.8 | 558,745 | — | |||||||||||
Total | $ | 778,591 | ||||||||||||
Heidi Manes | U.S. Home Office Pension Plan (qualified plan) | 2.3 | $ | 18,699 | — |
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Aggregate | ||||||||||||||||||||
Aggregate | Balance at | |||||||||||||||||||
Executive | Registrant | Aggregate | Withdrawals / | November 29, | ||||||||||||||||
Name | Contributions | Contributions | Earnings | Distributions | 2009 | |||||||||||||||
John Anderson(1) | $ | 645,304 | $ | 120,450 | $ | 513,326 | $ | — | $ | 2,340,486 | ||||||||||
— | — | — | — | 4,048,719 | (2) | |||||||||||||||
— | — | — | — | 992,234 | (3) | |||||||||||||||
Armin Broger | — | 41,318 | — | — | 41,318 | |||||||||||||||
Robert Hanson(1) | 73,390 | 55,043 | 34,665 | (443,778 | ) | 471,180 | ||||||||||||||
Aaron Boey(4) | 11,013 | 7,988 | — | — | — |
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(1) | For Mr. Anderson and Mr. Hanson, these amounts reflect the 401(k) excess match contributions made by the Company and are reflected in the Summary Compensation Table under All Other Compensation. | |
(2) | While Mr. Anderson was the President of our Asia Pacific region, he participated in a Supplemental Executive Incentive Plan, an unfunded plan to which the Company contributed 20% of his base salary and annual bonus each year. The plan was frozen as of November 26, 2006, when he assumed the role of CEO and no further contributions were made. Upon Mr. Anderson’s termination, without cause, he will be paid out the balance of his accrued benefits in a lump sum. Mr. Anderson’s benefits under this plan are in Australian Dollars. For purposes of the table, these amounts were converted into U.S. Dollars using an exchange rate of 0.904, which was the average exchange rate for the last month of the 2007 fiscal year. | |
(3) | Mr. Anderson previously participated in the Levi Strauss Australia Staff Superannuation Plan that applied to all employees in Australia. Plan benefits are similar to a U.S. defined contribution plan benefit, which are based on both company and participant contributions. Employee accounts are tied to the investment market and therefore, may vary fromyear-to-year. Mr. Anderson ceased to be an active participant in that plan in 1998, and is accruing no further company contributions under the plan. Part of his benefit continues to vest over time. Full vesting of his benefit is achieved at age 60. For purposes of the table, these amounts were converted into U.S. Dollars using an exchange rate of 0.9195, which was the average exchange rate for the last month of the 2009 fiscal year. | |
(4) | The CPF is a government-managed program. As a result, we do not have access to information regarding Mr. Boey’s account activity. |
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Involuntary | ||||||||||||||||||||
Executive Benefits and | Voluntary | Not for Cause | For Cause | Change of | ||||||||||||||||
Payments Upon Termination | Termination | Retirement | Termination | Termination | Control | |||||||||||||||
Compensation: | ||||||||||||||||||||
Severance(1) | $ | — | $ | — | $ | 4,065,288 | $ | — | $ | — | ||||||||||
Stock Appreciation Rights | — | — | — | — | 1,762,500 | |||||||||||||||
Benefits: | ||||||||||||||||||||
COBRA & Life Insurance(2) | — | — | 7,527 | — | — | |||||||||||||||
Supplemental Executive Incentive Plan:(3) | 4,048,719 | 4,048,719 | 4,048,719 | — | 4,048,719 |
(1) | Based on Mr. Anderson’s annual base salary of $1,275,000 and his AIP target of 110% of his base salary. | |
(2) | Reflects 18 months of COBRA and life insurance premiums at the same Company/employee percentage sharing as during employment. | |
(3) | Reflects a lump sum payment under the Supplemental Executive Incentive Plan in which Mr. Anderson previously participated. The Company contributed 20% of his base salary and annual bonus into this unfunded plan each year. His participation in the plan was frozen as of November 26, 2006, when he assumed the role of CEO. |
Involuntary | ||||||||||||||||||||
Executive Benefits and | Voluntary | Not for Cause | For Cause | Change of | ||||||||||||||||
Payments Upon Termination | Termination | Retirement | Termination | Termination | Control | |||||||||||||||
Compensation: | ||||||||||||||||||||
Severance(1) | $ | — | $ | — | $ | 1,731,250 | $ | — | $ | — | ||||||||||
Stock Appreciation Rights | — | — | — | — | 904,904 | |||||||||||||||
Benefits: | ||||||||||||||||||||
COBRA & Life Insurance(2) | — | — | 5,805 | — | — |
(1) | Based on Mr. Jorgensen’s annual base salary of $650,000 and his AIP target of 75% of his base salary. | |
(2) | Reflects 18 months of COBRA and life insurance premiums at the same Company/employee percentage sharing as during employment. |
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Involuntary | ||||||||||||||||||||
Executive Benefits and | Voluntary | Not for Cause | For Cause | Change of | ||||||||||||||||
Payments Upon Termination | Termination | Retirement | Termination | Termination | Control | |||||||||||||||
Compensation:(1) | ||||||||||||||||||||
Severance(2) | $ | — | $ | — | $ | 4,974,540 | $ | — | $ | — | ||||||||||
Stock Appreciation Rights | — | — | — | — | 173,465 |
(1) | These payments do not reflect any tax protection benefit since that amount is determined only after review and approval of the individual’s tax return by the Belgian tax authorities during the calendar year following the applicable compensation year. | |
(2) | Based on two times the sum of Mr. Broger’s base salary and AIP target of 65%, eight months’ notice pay and six months’ pay for a non-compete consideration (based on base salary only). |
Involuntary | ||||||||||||||||||||
Executive Benefits and | Voluntary | Not for Cause | For Cause | Change of | ||||||||||||||||
Payments Upon Termination | Termination | Retirement | Termination | Termination | Control | |||||||||||||||
Compensation: | ||||||||||||||||||||
Severance(1) | $ | — | $ | — | $ | 1,848,162 | $ | — | $ | — | ||||||||||
Stock Appreciation Rights | — | — | — | — | 433,669 | |||||||||||||||
Benefits: | ||||||||||||||||||||
COBRA & Life Insurance(2) | — | — | 5,547 | — | — |
(1) | Based on Mr. Hanson’s annual base salary of $714,000 and his AIP target of 70% of his base salary. | |
(2) | Reflects 18 months of COBRA and life insurance premiums at the same Company/employee percentage sharing as during employment. |
Involuntary | ||||||||||||||||||||
Executive Benefits and | Voluntary | Not for Cause | For Cause | Change of | ||||||||||||||||
Payments Upon Termination | Termination | Retirement | Termination | Termination | Control | |||||||||||||||
Compensation: | ||||||||||||||||||||
Severance(1) | $ | — | $ | — | $ | 254,805 | $ | — | $ | — | ||||||||||
Stock Appreciation Rights | — | — | — | — | 173,465 |
(1) | Based on two months of Mr. Boey’s base salary as notice pay and four months’ salary based on years of service, per the local Singapore provisions. |
Involuntary | ||||||||||||||||||||
Executive Benefits and | Voluntary | Not for Cause | For Cause | Change of | ||||||||||||||||
Payments Upon Termination | Termination | Retirement | Termination | Termination | Control | |||||||||||||||
Compensation: | ||||||||||||||||||||
Severance(1) | $ | — | $ | — | $ | 376,443 | $ | — | $ | — | ||||||||||
Benefits: | ||||||||||||||||||||
COBRA & Life Insurance(2) | — | — | 9,689 | — | — |
(1) | Based on Ms. Manes’ annual base salary of $350,000 and her AIP target of 50% of her base salary. | |
(2) | Reflects 18 months of COBRA and life insurance premiums at the same Company/employee percentage sharing as during employment. |
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• | Each person known by us to own beneficially more than 5% of our voting trust certificates; | |
• | Each of our directors and each of our named executive officers; and | |
• | All of our directors and executive officers as a group. |
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Percentage of | ||||||||
Number of Voting | Voting Trust | |||||||
Trust Certificates | Certificates | |||||||
Name | Beneficially Owned | Outstanding | ||||||
Peter E. Haas, Jr. | 7,751,690 | (1) | 20.78 | % | ||||
Miriam L. Haas | 6,547,314 | 17.55 | % | |||||
Margaret E. Haas | 4,261,717 | (2) | 11.42 | % | ||||
Robert D. Haas | 3,946,016 | (3) | 10.58 | % | ||||
Richard L. Kauffman | — | — | ||||||
R. John Anderson | — | — | ||||||
Vanessa J. Castagna | 784 | * | ||||||
Robert A. Eckert | — | — | ||||||
Peter A. Georgescu | — | — | ||||||
Leon J. Level | 784 | * | ||||||
Stephen C. Neal | 784 | * | ||||||
Patricia Salas Pineda | — | — | ||||||
Beng (Aaron) Keong Boey | — | — | ||||||
Armin Broger | — | — | ||||||
Robert L. Hanson | — | — | ||||||
Blake Jorgensen | — | — | ||||||
Heidi L. Manes | — | — | ||||||
Directors and executive officers as a group (15 persons) | 11,700,058 | 31.36 | % |
* | Less than 0.01%. |
(1) | Includes 2,715,070 voting trust certificates held by the Joanne and Peter Haas Jr. Fund, of which Mr. Haas is president, for the benefit of charitable entities. Includes 40,000 voting trust certificates owned by the spouse of Mr. Haas and a total of 1,162,351 voting trust certificates held by trusts, of which Mr. Haas is trustee, for the benefit of his children. Mr. Haas disclaims beneficial ownership of all the foregoing voting trust certificates. Also includes 2,200,000 voting trust certificates representing shares of common stock pledged to a third party as collateral for a loan. | |
(2) | Includes 20,793 voting trust certificates held in a custodial account, of which Ms. Haas is custodian, for the benefit of Ms. Haas’ son. Includes 905,390 voting trust certificates held by the Margaret E. Haas Fund, of which Ms. Haas is president, for the benefit of charitable entities. Ms. Haas disclaims beneficial ownership of all of the foregoing voting trust certificates. | |
(3) | Includes an aggregate of 51,401 voting trust certificates owned by the spouse of Mr. Haas and by a trust, of which Mr. Haas is trustee, for the benefit of their daughter. Mr. Haas disclaims beneficial ownership of all of the foregoing voting trust certificates. Includes 389 voting trust certificates held by the Walter A. Haas, Jr. QTIP Trust A, of which Mr. Haas is a co-trustee. Mr. Haas disclaims beneficial ownership of two-thirds of the foregoing voting trust certificates. |
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• | senior unsecured obligations of the Company; | |
• | effectively subordinated in right of payment to existing and future secured debt, including obligations under our Existing Bank Credit Facilities; | |
• | structurally subordinated to all debt of our subsidiaries; | |
• | equal in ranking (“pari passu”) with all our existing and future senior debt; and | |
• | senior in right of payment to all our future subordinated debt. |
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Redemption Year | Price | |||
2015 | 103.813 | % | ||
2016 | 102.542 | % | ||
2017 | 101.271 | % | ||
2018 and thereafter | 100.000 | % |
Redemption Year | Price | |||
2014 | 103.875 | % | ||
2015 | 101.938 | % | ||
2016 and thereafter | 100.000 | % |
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• | “— Limitation on Debt,” | |
• | “— Limitation on Restricted Payments,” | |
• | “— Limitation on Asset Sales,” | |
• | “— Limitation on Restrictions on Distributions from Restricted Subsidiaries,” | |
• | clause (x) of the third paragraph (and as referred to in the first paragraph) of “— Designation of Restricted and Unrestricted Subsidiaries,” and | |
• | clause (e) of the first paragraph of “— Merger, Consolidation and Sale of Property” |
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• | a broker-dealer, a dealer in securities, or a trader in securities who elects to apply amark-to-market method of accounting, or a financial institution; | |
• | an S corporation; | |
• | an insurance company; | |
• | a tax-exempt organization; | |
• | a person subject to the alternative minimum tax provisions of the Code; | |
• | a person holding the exchange notes as part of a hedge, straddle, conversion transaction or other risk reduction or constructive sale transaction; | |
• | a nonresident alien or foreign corporation subject to U.S. federal income tax on income or gain with respect to an exchange note because such income or gain is effectively connected with the conduct of a U.S. trade or business; | |
• | an expatriate of the United States; or | |
• | a U.S. person whose functional currency is not the U.S. dollar. |
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• | an individual who is a citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or who meets the “substantial presence” test under Section 7701(b) of the Code; | |
• | a corporation, or other entity taxable as a corporation, created or organized in the United States or under the laws of the United States, any state thereof or the District of Columbia; | |
• | an estate, the income of which is subject to U.S. federal income tax regardless of its source; or | |
• | a trust, if a U.S. court can exercise primary supervision over the administration of the trust and one or more U.S. persons can control all substantial decisions of the trust, or if the trust was in existence on August 20, 1996 and has elected to continue to be treated as a U.S. person. |
• | when you receive it, if you use the cash method of accounting for U.S. federal income tax purposes; or | |
• | when it accrues, if you use the accrual method of accounting for U.S. federal income tax purposes. |
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• | you represent that you are the beneficial owner of exchange notes and not a U.S. person for U.S. federal income tax purposes and you provide your name and address to us or our paying agent on a properly executed IRSForm W-8 (or a suitable substitute form) signed under penalties of perjury; | |
• | a securities clearing organization, bank or other financial institution that holds customers’ securities in the ordinary course of its trade or business holds the exchange notes on your behalf, certifies to us or our agent under penalty of perjury that it has received IRSForm W-8 (or a suitable substitute form) from you or from another qualifying financial institution intermediary, and provides a copy to us or our agent; or |
• | you own, actually or constructively, 10% or more of the total combined voting power of all classes of our capital stock which is entitled to vote; | |
• | you are a controlled foreign corporation with respect to which we are a “related person” within the meaning of Section 864(d)(4) of the Code; or | |
• | you are a bank receiving interest described in Section 881(c)(3)(A) of the Code. |
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• | our organizational documents; | |
• | the purchase agreement relating to the Dollar Exchange Notes and the Euro Exchange Notes; and | |
• | the indenture relating to the Dollar Notes and the Euro Notes (which includes the forms of the Dollar Exchange Notes and the Euro Exchange Notes). |
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Common | ||||||||||||
CUSIP | Code | ISIN | ||||||||||
Euro Exchange Notes | — | 52023521 | XS0520235218 | |||||||||
Dollar Exchange Notes | 52736R BB7 | — | US52736RBB78 |
• | there has been no material adverse change in our financial position since November 29, 2009; and | |
• | we and our subsidiaries have not been involved in any litigation, administrative proceeding or arbitration relating to claims or amounts which are material in the context of the issue of exchange notes, and, so far as we are aware, no such litigation, administrative proceeding or arbitration is pending or threatened. |
• | Levi Strauss International Inc. | |
• | Levi Strauss International | |
• | Levi Strauss & Co. Europe SCA | |
• | Levi Strauss Continental S.A. | |
• | Levi Strauss International Group Finance Coordination Services SCA | |
• | 501 Holdings C.V. | |
• | 505 Finance, C.V. | |
• | 550 Holdings C.V. | |
• | Levi Strauss Nederland B.V. | |
• | Levi Strauss Asia Pacific Division Pte Ltd. |
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• | LVC, B.V. | |
• | Levi Strauss Nederland Holding B.V. |
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Page | ||||
Levi Strauss & Co. and Subsidiaries: | ||||
Unaudited Consolidated Financial Statements | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
Audited Consolidated Financial Statements | ||||
F-15 | ||||
F-16 | ||||
F-17 | ||||
F-18 | ||||
F-19 | ||||
F-20 |
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(Unaudited) | ||||||||
February 28, | November 29, | |||||||
2010 | 2009 | |||||||
(Dollars in thousands) | ||||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 315,369 | $ | 270,804 | ||||
Restricted cash | 3,401 | 3,684 | ||||||
Trade receivables, net of allowance for doubtful accounts of $21,667 and $22,523 | 455,457 | 552,252 | ||||||
Inventories: | ||||||||
Raw materials | 6,146 | 6,818 | ||||||
Work-in-process | 9,297 | 10,908 | ||||||
Finished goods | 440,950 | 433,546 | ||||||
Total inventories | 456,393 | 451,272 | ||||||
Deferred tax assets, net | 134,477 | 135,508 | ||||||
Other current assets | 103,276 | 92,344 | ||||||
Total current assets | 1,468,373 | 1,505,864 | ||||||
Property, plant and equipment, net of accumulated depreciation of $659,462 and $664,891 | 421,941 | 430,070 | ||||||
Goodwill | 239,707 | 241,768 | ||||||
Other intangible assets, net | 97,020 | 103,198 | ||||||
Non-current deferred tax assets, net | 587,500 | 601,526 | ||||||
Other assets | 106,876 | 106,955 | ||||||
Total assets | $ | 2,921,417 | $ | 2,989,381 | ||||
LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIT | ||||||||
Current Liabilities: | ||||||||
Short-term borrowings | $ | 27,759 | $ | 18,749 | ||||
Current maturities of long-term debt | — | — | ||||||
Current maturities of capital leases | 1,649 | 1,852 | ||||||
Accounts payable | 198,059 | 198,220 | ||||||
Other accrued liabilities | 211,851 | 271,019 | ||||||
Accrued salaries, wages and employee benefits | 155,461 | 195,434 | ||||||
Accrued interest payable | 34,431 | 28,709 | ||||||
Accrued income taxes | 29,069 | 12,993 | ||||||
Total current liabilities | 658,279 | 726,976 | ||||||
Long-term debt | 1,793,434 | 1,834,151 | ||||||
Long-term capital leases | 4,638 | 5,513 | ||||||
Postretirement medical benefits | 154,566 | 156,834 | ||||||
Pension liability | 378,453 | 382,503 | ||||||
Long-term employee related benefits | 91,885 | 97,508 | ||||||
Long-term income tax liabilities | 57,689 | 55,862 | ||||||
Other long-term liabilities | 44,202 | 43,480 | ||||||
Total liabilities | 3,183,146 | 3,302,827 | ||||||
Commitments and contingencies (Note 7) | ||||||||
Temporary equity | 3,726 | 1,938 | ||||||
Stockholders’ Deficit: | ||||||||
Levi Strauss & Co. stockholders’ deficit | ||||||||
Common stock — $.01 par value; 270,000,000 shares authorized; 37,300,215 shares and 37,284,741 shares issued and outstanding | 373 | 373 | ||||||
Additional paid-in capital | 39,331 | 39,532 | ||||||
Accumulated deficit | (66,803 | ) | (123,157 | ) | ||||
Accumulated other comprehensive loss | (254,998 | ) | (249,867 | ) | ||||
Total Levi Strauss & Co. stockholders’ deficit | (282,097 | ) | (333,119 | ) | ||||
Noncontrolling interest | 16,642 | 17,735 | ||||||
Total stockholders’ deficit | (265,455 | ) | (315,384 | ) | ||||
Total liabilities, temporary equity and stockholders’ deficit | $ | 2,921,417 | $ | 2,989,381 | ||||
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Three Months Ended | ||||||||
February 28, | March 1, | |||||||
2010 | 2009 | |||||||
(Dollars in thousands) (Unaudited) | ||||||||
Net sales | $ | 1,016,007 | $ | 931,254 | ||||
Licensing revenue | 19,199 | 20,210 | ||||||
Net revenues | 1,035,206 | 951,464 | ||||||
Cost of goods sold | 502,278 | 506,343 | ||||||
Gross profit | 532,928 | 445,121 | ||||||
Selling, general and administrative expenses | 425,677 | 339,081 | ||||||
Operating income | 107,251 | 106,040 | ||||||
Interest expense | (34,173 | ) | (34,690 | ) | ||||
Other income, net | 12,463 | 2,989 | ||||||
Income before income taxes | 85,541 | 74,339 | ||||||
Income tax expense | 29,672 | 26,349 | ||||||
Net income | 55,869 | 47,990 | ||||||
Net loss attributable to noncontrolling interest | 485 | 79 | ||||||
Net income attributable to Levi Strauss & Co. | $ | 56,354 | $ | 48,069 | ||||
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Three Months Ended | ||||||||
February 28, | March 1, | |||||||
2010 | 2009 | |||||||
(Dollars in thousands) | ||||||||
(Unaudited) | ||||||||
Cash Flows from Operating Activities: | ||||||||
Net income | $ | 55,869 | $ | 47,990 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 25,524 | 17,799 | ||||||
Asset impairments | 580 | 80 | ||||||
Gain on disposal of property, plant and equipment | (121 | ) | (29 | ) | ||||
Unrealized foreign exchange (gains) losses | (12,677 | ) | 604 | |||||
Realized loss (gain) on settlement of forward foreign exchange contracts not designated for hedge accounting | 2,364 | (3,390 | ) | |||||
Employee benefit plans’ amortization from accumulated other comprehensive loss | 944 | (4,891 | ) | |||||
Employee benefit plans’ curtailment loss (gain), net | 100 | (1,808 | ) | |||||
Amortization of deferred debt issuance costs | 1,144 | 1,053 | ||||||
Stock-based compensation | 1,586 | 1,524 | ||||||
Allowance for doubtful accounts | 1,306 | 2,058 | ||||||
Change in operating assets and liabilities (excluding assets and liabilities acquired): | ||||||||
Trade receivables | 78,826 | 82,096 | ||||||
Inventories | (20,683 | ) | (22,476 | ) | ||||
Other current assets | (11,326 | ) | (2,776 | ) | ||||
Other non-current assets | (6,103 | ) | (1,280 | ) | ||||
Accounts payable and other accrued liabilities | (18,224 | ) | (70,532 | ) | ||||
Income tax liabilities | 15,591 | 14,946 | ||||||
Accrued salaries, wages and employee benefits | (38,560 | ) | (49,103 | ) | ||||
Long-term employee related benefits | (3,772 | ) | (1,571 | ) | ||||
Other long-term liabilities | 3,220 | (1,172 | ) | |||||
Other, net | (61 | ) | 537 | |||||
Net cash provided by operating activities | 75,527 | 9,659 | ||||||
Cash Flows from Investing Activities: | ||||||||
Purchases of property, plant and equipment | (36,365 | ) | (14,687 | ) | ||||
Proceeds from sale of property, plant and equipment | 914 | 99 | ||||||
(Payments) proceeds on settlement of forward foreign exchange contracts not designated for hedge accounting | (2,364 | ) | 3,390 | |||||
Acquisitions, net of cash acquired | — | (3,479 | ) | |||||
Other | (114 | ) | — | |||||
Net cash used for investing activities | (37,929 | ) | (14,677 | ) | ||||
Cash Flows from Financing Activities: | ||||||||
Repayments of long-term debt and capital leases | (454 | ) | (18,195 | ) | ||||
Short-term borrowings, net | 8,884 | 1,711 | ||||||
Restricted cash | (32 | ) | (385 | ) | ||||
Dividends to noncontrolling interest shareholders | — | (694 | ) | |||||
Net cash provided by (used for) financing activities | 8,398 | (17,563 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | (1,431 | ) | (2,138 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 44,565 | (24,719 | ) | |||||
Beginning cash and cash equivalents | 270,804 | 210,812 | ||||||
Ending cash and cash equivalents | $ | 315,369 | $ | 186,093 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | 26,283 | $ | 27,550 | ||||
Income taxes | 16,500 | 9,538 |
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FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 2010
NOTE 1: | SIGNIFICANT ACCOUNTING POLICIES |
F-5
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NOTE 2: | GOODWILL AND OTHER INTANGIBLE ASSETS |
Asia | ||||||||||||||||
Americas | Europe | Pacific | Total | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Balance, November 29, 2009 | $ | 207,423 | $ | 32,080 | $ | 2,265 | $ | 241,768 | ||||||||
Additions | — | 765 | — | 765 | ||||||||||||
Foreign currency fluctuation | 2 | (2,772 | ) | (56 | ) | (2,826 | ) | |||||||||
Balance, February 28, 2010 | $ | 207,425 | $ | 30,073 | $ | 2,209 | $ | 239,707 | ||||||||
February 28, 2010 | November 29, 2009 | |||||||||||||||||||||||
Gross | Gross | |||||||||||||||||||||||
Carrying | Accumulated | Carrying | Accumulated | |||||||||||||||||||||
Value | Amortization | Total | Value | Amortization | Total | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Unamortized intangible assets: | ||||||||||||||||||||||||
Trademarks | $ | 42,743 | $ | — | $ | 42,743 | $ | 42,743 | $ | — | $ | 42,743 | ||||||||||||
Amortized intangible assets: | ||||||||||||||||||||||||
Acquired contractual rights | 45,964 | (8,872 | ) | 37,092 | 46,529 | (6,019 | ) | 40,510 | ||||||||||||||||
Customer lists | 20,366 | (3,181 | ) | 17,185 | 22,340 | (2,395 | ) | 19,945 | ||||||||||||||||
$ | 109,073 | $ | (12,053 | ) | $ | 97,020 | $ | 111,612 | $ | (8,414 | ) | $ | 103,198 | |||||||||||
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NOTE 3: | FAIR VALUE OF FINANCIAL INSTRUMENTS |
February 28, 2010 | November 29, 2009 | |||||||||||||||||||||||
Fair Value Estimated Using | Fair Value Estimated Using | |||||||||||||||||||||||
Level 1 | Level 2 | Level 1 | Level 2 | |||||||||||||||||||||
Fair Value | Inputs(1) | Inputs(2) | Fair Value | Inputs(1) | Inputs(2) | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Financial assets carried at fair value | ||||||||||||||||||||||||
Rabbi trust assets | $ | 16,994 | $ | 16,994 | $ | — | $ | 16,855 | $ | 16,855 | $ | — | ||||||||||||
Forward foreign exchange contracts, net(3) | 468 | — | 468 | 721 | — | 721 | ||||||||||||||||||
Total financial assets carried at fair value | $ | 17,462 | $ | 16,994 | $ | 468 | $ | 17,576 | $ | 16,855 | $ | 721 | ||||||||||||
Financial liabilities carried at fair value | ||||||||||||||||||||||||
Forward foreign exchange contracts, net(3) | $ | 6,919 | $ | — | $ | 6,919 | $ | 14,519 | $ | — | $ | 14,519 | ||||||||||||
Interest rate swap, net | 751 | — | 751 | 1,451 | — | 1,451 | ||||||||||||||||||
Total financial liabilities carried at fair value | $ | 7,670 | $ | — | $ | 7,670 | $ | 15,970 | $ | — | $ | 15,970 | ||||||||||||
(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 credit default swap prices. For the interest rate swap, for which the Company’s fair value estimate incorporates discounted future cash flows using a forward curve mid-market pricing convention, inputs include LIBOR forward rates and credit default swap prices. | |
(3) | The Company’s forward foreign exchange contracts are subject to International Swaps and Derivatives Association, Inc. (“ISDA”) master agreements. These agreements are signed between the Company and each respective financial institution, and permit the net-settlement of forward foreign exchange contracts on a per institution basis. |
February 28, 2010 | November 29, 2009 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Value | Fair Value(1) | Value | Fair Value(1) | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Financial liabilities carried at adjusted historical cost | ||||||||||||||||
Senior revolving credit facility | $ | 108,275 | $ | 104,486 | $ | 108,489 | $ | 103,618 | ||||||||
U.S. Dollar notes | 814,355 | 844,453 | 817,824 | 852,067 | ||||||||||||
Euro senior notes | 354,541 | 359,665 | 379,935 | 379,935 | ||||||||||||
Senior term loan | 323,511 | 300,063 | 323,497 | 291,163 | ||||||||||||
Yen-denominated Eurobonds | 227,074 | 197,399 | 232,494 | 197,448 | ||||||||||||
Short-term and other borrowings | 28,298 | 28,298 | 19,027 | 19,027 | ||||||||||||
Total financial liabilities carried at adjusted historical cost | $ | 1,856,054 | $ | 1,834,364 | $ | 1,881,266 | $ | 1,843,258 | ||||||||
(1) | Fair value estimate incorporates mid-market price quotes. |
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NOTE 4: | DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES |
February 28, 2010 | November 29, 2009 | |||||||||||||||||||||||
Assets | (Liabilities) | Assets | (Liabilities) | |||||||||||||||||||||
Derivative | Derivative | |||||||||||||||||||||||
Carrying | Carrying | Net Carrying | Carrying | Carrying | Net Carrying | |||||||||||||||||||
Value | Value | Value | Value | Value | Value | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Derivatives not designated as hedging instruments | ||||||||||||||||||||||||
Forward foreign exchange contracts(1) | $ | 686 | $ | (218 | ) | $ | 468 | $ | 1,189 | $ | (468 | ) | $ | 721 | ||||||||||
Forward foreign exchange contracts(2) | 1,860 | (8,779 | ) | (6,919 | ) | 5,675 | (20,194 | ) | (14,519 | ) | ||||||||||||||
Interest rate contracts(2) | — | (751 | ) | (751 | ) | — | (1,451 | ) | (1,451 | ) | ||||||||||||||
Total derivatives not designated as hedging instruments | $ | 2,546 | $ | (9,748 | ) | $ | 6,864 | $ | (22,113 | ) | ||||||||||||||
Non-derivatives designated as hedging instruments | ||||||||||||||||||||||||
Euro senior notes | $ | — | $ | (341,589 | ) | $ | — | $ | (374,641 | ) | ||||||||||||||
Yen-denominated Eurobonds(3) | — | (87,346 | ) | — | (92,684 | ) | ||||||||||||||||||
Total non-derivatives designated as hedging instruments | $ | — | $ | (428,935 | ) | $ | — | $ | (467,325 | ) | ||||||||||||||
(1) | Included in “Other current assets” on the Company’s consolidated balance sheets. | |
(2) | Included in “Other accrued liabilities” on the Company’s consolidated balance sheets. | |
(3) | Represents the portion of the Yen-denominated Eurobonds that have been designated as a net investment hedge. |
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Gain or (Loss) | ||||||||||||||||
Recognized in Other Income (Expense), net | ||||||||||||||||
Gain or (Loss) | (Ineffective Portion and Amount | |||||||||||||||
Recognized in AOCI | Excluded from | |||||||||||||||
(Effective Portion) | Effectiveness Testing) | |||||||||||||||
As of | As of | Three Months Ended | ||||||||||||||
February 28, | November 29, | February 28, | March 1, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Forward foreign exchange contracts | $ | 4,637 | $ | 4,637 | $ | — | $ | — | ||||||||
Euro senior notes | (28,670 | ) | (61,570 | ) | — | — | ||||||||||
Yen-denominated Eurobonds | (20,600 | ) | (23,621 | ) | 4,725 | 2,557 | ||||||||||
Cumulative income taxes | 17,547 | 31,237 | ||||||||||||||
Total | $ | (27,086 | ) | $ | (49,317 | ) | ||||||||||
Gain or (Loss) During | ||||||||
Three Months Ended | ||||||||
February 28, | March 1, | |||||||
2010 | 2009 | |||||||
(Dollars in thousands) | ||||||||
Forward foreign exchange contracts: | ||||||||
Realized | $ | (2,364 | ) | $ | 3,390 | |||
Unrealized | 7,347 | 969 | ||||||
Total | $ | 4,983 | $ | 4,359 | ||||
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NOTE 5: | DEBT |
February 28, | November 29, | |||||||
2010 | 2009 | |||||||
(Dollars in thousands) | ||||||||
Long-term debt | ||||||||
Secured: | ||||||||
Senior revolving credit facility | $ | 108,250 | $ | 108,250 | ||||
Total secured | 108,250 | 108,250 | ||||||
Unsecured: | ||||||||
8.625% Euro senior notes due 2013 | 341,589 | 374,641 | ||||||
Senior term loan due 2014 | 323,421 | 323,340 | ||||||
9.75% senior notes due 2015 | 446,210 | 446,210 | ||||||
8.875% senior notes due 2016 | 350,000 | 350,000 | ||||||
4.25% Yen-denominated Eurobonds due 2016 | 223,964 | 231,710 | ||||||
Total unsecured | 1,685,184 | 1,725,901 | ||||||
Less: current maturities | — | — | ||||||
Total long-term debt | $ | 1,793,434 | $ | 1,834,151 | ||||
Short-term debt | ||||||||
Short-term borrowings | $ | 27,759 | $ | 18,749 | ||||
Current maturities of long-term debt | — | — | ||||||
Total short-term debt | $ | 27,759 | $ | 18,749 | ||||
Total long-term and short-term debt | $ | 1,821,193 | $ | 1,852,900 | ||||
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NOTE 6: | EMPLOYEE BENEFIT PLANS |
Pension Benefits | Postretirement Benefits | |||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||
February 28, | March 1, | February 28, | March 1, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Net periodic benefit cost (income): | ||||||||||||||||
Service cost | $ | 1,987 | $ | 1,269 | $ | 118 | $ | 107 | ||||||||
Interest cost | 14,989 | 15,317 | 2,169 | 2,761 | ||||||||||||
Expected return on plan assets | (11,568 | ) | (10,522 | ) | — | — | ||||||||||
Amortization of prior service cost (benefit)(1) | 118 | 198 | (7,392 | ) | (9,925 | ) | ||||||||||
Amortization of actuarial loss(2) | 6,665 | 4,287 | 1,402 | 434 | ||||||||||||
Curtailment loss (gain) | 100 | (27 | ) | — | (1,781 | ) | ||||||||||
Net settlement loss | 172 | 115 | — | — | ||||||||||||
Net periodic benefit cost (income) | 12,463 | 10,637 | (3,703 | ) | (8,404 | ) | ||||||||||
Changes in accumulated other comprehensive income (loss): | ||||||||||||||||
Actuarial loss | 124 | — | — | — | ||||||||||||
Amortization of prior service (cost) benefit | (118 | ) | (198 | ) | 7,392 | 9,925 | ||||||||||
Amortization of actuarial loss | (6,665 | ) | (4,287 | ) | (1,402 | ) | (434 | ) | ||||||||
Curtailment (loss) gain | (13 | ) | 27 | — | 1,781 | |||||||||||
Net settlement loss | (151 | ) | (115 | ) | — | — | ||||||||||
Total recognized in accumulated other comprehensive income (loss) | (6,823 | ) | (4,573 | ) | 5,990 | 11,272 | ||||||||||
Total recognized in net periodic benefit cost (income) and accumulated other comprehensive income (loss) | $ | 5,640 | $ | 6,064 | $ | 2,287 | $ | 2,868 | ||||||||
(1) | Amortization of prior service benefit recognized during each period with respect to the Company’s postretirement benefit plans relates primarily to the favorable impact of plan amendments in February 2004 and August 2003. For the three months ended February 28, 2010, as compared to the same prior-year period, “Amortization of prior service cost (benefit)” declined in relation to the expected service lives of the employees affected by these plan changes. | |
(2) | For the three months ended February 28, 2010, as compared to the same prior-year period, the higher “Amortization of actuarial loss” resulted from the impact of the changes in the discount rate assumptions for the pension and postretirement benefit plans as of November 29, 2009. |
NOTE 7: | COMMITMENTS AND CONTINGENCIES |
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NOTE 8: | COMPREHENSIVE INCOME (LOSS) |
Three Months Ended | ||||||||
February 28, | March 1, | |||||||
2010 | 2009 | |||||||
(Dollars in thousands) | ||||||||
Net income | $ | 55,869 | $ | 47,990 | ||||
Other comprehensive income (loss): | ||||||||
Pension and postretirement benefits | (2,231 | ) | (4,786 | ) | ||||
Net investment hedge gains | 22,231 | 4,042 | ||||||
Foreign currency translation losses | (25,755 | ) | (14,346 | ) | ||||
Unrealized gain (loss) on marketable securities | 17 | (879 | ) | |||||
Total other comprehensive loss | (5,738 | ) | (15,969 | ) | ||||
Comprehensive income | 50,131 | 32,021 | ||||||
Comprehensive loss attributable to noncontrolling interest | (1,092 | ) | (440 | ) | ||||
Comprehensive income attributable to Levi Strauss & Co. | $ | 51,223 | $ | 32,461 | ||||
February 28, | November 29, | |||||||
2010 | 2009 | |||||||
(Dollars in thousands) | ||||||||
Pension and postretirement benefits | $ | (179,111 | ) | $ | (176,880 | ) | ||
Net investment hedge losses | (27,086 | ) | (49,317 | ) | ||||
Foreign currency translation losses | (37,405 | ) | (11,650 | ) | ||||
Unrealized loss on marketable securities | (2,058 | ) | (2,075 | ) | ||||
Accumulated other comprehensive loss | (245,660 | ) | (239,922 | ) | ||||
Accumulated other comprehensive income attributable to noncontrolling interest | 9,338 | 9,945 | ||||||
Accumulated other comprehensive loss attributable to Levi Strauss & Co. | $ | (254,998 | ) | $ | (249,867 | ) | ||
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NOTE 9: | OTHER INCOME, NET |
Three Months Ended | ||||||||
February 28, | March 1, | |||||||
2010 | 2009 | |||||||
(Dollars in thousands) | ||||||||
Foreign exchange management gains | $ | 4,983 | $ | 4,359 | ||||
Foreign currency transaction gains (losses)(1) | 7,176 | (1,899 | ) | |||||
Interest income | 592 | 599 | ||||||
Other | (288 | ) | (70 | ) | ||||
Total other income, net | $ | 12,463 | $ | 2,989 | ||||
(1) | Foreign currency transaction gains in 2010 were primarily driven by the strengthening of the U.S. Dollar against the Japanese Yen and the Euro. |
NOTE 10: | INCOME TAXES |
NOTE 11: | RELATED PARTIES |
NOTE 12: | BUSINESS SEGMENT INFORMATION |
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Three Months Ended | ||||||||
February 28, | March 1, | |||||||
2010 | 2009 | |||||||
(Dollars in thousands) | ||||||||
Net revenues: | ||||||||
Americas | $ | 545,249 | $ | 503,862 | ||||
Europe | 306,123 | 267,336 | ||||||
Asia Pacific | 183,834 | 180,266 | ||||||
Total net revenues | $ | 1,035,206 | $ | 951,464 | ||||
Operating income: | ||||||||
Americas | $ | 76,063 | $ | 54,215 | ||||
Europe | 66,385 | 58,284 | ||||||
Asia Pacific | 30,653 | 31,734 | ||||||
Regional operating income | 173,101 | 144,233 | ||||||
Corporate expenses | 65,850 | 38,193 | ||||||
Total operating income | 107,251 | 106,040 | ||||||
Interest expense | (34,173 | ) | (34,690 | ) | ||||
Other income, net | 12,463 | 2,989 | ||||||
Income before income taxes | $ | 85,541 | $ | 74,339 | ||||
NOTE 13: | SUBSEQUENT EVENT |
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November 29, | November 30, | |||||||
2009 | 2008 | |||||||
(Dollars in thousands) | ||||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 270,804 | $ | 210,812 | ||||
Restricted cash | 3,684 | 2,664 | ||||||
Trade receivables, net of allowance for doubtful accounts of $22,523 and $16,886 | 552,252 | 546,474 | ||||||
Inventories: | ||||||||
Raw materials | 6,818 | 15,895 | ||||||
Work-in-process | 10,908 | 8,867 | ||||||
Finished goods | 433,546 | 517,912 | ||||||
Total inventories | 451,272 | 542,674 | ||||||
Deferred tax assets, net | 135,508 | 114,123 | ||||||
Other current assets | 92,344 | 88,527 | ||||||
Total current assets | 1,505,864 | 1,505,274 | ||||||
Property, plant and equipment, net of accumulated depreciation of $664,891 and $596,967 | 430,070 | 411,908 | ||||||
Goodwill | 241,768 | 204,663 | ||||||
Other intangible assets, net | 103,198 | 42,774 | ||||||
Non-current deferred tax assets, net | 601,526 | 526,069 | ||||||
Other assets | 106,955 | 86,187 | ||||||
Total assets | $ | 2,989,381 | $ | 2,776,875 | ||||
LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIT | ||||||||
Current Liabilities: | ||||||||
Short-term borrowings | $ | 18,749 | $ | 20,339 | ||||
Current maturities of long-term debt | — | 70,875 | ||||||
Current maturities of capital leases | 1,852 | 1,623 | ||||||
Accounts payable | 198,220 | 203,207 | ||||||
Restructuring liabilities | 1,410 | 2,428 | ||||||
Other accrued liabilities | 269,609 | 251,720 | ||||||
Accrued salaries, wages and employee benefits | 195,434 | 194,289 | ||||||
Accrued interest payable | 28,709 | 29,240 | ||||||
Accrued income taxes | 12,993 | 17,909 | ||||||
Total current liabilities | 726,976 | 791,630 | ||||||
Long-term debt | 1,834,151 | 1,761,993 | ||||||
Long-term capital leases | 5,513 | 6,183 | ||||||
Postretirement medical benefits | 156,834 | 130,223 | ||||||
Pension liability | 382,503 | 240,701 | ||||||
Long-term employee related benefits | 97,508 | 87,704 | ||||||
Long-term income tax liabilities | 55,862 | 42,794 | ||||||
Other long-term liabilities | 43,480 | 46,590 | ||||||
Total liabilities | 3,302,827 | 3,107,818 | ||||||
Commitments and contingencies (Note 14) | ||||||||
Temporary equity | 1,938 | 592 | ||||||
Stockholders’ Deficit: | ||||||||
Levi Strauss & Co. stockholders’ deficit | ||||||||
Common stock — $.01 par value; 270,000,000 shares authorized; 37,284,741 | ||||||||
shares and 37,278,238 shares issued and outstanding | 373 | 373 | ||||||
Additional paid-in capital | 39,532 | 53,057 | ||||||
Accumulated deficit | (123,157 | ) | (275,032 | ) | ||||
Accumulated other comprehensive loss | (249,867 | ) | (127,915 | ) | ||||
Total Levi Strauss & Co. stockholders’ deficit | (333,119 | ) | (349,517 | ) | ||||
Noncontrolling interest | 17,735 | 17,982 | ||||||
Total stockholders’ deficit | (315,384 | ) | (331,535 | ) | ||||
Total liabilities, temporary equity and stockholders’ deficit | $ | 2,989,381 | $ | 2,776,875 | ||||
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Year Ended | Year Ended | Year Ended | ||||||||||
November 29, | November 30, | November 25, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands) | ||||||||||||
Net sales | $ | 4,022,854 | $ | 4,303,075 | $ | 4,266,108 | ||||||
Licensing revenue | 82,912 | 97,839 | 94,821 | |||||||||
Net revenues | 4,105,766 | 4,400,914 | 4,360,929 | |||||||||
Cost of goods sold | 2,132,361 | 2,261,112 | 2,318,883 | |||||||||
Gross profit | 1,973,405 | 2,139,802 | 2,042,046 | |||||||||
Selling, general and administrative expenses | 1,590,093 | 1,606,482 | 1,386,547 | |||||||||
Restructuring charges, net | 5,224 | 8,248 | 14,458 | |||||||||
Operating income | 378,088 | 525,072 | 641,041 | |||||||||
Interest expense | (148,718 | ) | (154,086 | ) | (215,715 | ) | ||||||
Loss on early extinguishment of debt | — | (1,417 | ) | (63,838 | ) | |||||||
Other income (expense), net | (39,445 | ) | (303 | ) | 15,047 | |||||||
Income before income taxes | 189,925 | 369,266 | 376,535 | |||||||||
Income tax expense (benefit) | 39,213 | 138,884 | (84,759 | ) | ||||||||
Net income | 150,712 | 230,382 | 461,294 | |||||||||
Net loss (income) attributable to noncontrolling interest | 1,163 | (1,097 | ) | (909 | ) | |||||||
Net income attributable to Levi Strauss & Co. | $ | 151,875 | $ | 229,285 | $ | 460,385 | ||||||
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Levi Strauss & Co. Stockholders | ||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||
Common | Paid-in | Accumulated | Comprehensive | Noncontrolling | Stockholders’ | |||||||||||||||||||
Stock | Capital | Deficit | Income (Loss) | Interest | Deficit | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Balance at November 26, 2006 | $ | 373 | $ | 89,837 | $ | (959,478 | ) | $ | (124,779 | ) | $ | 17,138 | $ | (976,909 | ) | |||||||||
Net income | — | — | 460,385 | — | 909 | 461,294 | ||||||||||||||||||
Other comprehensive income (net of tax) | — | — | — | 60,015 | 927 | 60,942 | ||||||||||||||||||
Total comprehensive income | — | — | — | — | — | 522,236 | ||||||||||||||||||
Adjustment to initially apply ASC TopicNo. 715-20 | — | — | — | 72,805 | — | 72,805 | ||||||||||||||||||
Stock-based compensation (net of $4,120 temporary equity) | — | 2,813 | — | — | — | 2,813 | ||||||||||||||||||
Cash dividend paid | — | — | — | — | (3,141 | ) | (3,141 | ) | ||||||||||||||||
Balance at November 25, 2007 | 373 | 92,650 | (499,093 | ) | 8,041 | 15,833 | (382,196 | ) | ||||||||||||||||
Net income | — | — | 229,285 | — | 1,097 | 230,382 | ||||||||||||||||||
Other comprehensive (loss) income (net of tax) | — | — | — | (135,956 | ) | 2,166 | (133,790 | ) | ||||||||||||||||
Total comprehensive income | — | — | — | — | — | 96,592 | ||||||||||||||||||
Cumulative impact of ASC TopicNo. 740-10-25 | — | — | (5,224 | ) | — | — | (5,224 | ) | ||||||||||||||||
Stock-based compensation (net of $592 temporary equity) | — | 10,360 | — | — | — | 10,360 | ||||||||||||||||||
Cash dividend paid | — | (49,953 | ) | — | — | (1,114 | ) | (51,067 | ) | |||||||||||||||
Balance at November 30, 2008 | 373 | 53,057 | (275,032 | ) | (127,915 | ) | 17,982 | (331,535 | ) | |||||||||||||||
Net income (loss) | — | — | 151,875 | — | (1,163 | ) | 150,712 | |||||||||||||||||
Other comprehensive (loss) income (net of tax) | — | — | — | (121,952 | ) | 1,894 | (120,058 | ) | ||||||||||||||||
Total comprehensive income | — | — | — | — | — | 30,654 | ||||||||||||||||||
Stock-based compensation (net of $1,938 temporary equity) | — | 6,476 | — | — | — | 6,476 | ||||||||||||||||||
Cash dividend paid | — | (20,001 | ) | — | — | (978 | ) | (20,979 | ) | |||||||||||||||
Balance at November 29, 2009 | $ | 373 | $ | 39,532 | $ | (123,157 | ) | $ | (249,867 | ) | $ | 17,735 | $ | (315,384 | ) | |||||||||
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Year Ended | Year Ended | Year Ended | ||||||||||
November 29, | November 30, | November 25, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands) | ||||||||||||
Cash Flows from Operating Activities: | ||||||||||||
Net income | $ | 150,712 | $ | 230,382 | $ | 461,294 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 84,603 | 77,983 | 67,514 | |||||||||
Asset impairments | 16,814 | 20,308 | 9,070 | |||||||||
(Gain) loss on disposal of property, plant and equipment | (175 | ) | 40 | 444 | ||||||||
Unrealized foreign exchange losses (gains) | 14,657 | 50,736 | (7,186 | ) | ||||||||
Realized loss (gain) on settlement of forward foreign exchange contracts not designated for hedge accounting | 50,760 | (53,499 | ) | 16,137 | ||||||||
Employee benefit plans’ amortization from accumulated other comprehensive loss | (19,730 | ) | (35,995 | ) | — | |||||||
Employee benefit plans’ curtailment loss (gain), net | 1,643 | (5,162 | ) | (51,575 | ) | |||||||
Write-off of unamortized costs associated with early extinguishment of debt | — | 394 | 17,166 | |||||||||
Amortization of deferred debt issuance costs | 4,344 | 4,007 | 5,192 | |||||||||
Stock-based compensation | 7,822 | 6,832 | 4,977 | |||||||||
Allowance for doubtful accounts | 7,246 | 10,376 | 615 | |||||||||
Deferred income taxes | (5,128 | ) | 75,827 | (150,079 | ) | |||||||
Change in operating assets and liabilities (excluding assets and liabilities acquired): | ||||||||||||
Trade receivables | 27,568 | 61,707 | (18,071 | ) | ||||||||
Inventories | 113,014 | (21,777 | ) | 40,422 | ||||||||
Other current assets | 5,626 | (25,400 | ) | 19,235 | ||||||||
Other non-current assets | (11,757 | ) | (16,773 | ) | (10,598 | ) | ||||||
Accounts payable and other accrued liabilities | (55,649 | ) | (93,012 | ) | 16,168 | |||||||
Income tax liabilities | (3,377 | ) | 3,923 | 9,527 | ||||||||
Restructuring liabilities | (2,536 | ) | (7,376 | ) | (8,134 | ) | ||||||
Accrued salaries, wages and employee benefits | (20,082 | ) | (30,566 | ) | (89,031 | ) | ||||||
Long-term employee related benefits | 26,871 | (35,112 | ) | (32,634 | ) | |||||||
Other long-term liabilities | (4,452 | ) | 6,922 | 1,973 | ||||||||
Other, net | (11 | ) | 44 | (155 | ) | |||||||
Net cash provided by operating activities | 388,783 | 224,809 | 302,271 | |||||||||
Cash Flows from Investing Activities: | ||||||||||||
Purchases of property, plant and equipment | (82,938 | ) | (80,350 | ) | (92,519 | ) | ||||||
Proceeds from sale of property, plant and equipment | 939 | 995 | 3,881 | |||||||||
(Payments) proceeds on settlement of forward foreign exchange contracts not designated for hedge accounting | (50,760 | ) | 53,499 | (16,137 | ) | |||||||
Acquisitions, net of cash acquired | (100,270 | ) | (959 | ) | (2,502 | ) | ||||||
Net cash used for investing activities | (233,029 | ) | (26,815 | ) | (107,277 | ) | ||||||
Cash Flows from Financing Activities: | ||||||||||||
Proceeds from issuance of long-term debt | — | — | 669,006 | |||||||||
Repayments of long-term debt and capital leases | (72,870 | ) | (94,904 | ) | (984,333 | ) | ||||||
Short-term borrowings, net | (2,704 | ) | 12,181 | (1,711 | ) | |||||||
Debt issuance costs | — | (446 | ) | (5,297 | ) | |||||||
Restricted cash | (602 | ) | (1,224 | ) | (58 | ) | ||||||
Dividends to minority interest shareholders of Levi Strauss Japan K.K. | (978 | ) | (1,114 | ) | (3,141 | ) | ||||||
Dividend to stockholders | (20,001 | ) | (49,953 | ) | — | |||||||
Net cash used for financing activities | (97,155 | ) | (135,460 | ) | (325,534 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | 1,393 | (7,636 | ) | 6,953 | ||||||||
Net increase (decrease) in cash and cash equivalents | 59,992 | 54,898 | (123,587 | ) | ||||||||
Beginning cash and cash equivalents | 210,812 | 155,914 | 279,501 | |||||||||
Ending cash and cash equivalents | $ | 270,804 | $ | 210,812 | $ | 155,914 | ||||||
Supplemental disclosure of cash flow information: | ||||||||||||
Cash paid during the period for: | ||||||||||||
Interest | $ | 135,576 | $ | 154,103 | $ | 237,017 | ||||||
Income taxes | 56,922 | 63,107 | 52,275 |
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NOTE 1: | SIGNIFICANT ACCOUNTING POLICIES |
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• | In December 2007 the FASB issued SFAS 141 (revised 2007),“Business Combinations”and in April 2009, the FASB issued FASB Staff Position No. FAS 141(R)-1,“Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies,” both of which were subsequently codified by the FASB under ASC Topic 805 (“Topic 805”). This guidance establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired and liabilities assumed (including those arising from contingencies) and any noncontrolling interest in the acquiree. Topic 805 requires assets acquired, liabilities assumed and any noncontrolling interest in the acquiree to be measured at their acquisition-date fair value (with limited exceptions). If such items are contingent upon future events, Topic 805 requires measurement at acquisition-date fair value only if it can be determined during the prescribed measurement period. If it cannot be determined during the measurement period, the asset acquired or liability assumed may only be recognized if certain criteria are met. The Company does not anticipate that the adoption of this statement will have a material impact on its consolidated financial statements, absent any material business combinations. | |
• | In December 2007 the FASB issued EITF IssueNo. 07-1,“Accounting for Collaborative Arrangements,”which was subsequently codified by the FASB under ASC Topic808-10 (“Topic808-10”). Topic808-10 defines collaborative arrangements and requires that transactions with third parties that do not participate in the arrangement be reported in the appropriate income statement line items pursuant to the guidance inEITF 99-19,“Reporting Revenue Gross as a Principal versus Net as an Agent.”Income statement classification of payments made between participants of a collaborative arrangement are to be based on other applicable authoritative accounting literature. If the payments are not within the scope or analogy of other authoritative accounting literature, a reasonable, rational and consistent accounting policy is to be elected. This new guidance is to be applied retrospectively to all prior periods presented for all collaborative arrangements existing as of the effective date. The Company does not anticipate that the adoption of this statement will have a material impact on its consolidated financial statements. | |
• | In April 2008 the FASB issued FASB Staff PositionNo. FAS 142-3,“Determination of the Useful Life of Intangible Assets,”which was subsequently codified by the FASB under ASC Topic350-30 (“Topic 350”). This new guidance amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142,“Goodwill and Other Intangible Assets.”More specifically, it removes the requirement under paragraph 11 of SFAS 142 to consider whether an intangible asset can be renewed without substantial cost or material modifications to the existing terms and conditions and instead, requires an entity to consider its own historical experience in renewing similar arrangements. This standard also requires expanded disclosure related to the determination of intangible asset useful lives. The Company does not anticipate that the adoption of this statement will have a material impact on its consolidated financial statements. | |
• | In June 2009 the FASB issued SFAS No. 166,“Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140,”which was subsequently codified by the FASB under ASC Topic 860 (“Topic 860”). Topic 860 seeks to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets. Specifically, Topic 860 |
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eliminates the concept of a qualifying special-purpose entity, creates more stringent conditions for reporting a transfer of a portion of a financial asset as a sale, clarifies other sale-accounting criteria, and changes the initial measurement of a transferor’s interest in transferred financial assets. The Company does not anticipate that the adoption of this statement will have a material impact on its consolidated financial statements. |
• | In June 2009 the FASB issued SFAS No. 167,“Amendments to FASB Interpretation No. 46(R),” which was subsequently codified by the FASB as ASC Topic 810 (“Topic810-10”). Topic 810 amends FASB Interpretation No. 46(R), “Variable Interest Entities” for determining whether an entity is a variable interest entity (“VIE”) and requires an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a VIE. Under Topic 810, an enterprise has a controlling financial interest when it has (a) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance, and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. Topic 810 also requires an enterprise to assess whether it has an implicit financial responsibility to ensure that a VIE operates as designed when determining whether it has power to direct the activities of the VIE that most significantly impact the entity’s economic performance. Topic 810 also requires ongoing assessments of whether an enterprise is the primary beneficiary of a VIE, requires enhanced disclosures and eliminates the scope exclusion for qualifying special-purpose entities. The Company does not anticipate that the adoption of this statement will have a material impact on its consolidated financial statements. |
• | In January 2010 the FASB issued Accounting Standards UpdateNo. 2010-06,“Fair Value Measurements Disclosures,” which amends Subtopic820-10 of the FASB Accounting Standards Codification to require new disclosures for fair value measurements and provides clarification for existing disclosures requirements. More specifically, this update will require (a) an entity to disclose separately the amounts of significant transfers in and out of Levels 1 and 2 fair value measurements and to describe the reasons for the transfers; and (b) information about purchases, sales, issuances and settlements to be presented separately (i.e. present the activity on a gross basis rather than net) in the reconciliation for fair value measurements using significant unobservable inputs (Level 3 inputs). This update clarifies existing disclosure requirements for the level of disaggregation used for classes of assets and liabilities measured at fair value and requires disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements using Level 2 and Level 3 inputs. The Company does not anticipate that the adoption of this statement will materially expand its consolidated financial statement footnote disclosures. |
• | In December 2008 the FASB issued FASB Staff Position No. FAS 132(R)-1,“Employers’ Disclosures about Postretirement Benefit Plan Assets,”which was subsequently codified by the FASB under ASC Topic715-20-65 (“Topic715-20-65”). This standard amends FASB Statement No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits,” (“FAS 132(R)”) to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. The additional disclosure requirements under this FSP include expanded disclosures about an entity’s investment policies and strategies, the categories of plan assets, concentrations of credit risk and fair value methodologies and measurements of plan assets. The Company anticipates that the adoption of this statement will materially expand its consolidated financial statement footnote disclosures. |
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• | In September 2009 the FASB issued Accounting Standards Update2009-13,“Revenue Recognition (Topic 605): Multiple Deliverable Revenue Arrangements (a consensus of the FASB Emerging Issues Task Force),”(“ASU2009-13”). ASU2009-13 provides principles and application guidance on whether multiple deliverables exist, how the arrangement should be separated and the consideration allocation. Additionally, ASU2009-13 requires an entity to allocate revenue in an arrangement using estimated selling prices of deliverables if a vendor does not have vendor-specific objective evidence or third-party evidence of selling price, eliminates the residual method and requires an entity to allocate revenue using the relative selling price method. ASU2009-13 may be applied retrospectively or prospectively for new or materially modified arrangements and early adoption is permitted. The Company does not anticipate that the adoption of this statement will have a material impact on its consolidated financial statements. |
NOTE 2: | PROPERTY, PLANT AND EQUIPMENT |
November 29, | November 30, | |||||||
2009 | 2008 | |||||||
(Dollars in thousands) | ||||||||
Land | $ | 30,118 | $ | 27,864 | ||||
Buildings and leasehold improvements | 380,601 | 357,203 | ||||||
Machinery and equipment | 493,152 | 473,456 | ||||||
Capitalized internal-use software | 158,630 | 133,593 | ||||||
Construction in progress | 32,460 | 16,759 | ||||||
Subtotal | 1,094,961 | 1,008,875 | ||||||
Accumulated depreciation | (664,891 | ) | (596,967 | ) | ||||
PP&E, net | $ | 430,070 | $ | 411,908 | ||||
NOTE 3: | BUSINESS ACQUISITIONS |
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Asia | ||||||||||||||||
Americas | Europe | Pacific | Total | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Balance, November 25, 2007 | $ | 199,905 | $ | 4,063 | $ | 2,518 | $ | 206,486 | ||||||||
Foreign currency fluctuation | — | (1,025 | ) | (798 | ) | (1,823 | ) | |||||||||
Balance, November 30, 2008 | $ | 199,905 | $ | 3,038 | $ | 1,720 | $ | 204,663 | ||||||||
Additions | 7,513 | 24,427 | — | 31,940 | ||||||||||||
Foreign currency fluctuation | 5 | 4,615 | 545 | 5,165 | ||||||||||||
Balance, November 29, 2009 | $ | 207,423 | $ | 32,080 | $ | 2,265 | $ | 241,768 | ||||||||
November 29, 2009 | November 30, 2008 | |||||||||||||||||||||||
Gross | Gross | |||||||||||||||||||||||
Carrying | Accumulated | Carrying | Accumulated | |||||||||||||||||||||
Value | Amortization | Total | Value | Amortization | Total | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Unamortized intangible assets: | ||||||||||||||||||||||||
Trademarks | $ | 42,743 | $ | — | $ | 42,743 | $ | 42,771 | $ | — | $ | 42,771 | ||||||||||||
Amortized intangible assets: | ||||||||||||||||||||||||
Acquired contractual rights | 46,529 | (6,019 | ) | 40,510 | 142 | (139 | ) | 3 | ||||||||||||||||
Customer lists | 22,340 | (2,395 | ) | 19,945 | — | — | — | |||||||||||||||||
$ | 111,612 | $ | (8,414 | ) | $ | 103,198 | $ | 42,913 | $ | (139 | ) | $ | 42,774 | |||||||||||
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NOTE 4: | FAIR VALUE OF FINANCIAL INSTRUMENTS |
November 29, 2009 | November 30, 2008 | |||||||||||||||||||||||
Fair Value Estimated Using | Fair Value Estimated Using | |||||||||||||||||||||||
Level 1 | Level 2 | Level 1 | Level 2 | |||||||||||||||||||||
Fair Value | Inputs(1) | Inputs(2) | Fair Value | Inputs(1) | Inputs(2) | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Financial assets carried at fair value | ||||||||||||||||||||||||
Rabbi trust assets | $ | 16,855 | $ | 16,855 | $ | — | $ | 13,465 | $ | 13,465 | $ | — | ||||||||||||
Forward foreign exchange contracts, net(3) | 721 | — | 721 | 10,211 | — | 10,211 | ||||||||||||||||||
Total financial assets carried at fair value | $ | 17,576 | $ | 16,855 | $ | 721 | $ | 23,676 | $ | 13,465 | $ | 10,211 | ||||||||||||
Financial liabilities carried at fair value | ||||||||||||||||||||||||
Forward foreign exchange contracts, net(3) | $ | 14,519 | $ | — | $ | 14,519 | $ | 5,225 | $ | — | $ | 5,225 | ||||||||||||
Interest rate swap, net | 1,451 | — | 1,451 | 1,454 | — | 1,454 | ||||||||||||||||||
Total financial liabilities carried at fair value | $ | 15,970 | $ | — | $ | 15,970 | $ | 6,679 | $ | — | $ | 6,679 | ||||||||||||
(1) | Fair values estimated using Level 1 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. See Note 12 for more information on rabbi trust assets. | |
(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 credit default swap prices. For the interest rate swap, for which the Company’s fair value estimate incorporates discounted future cash flows using a forward curve mid-market pricing convention, inputs include LIBOR forward rates and credit default swap prices. | |
(3) | The Company’s forward foreign exchange contracts are subject to International Swaps and Derivatives Association, Inc. (“ISDA”) master agreements. These agreements are signed between the Company and each respective financial institution, and permit the net-settlement of forward foreign exchange contracts on a per institution basis. |
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November 29, 2009 | November 30, 2008 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Value | Fair Value(1) | Value | Fair Value(1) | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Financial liabilities carried at adjusted historical cost | ||||||||||||||||
Senior revolving credit facility | $ | 108,489 | $ | 103,618 | $ | 179,992 | $ | 149,541 | ||||||||
U.S. Dollar notes | 817,824 | 852,067 | 818,029 | 477,583 | ||||||||||||
Euro senior notes | 379,935 | 379,935 | 329,169 | 151,900 | ||||||||||||
Senior term loan | 323,497 | 291,163 | 323,589 | 204,069 | ||||||||||||
Yen-denominated Eurobonds | 232,494 | 197,448 | 210,621 | 86,788 | ||||||||||||
Short-term and other borrowings | 19,027 | 19,027 | 20,943 | 20,943 | ||||||||||||
Total financial liabilities carried at adjusted historical cost | $ | 1,881,266 | $ | 1,843,258 | $ | 1,882,343 | $ | 1,090,824 | ||||||||
(1) | Fair value estimate incorporates mid-market price quotes. |
NOTE 5: | DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES |
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November 29, 2009 | November 30, 2008 | |||||||||||||||||||||||
Assets | (Liabilities) | Assets | (Liabilities) | |||||||||||||||||||||
Derivative | Derivative | |||||||||||||||||||||||
Carrying | Carrying | Net Carrying | Carrying | Carrying | Net Carrying | |||||||||||||||||||
Value | Value | Value | Value | Value | Value | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Derivatives not designated as hedging instruments | ||||||||||||||||||||||||
Forward foreign exchange contracts(1) | $ | 1,189 | $ | (468 | ) | $ | 721 | $ | 13,522 | $ | (3,311 | ) | $ | 10,211 | ||||||||||
Forward foreign exchange contracts(2) | 5,675 | (20,194 | ) | (14,519 | ) | 2,766 | (7,991 | ) | (5,225 | ) | ||||||||||||||
Interest rate contracts(2) | — | (1,451 | ) | (1,451 | ) | — | (1,454 | ) | (1,454 | ) | ||||||||||||||
Total derivatives not designated as hedging instruments | $ | 6,864 | $ | (22,113 | ) | $ | 16,288 | $ | (12,756 | ) | ||||||||||||||
Non-derivatives designated as hedging instruments | ||||||||||||||||||||||||
Euro senior notes | $ | — | $ | (374,641 | ) | $ | — | $ | (324,520 | ) | ||||||||||||||
Yen-denominated Eurobonds(3) | — | (92,684 | ) | — | (83,954 | ) | ||||||||||||||||||
Total non-derivatives designated as hedging instruments | $ | — | $ | (467,325 | ) | $ | — | $ | (408,474 | ) | ||||||||||||||
(1) | Included in “Other current assets” on the Company’s consolidated balance sheets. | |
(2) | Included in “Other accrued liabilities” on the Company’s consolidated balance sheets. | |
(3) | Represents the portion of the Yen-denominated Eurobonds that have been designated as a net investment hedge. |
Gain or (Loss) | ||||||||||||||||||||
Gain or (Loss) | Recognized in Other Income (Expense), net | |||||||||||||||||||
Recognized in AOCI | (Ineffective Portion and Amount | |||||||||||||||||||
(Effective Portion) | Excluded from Effectiveness Testing) | |||||||||||||||||||
As of | As of | Year Ended | ||||||||||||||||||
November 29, | November 30, | November 29, | November 30, | November 25, | ||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2007 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Forward foreign exchange contracts(1) | $ | 4,637 | $ | 4,637 | $ | — | $ | — | $ | — | ||||||||||
Euro senior notes | (61,570 | ) | (10,870 | ) | — | — | — | |||||||||||||
Yen-denominated Eurobonds | (23,621 | ) | (14,892 | ) | (13,094 | ) | (14,815 | ) | (6,981 | ) | ||||||||||
Cumulative income taxes | 31,237 | 8,828 | ||||||||||||||||||
Total | $ | (49,317 | ) | $ | (12,297 | ) | ||||||||||||||
(1) | Realized gains on settled foreign exchange derivatives designated as net investment hedges. |
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Gain or (Loss) During | ||||||||||||
Year Ended | ||||||||||||
November 29, | November 30, | November 25, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands) | ||||||||||||
Forward foreign exchange contracts(1): | ||||||||||||
Realized | $ | (50,760 | ) | $ | 53,499 | $ | (16,137 | ) | ||||
Unrealized | (18,794 | ) | 10,944 | (5,934 | ) | |||||||
Total | $ | (69,554 | ) | $ | 64,443 | $ | (22,071 | ) | ||||
(1) | Recognized in “Other income (expense), net” in the Company’s consolidated statements of income. |
NOTE 6: | DEBT |
November 29, | November 30, | |||||||
2009 | 2008 | |||||||
(Dollars in thousands) | ||||||||
Long-term debt | ||||||||
Secured: | ||||||||
Senior revolving credit facility | $ | 108,250 | $ | 179,125 | ||||
Notes payable, at various rates | — | 99 | ||||||
Total secured | 108,250 | 179,224 | ||||||
Unsecured: | ||||||||
8.625% Euro senior notes due 2013 | 374,641 | 324,520 | ||||||
Senior term loan due 2014 | 323,340 | 323,028 | ||||||
9.75% senior notes due 2015 | 446,210 | 446,210 | ||||||
8.875% senior notes due 2016 | 350,000 | 350,000 | ||||||
4.25% Yen-denominated Eurobonds due 2016 | 231,710 | 209,886 | ||||||
Total unsecured | 1,725,901 | 1,653,644 | ||||||
Less: current maturities | — | (70,875 | ) | |||||
Total long-term debt | $ | 1,834,151 | $ | 1,761,993 | ||||
Short-term debt | ||||||||
Short-term borrowings | $ | 18,749 | $ | 20,339 | ||||
Current maturities of long-term debt | — | 70,875 | ||||||
Total short-term debt | $ | 18,749 | $ | 91,214 | ||||
Total long-term and short-term debt | $ | 1,852,900 | $ | 1,853,207 | ||||
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(Dollars in thousands) | ||||
2010 | $ | 18,749 | ||
2011 | — | |||
2012 | 108,250 | |||
2013 | 374,641 | |||
2014 | 323,340 | |||
Thereafter | 1,027,920 | |||
Total future debt principal payments | $ | 1,852,900 | ||
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NOTE 7: | GUARANTEES |
NOTE 8: | EMPLOYEE BENEFIT PLANS |
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Pension Benefits | Postretirement Benefits | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Change in benefit obligation: | ||||||||||||||||
Benefit obligation at beginning of year | $ | 840,683 | $ | 957,693 | $ | 151,097 | $ | 179,581 | ||||||||
Service cost | 5,254 | 6,370 | 428 | 590 | ||||||||||||
Interest cost | 61,698 | 61,581 | 11,042 | 10,785 | ||||||||||||
Plan participants’ contribution | 1,294 | 1,456 | 6,431 | 6,691 | ||||||||||||
Actuarial loss (gain)(1) | 195,390 | (90,340 | ) | 30,569 | (17,334 | ) | ||||||||||
Net curtailment (gain) loss | (852 | ) | 978 | 2,996 | 218 | |||||||||||
Impact of foreign currency changes | 16,946 | (32,062 | ) | — | — | |||||||||||
Plan settlements | (5,787 | ) | (5,127 | ) | — | — | ||||||||||
Special termination benefits | 78 | 36 | — | — | ||||||||||||
Benefits paid | (53,439 | ) | (59,902 | ) | (25,798 | ) | (29,434 | ) | ||||||||
Benefit obligation at end of year | $ | 1,061,265 | $ | 840,683 | $ | 176,765 | $ | 151,097 | ||||||||
Change in plan assets: | ||||||||||||||||
Fair value of plan assets at beginning of year | $ | 601,612 | $ | 883,566 | $ | — | $ | — | ||||||||
Actual return on plan assets(2) | 108,388 | (213,486 | ) | — | — | |||||||||||
Employer contribution | 18,051 | 18,260 | 19,367 | 22,743 | ||||||||||||
Plan participants’ contributions | 1,294 | 1,456 | 6,431 | 6,691 | ||||||||||||
Plan settlements | (5,787 | ) | (5,127 | ) | — | — | ||||||||||
Impact of foreign currency changes | 10,889 | (23,155 | ) | — | — | |||||||||||
Benefits paid | (53,439 | ) | (59,902 | ) | (25,798 | ) | (29,434 | ) | ||||||||
Fair value of plan assets at end of year | 681,008 | 601,612 | — | — | ||||||||||||
Funded status at end of year | $ | (380,257 | ) | $ | (239,071 | ) | $ | (176,765 | ) | $ | (151,097 | ) | ||||
(1) | Actuarial (gains) and losses in the Company’s pension benefit and postretirement benefit plans were driven by changes in discount rate assumptions, primarily for the Company’s U.S. plans. | |
(2) | Global financial market conditions drove the 2008 decline in fair value of pension plan assets, primarily related to the Company’s U.S. pension plans. |
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Pension Benefits | Postretirement Benefits | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Prepaid benefit cost | $ | 2,107 | $ | 2,337 | $ | — | $ | — | ||||||||
Accrued benefit liability — current portion | (7,698 | ) | (7,852 | ) | (19,931 | ) | (20,874 | ) | ||||||||
Accrued benefit liability — long-term portion | (374,666 | ) | (233,556 | ) | (156,834 | ) | (130,223 | ) | ||||||||
$ | (380,257 | ) | $ | (239,071 | ) | $ | (176,765 | ) | $ | (151,097 | ) | |||||
Accumulated other comprehensive income (loss): | ||||||||||||||||
Net actuarial loss | $ | (316,561 | ) | $ | (207,979 | ) | $ | (56,707 | ) | $ | (27,872 | ) | ||||
Net prior service benefit (cost) | 710 | (346 | ) | 75,360 | 117,587 | |||||||||||
$ | (315,851 | ) | $ | (208,325 | ) | $ | 18,653 | $ | 89,715 | |||||||
Pension Benefits | ||||||||
2009 | 2008 | |||||||
(Dollars in thousands) | ||||||||
Accumulated benefit obligations in excess of plan assets: | ||||||||
Aggregate accumulated benefit obligation | $ | 983,057 | $ | 795,598 | ||||
Aggregate fair value of plan assets | 621,826 | 579,918 | ||||||
Projected benefit obligations in excess of plan assets: | ||||||||
Aggregate projected benefit obligation | $ | 1,036,245 | $ | 821,326 | ||||
Aggregate fair value of plan assets | 653,881 | 579,918 |
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Pension Benefits | Postretirement Benefits | |||||||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Net periodic benefit cost (income): | ||||||||||||||||||||||||
Service cost | $ | 5,254 | $ | 6,370 | $ | 7,930 | $ | 428 | $ | 590 | $ | 713 | ||||||||||||
Interest cost | 61,698 | 61,581 | 58,237 | 11,042 | 10,785 | 10,833 | ||||||||||||||||||
Expected return on plan assets | (42,191 | ) | (62,847 | ) | (60,252 | ) | — | — | — | |||||||||||||||
Amortization of prior service cost (benefit)(1) | 792 | 857 | 3,614 | (39,698 | ) | (41,405 | ) | (45,726 | ) | |||||||||||||||
Amortization of transition asset | — | 231 | 491 | — | — | — | ||||||||||||||||||
Amortization of actuarial loss | 17,082 | 577 | 6,059 | 1,734 | 3,960 | 4,682 | ||||||||||||||||||
Curtailment loss (gain)(2) | 1,176 | 782 | 1,188 | 467 | (5,944 | ) | (52,763 | ) | ||||||||||||||||
Special termination benefit | 78 | 36 | 164 | — | — | — | ||||||||||||||||||
Net settlement loss (gain) | 1,655 | (65 | ) | 55 | — | — | — | |||||||||||||||||
Net periodic benefit cost (income) | 45,544 | 7,522 | 17,486 | (26,027 | ) | (32,014 | ) | (82,261 | ) | |||||||||||||||
Changes in accumulated other comprehensive income (loss) : | ||||||||||||||||||||||||
Actuarial loss (gain)(3) | 127,374 | 184,375 | 30,569 | (17,334 | ) | |||||||||||||||||||
Amortization of prior service (cost) benefit | (792 | ) | (857 | ) | 39,698 | 41,405 | ||||||||||||||||||
Amortization of transition asset | — | (231 | ) | — | — | |||||||||||||||||||
Amortization of actuarial loss | (17,082 | ) | (577 | ) | (1,734 | ) | (3,960 | ) | ||||||||||||||||
Curtailment (loss) gain | (1,625 | ) | (83 | ) | 2,529 | 6,162 | ||||||||||||||||||
Net settlement (loss) gain | (360 | ) | 214 | — | — | |||||||||||||||||||
Total recognized in accumulated other comprehensive income (loss) | 107,515 | 182,841 | 71,062 | 26,273 | ||||||||||||||||||||
Total recognized in net periodic benefit cost (income) and accumulated other comprehensive income (loss) | $ | 153,059 | $ | 190,363 | $ | 45,035 | $ | (5,741 | ) | |||||||||||||||
(1) | Postretirement benefits amortization of prior service benefit recognized during each of years 2009, 2008 and 2007, relates primarily to the favorable impact of the February 2004 and August 2003 plan amendments. | |
(2) | In 2007, the Company entered into a new labor agreement with the union that represents many of its distribution-related employees in North America, which contained a voluntary separation and buyout program. As a result of the voluntary terminations that occurred with this program, the Company remeasured certain pension and postretirement benefit obligations as of July 31, 2007, which resulted in an estimated $31.7 million postretirement benefit curtailment gain, attributable to the accelerated recognition of benefits associated with prior plan changes. Of the total $31.7 million, $27.5 million was recognized during 2007 related to employees that elected the buyout and left the Company. The remaining curtailment gain of $4.2 million was recognized in 2008. | |
As a result of the 2006 closure of and job reductions related to the Company’s facility in Little Rock, Arkansas, the Company recognized a $54.3 million curtailment gain attributable to the accelerated recognition of prior service benefit associated with prior plan amendments. Of the total $54.3 million, $25.3 million was recognized during 2007 as the related employees terminated. | ||
(3) | Reflects the impact of the changes in the discount rate assumptions for the pension and postretirement benefit plans for 2009, and for 2008, reflects the impact of the substantial decline in the fair value of the pension plan assets in that year. |
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Pension Benefits | Postretirement Benefits | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Weighted-average assumptions used to determine net periodic benefit cost: | ||||||||||||||||
Discount rate | 7.5 | % | 6.7 | % | 7.9 | % | 6.4 | % | ||||||||
Expected long-term rate of return on plan assets | 7.2 | % | 7.4 | % | ||||||||||||
Rate of compensation increase | 4.0 | % | 4.0 | % | ||||||||||||
Weighted-average assumptions used to determine benefit obligations: | ||||||||||||||||
Discount rate(1) | 5.8 | % | 7.5 | % | 5.2 | % | 7.9 | % | ||||||||
Rate of compensation increase | 4.0 | % | 4.0 | % | ||||||||||||
Assumed health care cost trend rates were as follows: | ||||||||||||||||
Health care trend rate assumed for next year | 8.0 | % | 9.0 | % | ||||||||||||
Rate trend to which the cost trend is assumed to decline | 4.5 | % | 5.0 | % | ||||||||||||
Year that rate reaches the ultimate trend rate(2) | 2028 | 2020 |
(1) | Decline in discount rate driven by changes in the financial markets during 2009, including a decrease in corporate bond yield indices. | |
(2) | Change as compared to prior year had no significant effect on the total service and interest cost components or on the postretirement benefit obligation. |
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November 29, | November 30, | |||||||
2009 | 2008 | |||||||
Equity securities | 46.1 | % | 51.1 | % | ||||
Debt securities | 44.2 | % | 44.2 | % | ||||
Real estate and other | 9.7 | % | 4.7 | % | ||||
Total | 100.0 | % | 100.0 | % | ||||
Pension | Postretirement | |||||||||||
Fiscal year | Benefits | Benefits | Total | |||||||||
(Dollars in thousands) | ||||||||||||
2010 | $ | 55,520 | $ | 22,167 | $ | 77,687 | ||||||
2011 | 53,788 | 21,841 | 75,629 | |||||||||
2012 | 56,157 | 21,317 | 77,474 | |||||||||
2013 | 56,795 | 20,559 | 77,354 | |||||||||
2014 | 57,518 | 19,695 | 77,213 | |||||||||
2015-2019 | 318,807 | 85,991 | 404,798 |
NOTE 9: | EMPLOYEE INVESTMENT PLANS |
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NOTE 10: | EMPLOYEE INCENTIVE COMPENSATION PLANS |
NOTE 11: | STOCK-BASED INCENTIVE COMPENSATION PLANS |
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Weighted-Average | ||||||||||||
Weighted-Average | Remaining | |||||||||||
Units | Exercise Price | Contractual Life (Yrs) | ||||||||||
Outstanding at November 25, 2007 | 1,639,856 | $ | 48.11 | |||||||||
Granted | 41,898 | 50.00 | ||||||||||
Exercised | — | — | ||||||||||
Forfeited | (256,923 | ) | 48.12 | |||||||||
Expired | (10,122 | ) | 42.00 | |||||||||
Outstanding at November 30, 2008 | 1,414,709 | 48.20 | 4.8 | |||||||||
Granted | 471,455 | 24.90 | ||||||||||
Exercised | — | — | ||||||||||
Forfeited | (173,608 | ) | 48.73 | |||||||||
Expired | — | — | ||||||||||
Outstanding at November 29, 2009 | 1,712,556 | $ | 41.73 | 4.7 | ||||||||
Vested and expected to vest at November 29, 2009 | 1,626,511 | $ | 40.31 | 4.7 | ||||||||
Exercisable at November 29, 2009 | 1,054,253 | $ | 46.15 | 3.8 | ||||||||
SARs Granted | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Weighted-average grant date fair value | $ | 11.98 | $ | 18.26 | $ | 24.79 | ||||||
Weighted-average assumptions: | ||||||||||||
Expected life (in years) | 4.5 | 4.5 | 5.5 | |||||||||
Expected volatility | 59.2 | % | 39.0 | % | 31.8 | % | ||||||
Risk-free interest rate | 1.9 | % | 2.7 | % | 4.7 | % | ||||||
Expected dividend | 0.4 | % | — | — |
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Weighted-Average | ||||||||
Units | Fair Value | |||||||
Outstanding at November 25, 2007 | 10,301 | $ | 68.00 | |||||
Granted | 27,159 | 44.50 | ||||||
Converted | — | — | ||||||
Forfeited | (3,768 | ) | 53.05 | |||||
Outstanding at November 30, 2008 | 33,692 | $ | 50.73 | |||||
Granted | 48,651 | 25.42 | ||||||
Converted | (6,503 | ) | 49.06 | |||||
Forfeited | — | — | ||||||
Outstanding, vested and expected to vest at November 29, 2009 | 75,840 | $ | 34.63 | |||||
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Weighted-Average | ||||||||||||
Weighted-Average | Fair Value | |||||||||||
Units | Exercise Price | At Period End | ||||||||||
Outstanding at November 25, 2007 | — | — | ||||||||||
Granted | 392,250 | $ | 49.77 | |||||||||
Exercised | — | — | ||||||||||
Forfeited | (25,200 | ) | 50.00 | |||||||||
Outstanding at November 30, 2008 | 367,050 | $ | 49.76 | $ | 7.27 | |||||||
Granted | 694,425 | 24.83 | ||||||||||
Exercised | — | — | ||||||||||
Forfeited | (153,400 | ) | 38.94 | |||||||||
Outstanding at November 29, 2009 | 908,075 | $ | 32.52 | $ | 8.56 | |||||||
Vested and expected to vest at November 29, 2009 | 664,248 | $ | 33.55 | $ | 8.19 | |||||||
TSRPs Outstanding at | ||||||||
November 29, | November 30, | |||||||
2009 | 2008 | |||||||
Weighted-average assumptions: | ||||||||
Expected life (in years) | 1.8 | 2.1 | ||||||
Expected volatility | 63.5 | % | 66.8 | % | ||||
Risk-free interest rate | 0.6 | % | 1.0 | % | ||||
Expected dividend | 2.0 | % | — |
NOTE 12: | LONG-TERM EMPLOYEE RELATED BENEFITS |
November 29, | November 30, | |||||||
2009 | 2008 | |||||||
(Dollars in thousands) | ||||||||
Workers’ compensation | $ | 21,185 | $ | 28,722 | ||||
Deferred compensation | 58,706 | 53,023 | ||||||
Non-current portion of liabilities for long-term and stock-based incentive plans | 17,617 | 5,959 | ||||||
Total | $ | 97,508 | $ | 87,704 | ||||
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NOTE 13: | RESTRUCTURING LIABILITIES |
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2009 Restructuring Activities | ||||||||||||||||||||
Liabilities | Liabilities | |||||||||||||||||||
November 30, | November 29, | |||||||||||||||||||
2008 | Charges | Utilization | Adjustments | 2009 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
2009 reorganization initiatives:(1) | ||||||||||||||||||||
Severance and employee benefits | $ | — | $ | 3,407 | $ | (3,239 | ) | $ | (27 | ) | $ | 141 | ||||||||
Other restructuring costs | — | 224 | (150 | ) | — | 74 | ||||||||||||||
Asset impairment | — | 1,325 | (1,325 | ) | — | — | ||||||||||||||
Prior reorganization initiatives:(2) | ||||||||||||||||||||
Severance and employee benefits | 1,105 | 2 | (839 | ) | (155 | ) | 113 | |||||||||||||
Other restructuring costs | 4,782 | 506 | (1,693 | ) | (59 | ) | 3,536 | |||||||||||||
Total | $ | 5,887 | $ | 5,464 | $ | (7,246 | ) | $ | (241 | ) | $ | 3,864 | ||||||||
Current portion | $ | 2,428 | $ | 1,410 | ||||||||||||||||
Long-term portion | 3,459 | 2,454 | ||||||||||||||||||
Total | $ | 5,887 | $ | 3,864 | ||||||||||||||||
(1) | In the first quarter of 2009, the Company decided to close its manufacturing facility in Hungary. This closure resulted in the elimination of the jobs of approximately 549 employees through the fourth quarter of 2009. Charges in 2009 include estimated severance costs and an asset impairment charge reflecting the write-down of building, land and some machinery and equipment to their estimated fair values. The Company does not expect to incur significant additional restructuring charges related to this initiative. | |
(2) | Prior reorganization initiatives include organizational changes and distribution center closures in2003-2008, primarily in Europe and the Americas. The restructuring liability at November 29, 2009, of $3.6 million, primarily consists of lease loss liabilities. The Company does not expect to incur significant future additional restructuring charges related to these prior reorganization initiatives. |
2008 Restructuring Activities | ||||||||||||||||||||
Liabilities | Liabilities | |||||||||||||||||||
November 25, | November 30, | |||||||||||||||||||
2007 | Charges | Utilization | Adjustments | 2008 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
2008 and prior reorganization initiatives | $ | 13,405 | $ | 10,110 | $ | (15,766 | ) | $ | (1,862 | ) | $ | 5,887 | ||||||||
2007 Restructuring Activities | ||||||||||||||||||||
Liabilities | Liabilities | |||||||||||||||||||
November 26, | November 25, | |||||||||||||||||||
2006 | Charges | Utilization | Adjustments | 2007 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
2007 and prior reorganization initiatives | $ | 20,747 | $ | 16,705 | $ | (21,800 | ) | $ | (2,247 | ) | $ | 13,405 | ||||||||
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NOTE 14: | COMMITMENTS AND CONTINGENCIES |
(Dollars in thousands) | ||||
2010 | $ | 132,490 | ||
2011 | 129,062 | |||
2012 | 112,111 | |||
2013 | 86,421 | |||
2014 | 68,838 | |||
Thereafter | 255,481 | |||
Total future minimum lease payments | $ | 784,403 | ||
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NOTE 15: | DIVIDEND PAYMENT |
NOTE 16: | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |
Levi Strauss & Co. | ||||||||||||||||||||||||||||||||
Translation Adjustments | Unrealized | |||||||||||||||||||||||||||||||
Pension and | Net | Foreign | Cash | Gain (Loss) on | ||||||||||||||||||||||||||||
Postretirement | Investment | Currency | Flow | Marketable | Noncontrolling | |||||||||||||||||||||||||||
Benefits | Hedges | Translation | Hedges | Securities(5) | Total | Interest | Totals | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Accumulated other comprehensive income (loss) at November 26, 2006 | $ | (88,176 | ) | $ | (6,407 | ) | $ | (30,359 | ) | $ | (1,369 | ) | $ | 1,532 | $ | (124,779 | ) | $ | 4,958 | $ | (119,821 | ) | ||||||||||
Gross changes(1) | 128,635 | (48,258 | ) | 21,542 | 2,255 | (2,325 | ) | 101,849 | 927 | 102,776 | ||||||||||||||||||||||
Tax | (47,837 | ) | 18,831 | (12,856 | ) | (863 | ) | 891 | (41,834 | ) | — | (41,834 | ) | |||||||||||||||||||
Other comprehensive income (loss), net of tax | 80,798 | (29,427 | ) | 8,686 | 1,392 | (1,434 | ) | 60,015 | 927 | 60,942 | ||||||||||||||||||||||
Adjustment to initially apply ASC TopicNo. 715-20(2) | 72,805 | 72,805 | 72,805 | |||||||||||||||||||||||||||||
Accumulated other comprehensive income (loss) at November 25, 2007 | 65,427 | (35,834 | ) | (21,673 | ) | 23 | 98 | 8,041 | 5,885 | 13,926 | ||||||||||||||||||||||
Gross changes(3) | (209,114 | ) | 38,369 | (26,395 | ) | (37 | ) | (6,691 | ) | (203,868 | ) | 2,166 | (201,702 | ) | ||||||||||||||||||
Tax | 75,526 | (14,832 | ) | 4,592 | 14 | 2,612 | 67,912 | — | 67,912 | |||||||||||||||||||||||
Other comprehensive income (loss), net of tax | (133,588 | ) | 23,537 | (21,803 | ) | (23 | ) | (4,079 | ) | (135,956 | ) | 2,166 | (133,790 | ) | ||||||||||||||||||
Accumulated other comprehensive income (loss) at November 30, 2008 | (68,161 | ) | (12,297 | ) | (43,476 | ) | — | (3,981 | ) | (127,915 | ) | 8,051 | (119,864 | ) | ||||||||||||||||||
Gross changes(4) | (178,577 | ) | (59,429 | ) | 21,550 | — | 3,178 | (213,278 | ) | 1,894 | (211,384 | ) | ||||||||||||||||||||
Tax | 69,858 | 22,409 | 331 | — | (1,272 | ) | 91,326 | — | 91,326 | |||||||||||||||||||||||
Other comprehensive income (loss), net of tax | (108,719 | ) | (37,020 | ) | 21,881 | — | 1,906 | (121,952 | ) | 1,894 | (120,058 | ) | ||||||||||||||||||||
Accumulated other comprehensive income (loss) at November 29, 2009 | $ | (176,880 | ) | $ | (49,317 | ) | $ | (21,595 | ) | $ | — | $ | (2,075 | ) | $ | (249,867 | ) | $ | 9,945 | $ | (239,922 | ) | ||||||||||
(1) | Amounts in 2007 primarily reflect the impact to the minimum pension liability resulting from the remeasurement of certain pension obligations resulting from the Little Rock, Arkansas, facility closure and the voluntary terminations associated with the 2007 labor agreement. | |
(2) | Reflects the Company’s adoption of ASC TopicNo. 715-20 in 2008, which required recognition of the funded status of pension plans and other postretirement benefit plans on the consolidated balance sheet and to measure plan assets and the benefit obligations as of the balance sheet date. |
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(3) | Pension and postretirement benefit amounts in 2008 primarily resulted from the actuarial loss recorded in conjunction with the 2008 year-end remeasurement of pension benefit obligations, and was primarily driven by reductions in the fair value of the pension plan assets. See Note 8 for more information. | |
(4) | Pension and postretirement benefit amounts in 2009 primarily resulted from the actuarial loss recorded in conjunction with the 2009 year-end remeasurement of pension and postretirement benefit obligations, and was primarily due to a decline in discount rates driven by changes in the financial markets during 2009, including a decrease in corporate bond yield indices. See Note 8 for more information. | |
(5) | Reflects unrealized loss on rabbi trust assets. See Note 12 for more information. |
NOTE 17: | OTHER INCOME (EXPENSE), NET |
Year Ended | ||||||||||||
November 29, | November 30, | November 25, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands) | ||||||||||||
Foreign exchange management (losses) gains(1) | $ | (69,554 | ) | $ | 64,443 | $ | (22,071 | ) | ||||
Foreign currency transaction gains (losses)(2) | 25,651 | (71,752 | ) | 20,608 | ||||||||
Interest income | 2,537 | 5,167 | 12,434 | |||||||||
Other | 1,921 | 1,839 | 4,076 | |||||||||
Total other income (expense), net | $ | (39,445 | ) | $ | (303 | ) | $ | 15,047 | ||||
(1) | Foreign exchange management losses and gains reflect the impact of foreign currency fluctuation on the Company’s forward foreign exchange contracts. Losses in 2009 were primarily driven by the weakening of the U.S. Dollar against the Euro and the Australian Dollar relative to the contracted rates. Gains in 2008 were primarily driven by the appreciation of the U.S. Dollar against the Euro and the Swedish Krona relative to the contracted rates. | |
(2) | Foreign currency transaction gains and losses reflect the impact of foreign currency fluctuation on the Company’s foreign currency denominated balances. Gains in 2009 were primarily driven by the appreciation of various foreign currencies against the U.S. Dollar. Losses in 2008 were primarily driven by the weakening of the U.S. Dollar against the Japanese Yen. |
NOTE 18: | INCOME TAXES |
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Year Ended | ||||||||||||
November 29, | November 30, | November 25, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands) | ||||||||||||
Domestic | $ | 45,992 | $ | 197,976 | $ | 211,679 | ||||||
Foreign | 143,933 | 171,290 | 164,856 | |||||||||
Total income before income taxes | $ | 189,925 | $ | 369,266 | $ | 376,535 | ||||||
Year Ended | ||||||||||||
November 29, | November 30, | November 25, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands) | ||||||||||||
U.S. Federal | ||||||||||||
Current | $ | 17,949 | $ | 10,333 | $ | 15,292 | ||||||
Deferred | (11,866 | ) | 77,706 | (156,647 | ) | |||||||
6,083 | 88,039 | (141,355 | ) | |||||||||
U.S. State | ||||||||||||
Current | 5,361 | 2,322 | 3,676 | |||||||||
Deferred | 5,077 | 6,507 | 745 | |||||||||
10,438 | 8,829 | 4,421 | ||||||||||
Foreign | ||||||||||||
Current | 21,031 | 50,402 | 46,352 | |||||||||
Deferred | 1,661 | (8,386 | ) | 5,823 | ||||||||
22,692 | 42,016 | 52,175 | ||||||||||
Consolidated | ||||||||||||
Current | 44,341 | 63,057 | 65,320 | |||||||||
Deferred | (5,128 | ) | 75,827 | (150,079 | ) | |||||||
Total income tax expense (benefit) | $ | 39,213 | $ | 138,884 | $ | (84,759 | ) | |||||
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Year Ended | ||||||||||||||||||||||||
November 29, | November 30, | November 25, | ||||||||||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Income tax expense at U.S. federal statutory rate | $ | 66,474 | 35.0 | % | $ | 129,243 | 35.0 | % | $ | 131,787 | 35.0 | % | ||||||||||||
State income taxes, net of U.S. federal impact | 6,976 | 3.7 | % | 6,248 | 1.7 | % | 2,354 | 0.6 | % | |||||||||||||||
Change in valuation allowance | 4,090 | 2.2 | % | (1,768 | ) | (0.5 | )% | (206,830 | ) | (54.9 | )% | |||||||||||||
Impact of foreign operations | (38,703 | ) | (20.4 | )% | 3,647 | 1.0 | % | (21,946 | ) | (5.8 | )% | |||||||||||||
Reassessment of tax liabilities due to change in estimate | (917 | ) | (0.5 | )% | 1,533 | 0.4 | % | 10,813 | 2.9 | % | ||||||||||||||
Other, including non-deductible expenses | 1,293 | 0.6 | % | (19 | ) | — | (937 | ) | (0.3 | )% | ||||||||||||||
Total | $ | 39,213 | 20.6 | % | $ | 138,884 | 37.6 | % | $ | (84,759 | ) | (22.5 | )% | |||||||||||
Valuation | Valuation | |||||||||||||||
Allowance at | Changes in Related | Allowance at | ||||||||||||||
November 30, | Gross Deferred Tax | Charge / | November 29, | |||||||||||||
2008 | Asset | (Release) | 2009 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
U.S. state net operating loss carryforwards | $ | 1,837 | $ | 223 | $ | — | $ | 2,060 | ||||||||
Foreign net operating loss carryforwards and other foreign deferred tax assets | 56,856 | 9,980 | 4,090 | 70,926 | ||||||||||||
$ | 58,693 | $ | 10,203 | $ | 4,090 | $ | 72,986 | |||||||||
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November 29, | November 30, | |||||||
2009 | 2008 | |||||||
(Dollars in thousands) | ||||||||
Deferred tax assets (liabilities): | ||||||||
Basis differences in foreign subsidiaries | $ | 33,218 | $ | — | ||||
Foreign tax credit carryforwards | 136,591 | 246,021 | ||||||
State net operating loss carryforwards | 12,251 | 14,296 | ||||||
Foreign net operating loss carryforwards | 89,931 | 77,705 | ||||||
Employee compensation and benefit plans | 288,741 | 238,939 | ||||||
Prepaid royalties | 85,073 | — | ||||||
Restructuring and special charges | 15,558 | 14,370 | ||||||
Sales returns and allowances | 31,621 | 34,494 | ||||||
Inventory | 6,719 | 4,680 | ||||||
Property, plant and equipment | 18,516 | 13,562 | ||||||
Unrealized gains/losses on investments | 32,466 | 10,058 | ||||||
Other | 59,335 | 44,760 | ||||||
Total gross deferred tax assets | 810,020 | 698,885 | ||||||
Less: Valuation allowance | (72,986 | ) | (58,693 | ) | ||||
Total net deferred tax assets | $ | 737,034 | $ | 640,192 | ||||
Current | ||||||||
Deferred tax assets | $ | 139,811 | $ | 115,954 | ||||
Valuation allowance | (4,303 | ) | (1,831 | ) | ||||
Total current deferred tax assets | $ | 135,508 | $ | 114,123 | ||||
Long-term | ||||||||
Deferred tax assets | $ | 670,209 | $ | 582,931 | ||||
Valuation allowance | (68,683 | ) | (56,862 | ) | ||||
Total long-term deferred tax assets | $ | 601,526 | $ | 526,069 | ||||
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(Dollars in thousands) | ||||
Gross unrecognized tax benefits as of November 26, 2007 (Adoption date of relevant guidance in ASC 740) | $ | 178,417 | ||
Increases related to current year tax positions | 7,515 | |||
Increases related to tax positions from prior years | 4,227 | |||
Decreases related to tax positions from prior years | (10,518 | ) | ||
Settlement with tax authorities | (1,290 | ) | ||
Lapses of statutes of limitation | (2,963 | ) | ||
Other, including foreign currency translation | (8,213 | ) | ||
Gross unrecognized tax benefits as of November 30, 2008 | 167,175 | |||
Increases related to current year tax positions | 11,188 | |||
Increases related to tax positions from prior years | 8,222 | |||
Decreases related to tax positions from prior years | (2,804 | ) | ||
Settlement with tax authorities | (16,363 | ) | ||
Lapses of statutes of limitation | (7,344 | ) | ||
Other, including foreign currency translation | 464 | |||
Gross unrecognized tax benefits as of November 29, 2009 | $ | 160,538 | ||
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Jurisdiction | Open Tax Years | |
U.S. federal | 2003-2009 | |
California | 1986-2009 | |
Belgium | 2007-2009 | |
United Kingdom | 2007-2009 | |
Spain | 2005-2009 | |
Mexico | 2004-2009 | |
Canada | 2003-2009 | |
Hong Kong | 2003-2009 | |
Italy | 2004-2009 | |
France | 2006-2009 | |
Turkey | 2005-2009 | |
Japan | 2004-2009 |
NOTE 19: | RELATED PARTIES |
NOTE 20: | BUSINESS SEGMENT INFORMATION |
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Year Ended | ||||||||||||
November 29, | November 30, | November 25, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands) | ||||||||||||
Net revenues: | ||||||||||||
Americas | $ | 2,357,662 | $ | 2,476,370 | $ | 2,581,271 | ||||||
Europe | 1,042,131 | 1,195,596 | 1,099,674 | |||||||||
Asia Pacific | 705,973 | 728,948 | 681,154 | |||||||||
Corporate | — | — | (1,170 | ) | ||||||||
Total net revenues | $ | 4,105,766 | $ | 4,400,914 | $ | 4,360,929 | ||||||
Operating income: | ||||||||||||
Americas | $ | 346,329 | $ | 346,855 | $ | 403,252 | ||||||
Europe | 154,839 | 257,941 | 236,904 | |||||||||
Asia Pacific | 90,967 | 99,526 | 95,262 | |||||||||
Regional operating income | 592,135 | 704,322 | 735,418 | |||||||||
Corporate: | ||||||||||||
Restructuring charges, net | 5,224 | 8,248 | 14,458 | |||||||||
Postretirement benefit plan curtailment gains | 467 | (5,944 | ) | (52,763 | ) | |||||||
Other corporate staff costs and expenses | 208,356 | 176,946 | 132,682 | |||||||||
Corporate expenses | 214,047 | 179,250 | 94,377 | |||||||||
Total operating income | 378,088 | 525,072 | 641,041 | |||||||||
Interest expense | (148,718 | ) | (154,086 | ) | (215,715 | ) | ||||||
Loss on early extinguishment of debt | — | (1,417 | ) | (63,838 | ) | |||||||
Other income (expense), net | (39,445 | ) | (303 | ) | 15,047 | |||||||
Income before income taxes | $ | 189,925 | $ | 369,266 | $ | 376,535 | ||||||
Year Ended | ||||||||||||
November 29, | November 30, | November 25, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands) | ||||||||||||
Depreciation and amortization expense: | ||||||||||||
Americas | $ | 44,492 | $ | 41,580 | $ | 33,238 | ||||||
Europe | 21,599 | 18,250 | 19,315 | |||||||||
Asia Pacific | 11,238 | 11,227 | 7,833 | |||||||||
Corporate | 7,274 | 6,926 | 7,128 | |||||||||
Total depreciation and amortization expense | $ | 84,603 | $ | 77,983 | $ | 67,514 | ||||||
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November 29, 2009 | ||||||||||||||||||||
Asia | Consolidated | |||||||||||||||||||
Americas | Europe | Pacific | Unallocated | Total | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Trade receivables, net | $ | 312,110 | $ | 134,428 | $ | 87,416 | $ | 18,298 | $ | 552,252 | ||||||||||
Inventories | 208,859 | 150,639 | 90,181 | 1,593 | 451,272 | |||||||||||||||
All other assets | — | — | — | 1,985,857 | 1,985,857 | |||||||||||||||
Total assets | $ | 2,989,381 | ||||||||||||||||||
November 30, 2008 | ||||||||||||||||||||
Asia | Consolidated | |||||||||||||||||||
Americas | Europe | Pacific | Unallocated | Total | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Trade receivables, net | $ | 309,904 | $ | 132,328 | $ | 83,538 | $ | 20,704 | $ | 546,474 | ||||||||||
Inventories | 277,910 | 159,861 | 105,379 | (476 | ) | 542,674 | ||||||||||||||
All other assets | — | — | — | 1,687,727 | 1,687,727 | |||||||||||||||
Total assets | $ | 2,776,875 | ||||||||||||||||||
Year Ended | ||||||||||||
November 29, | November 30, | November 25, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands) | ||||||||||||
Net revenues: | ||||||||||||
United States | $ | 2,107,055 | $ | 2,197,968 | $ | 2,321,561 | ||||||
Foreign countries | 1,998,711 | 2,202,946 | 2,039,368 | |||||||||
Total net revenues | $ | 4,105,766 | $ | 4,400,914 | $ | 4,360,929 | ||||||
November 29, | November 30, | November 25, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands) | ||||||||||||
Deferred tax assets: | ||||||||||||
United States | $ | 677,245 | $ | 578,653 | $ | 585,182 | ||||||
Foreign countries | 59,789 | 61,539 | 59,126 | |||||||||
Total deferred tax assets | $ | 737,034 | $ | 640,192 | $ | 644,308 | ||||||
November 29, | November 30, | November 25, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands) | ||||||||||||
Long-lived assets: | ||||||||||||
United States | $ | 270,344 | $ | 273,761 | $ | 300,513 | ||||||
Foreign countries | 181,023 | 155,836 | 164,642 | |||||||||
Total long-lived assets | $ | 451,367 | $ | 429,597 | $ | 465,155 | ||||||
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NOTE 21: | QUARTERLY FINANCIAL DATA (UNAUDITED) |
First | Second | Third | Fourth | |||||||||||||
Year Ended November 29, 2009 | Quarter | Quarter | Quarter | Quarter | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
Net sales | $ | 931,254 | $ | 886,519 | $ | 1,021,829 | $ | 1,183,252 | ||||||||
Licensing revenue | 20,210 | 17,999 | 18,571 | 26,132 | ||||||||||||
Net revenues | 951,464 | 904,518 | 1,040,400 | 1,209,384 | ||||||||||||
Cost of goods sold | 506,343 | 489,141 | 545,985 | 590,892 | ||||||||||||
Gross profit | 445,121 | 415,377 | 494,415 | 618,492 | ||||||||||||
Selling, general and administrative expenses | 336,720 | 357,889 | 394,838 | 500,646 | ||||||||||||
Restructuring charges, net of reversals | 2,361 | 1,379 | 1,203 | 281 | ||||||||||||
Operating income | 106,040 | 56,109 | 98,374 | 117,565 | ||||||||||||
Interest expense | (34,690 | ) | (40,027 | ) | (37,931 | ) | (36,070 | ) | ||||||||
Other income (expense), net | 2,989 | (20,260 | ) | (6,696 | ) | (15,478 | ) | |||||||||
Income before taxes | 74,339 | (4,178 | ) | 53,747 | 66,017 | |||||||||||
Income tax expense (benefit) | 26,349 | (266 | ) | 13,347 | (217 | ) | ||||||||||
Net income (loss) | 47,990 | (3,912 | ) | 40,400 | 66,234 | |||||||||||
Net loss (income) attributable to noncontrolling interest | 79 | (216 | ) | 303 | 997 | |||||||||||
Net income (loss) attributable to Levi Strauss & Co. | $ | 48,069 | $ | (4,128 | ) | $ | 40,703 | $ | 67,231 | |||||||
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First | Second | Third | Fourth | |||||||||||||
Year Ended November 30, 2008 | Quarter | Quarter | Quarter | Quarter | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
Net sales | $ | 1,060,920 | $ | 915,090 | $ | 1,088,384 | $ | 1,238,681 | ||||||||
Licensing revenue | 21,948 | 21,247 | 22,409 | 32,235 | ||||||||||||
Net revenues | 1,082,868 | 936,337 | 1,110,793 | 1,270,916 | ||||||||||||
Cost of goods sold | 537,669 | 498,938 | 578,294 | 646,211 | ||||||||||||
Gross profit | 545,199 | 437,399 | 532,499 | 624,705 | ||||||||||||
Selling, general and administrative expenses | 356,431 | 385,484 | 385,262 | 479,305 | ||||||||||||
Restructuring charges, net of reversals | 2,222 | 156 | 3,344 | 2,526 | ||||||||||||
Operating income | 186,546 | 51,759 | 143,893 | 142,874 | ||||||||||||
Interest expense | (40,680 | ) | (41,070 | ) | (37,305 | ) | (35,031 | ) | ||||||||
(Loss) gain on early extinguishment of debt | (30 | ) | (1,488 | ) | 101 | — | ||||||||||
Other income (expense), net | 4,188 | (8,161 | ) | 14,035 | (10,365 | ) | ||||||||||
Income before taxes | 150,024 | 1,040 | 120,724 | 97,478 | ||||||||||||
Income tax expense | 52,638 | 392 | 51,740 | 34,114 | ||||||||||||
Net income | 97,386 | 648 | 68,984 | 63,364 | ||||||||||||
Net (income) loss attributable to noncontrolling interest | (279 | ) | 53 | 181 | (1,052 | ) | ||||||||||
Net income attributable to Levi Strauss & Co. | $ | 97,107 | $ | 701 | $ | 69,165 | $ | 62,312 | ||||||||
F-65