UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 11, 2019
LEVI STRAUSS & CO.
(Exact name of registrant as specified in its charter)
| DELAWARE | 002-90139 | 94-0905160 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
1155 BATTERY STREET
SAN FRANCISCO, CALIFORNIA 94111
(Address of principal executive offices, including zip code)
(415) 501-6000
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (See General Instruction A.2. below):
| ☐ | Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240. 13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| ITEM 2.02. | Results of Operations and Financial Condition. |
On March 11, 2019, Levi Strauss & Co. (the “Company”) filed a Registration Statement on Form S-1/A (File No. 333-229630) (the “Registration Statement”) in connection with the proposed initial public offering of its Class A common stock. The section titled “Prospectus Summary—Recent Developments” of the prospectus in the Registration Statement contains preliminary estimates of certain unaudited financial information for the three months ended February 24, 2019. A copy of the disclosure containing these preliminary estimates is attached hereto as Exhibit 99.1.
The information contained in this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
| ITEM 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
| 99.1 | Section titled “Prospectus Summary—Recent Developments” from the Registration Statement on Form S-1/A filed by Levi Strauss & Co. on March 11, 2019. |
Special Note Regarding Forward-Looking Statements
This Current Report on Form 8-K and the attached exhibit contain forward-looking statements that may differ materially from actual results. These statements, including the preliminary estimates of net revenues, net income, Adjusted EBIT and Adjusted Net Income, should not be considered in isolation or as a substitute for the Company’s full interim or annual financial statements prepared in accordance with generally accepted accounting principles in the United States. Accordingly, you should not place undue reliance on these statements. Forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the Registration Statement under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| LEVI STRAUSS & CO. | ||||||
| DATE: March 11, 2019 | ||||||
| By: | /s/ Gavin Brockett | |||||
| Name: | Gavin Brockett | |||||
| Title: | Senior Vice President and Global Controller | |||||
| (Principal Accounting Officer and Duly Authorized Officer) | ||||||
Exhibit 99.1
Recent Developments
Set forth below are preliminary estimates of certain unaudited financial information for the three months ended February 24, 2019 and actual unaudited financial results for the three months ended February 25, 2018. Our actual results for the three months ended February 24, 2019 will not be available until after the completion of this offering. We have provided ranges, rather than specific amounts, for the preliminary estimates primarily because our financial closing and review procedures for the three months ended February 24, 2019 are not yet complete. The estimated ranges are preliminary and have not been audited or reviewed and are thus inherently uncertain and subject to change as we complete our financial closing and review procedures for the three months ended February 24, 2019. We are in the process of completing these closing and review procedures and, while we currently expect that our final results will be consistent with the preliminary estimates set forth below, such final results may differ materially from the preliminary estimates as a result of various factors, including those that are set forth under “Risk Factors” and “Special Note Regarding Forward-
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Looking Statements.” The preliminary estimates are not necessarily indicative of the results to be achieved for the remainder of fiscal year 2019 or any future period.
The preliminary estimates set forth below have been prepared by, and are the responsibility of, our management. PricewaterhouseCoopers LLP has not audited, reviewed, compiled or performed any procedures with respect to the preliminary estimates. Accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect thereto.
| Three Months Ended | ||||||||||||
| February 24, 2019 (Estimated) |
February 25, 2018 (Actual) |
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| (in millions) | Low | High | ||||||||||
| Net revenues |
$ | 1,420 | $ | 1,435 | $ | 1,343.7 | ||||||
| Net income |
130 | 146 | (18.6 | ) | ||||||||
| Other Financial and Operating Data |
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| Adjusted EBIT |
$ | 195 | $ | 205 | $ | 179.4 | ||||||
| Adjusted Net Income |
136 | 149 | 83.5 | |||||||||
For the three months ended February 24, 2019, we estimate net revenues in the range of $1,420 million to $1,435 million, representing an increase in the range of 6% to 7% over the three months ended February 25, 2018 (10% to 11% on a constant-currency basis). Net revenues are estimated to increase on both reported and constant-currency bases, with currency translation impacting net revenues unfavorably by $48 million, for the three months ended February 24, 2019 as compared to the prior year period. The estimated increase in net revenues is due to strong performance across all regions and channels.
For the three months ended February 24, 2019, we estimate net income in the range of $130 million to $146 million. Prior year net loss of $19 million was the result of a $136 million provisional non-cash tax charge, including a $99 million re-measurement of our deferred tax assets and liabilities at lower rates and a $37 million one-time transition tax on undistributed foreign earnings, each as a result of the enactment of the 2017 Tax Cuts and Jobs Act, or the Tax Act.
For the three months ended February 24, 2019, we estimate Adjusted EBIT in the range of $195 million to $205 million, representing an increase in the range of 9% to 14% over the three months ended February 25, 2018. Currency translation impacted Adjusted EBIT for the three months ended February 24, 2019, unfavorably by $9 million.
For the three months ended February 24, 2019, we estimate Adjusted Net Income in the range of $136 million to $149 million, representing an increase in the range of 63% to 78% over the three months ended February 25, 2018.
Adjusted EBIT, Adjusted Net Income and constant-currency net revenues are non-GAAP financial measures used by management to measure our operating performance. For more information on these non-GAAP financial measures, see “Selected Consolidated Financial and Other Data—Non-GAAP Financial Measures.”
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The following table provides a preliminary reconciliation of preliminary estimated net income, the most directly comparable financial measure calculated in accordance with GAAP, to preliminary estimated Adjusted EBIT for the three months ended February 24, 2019, and a reconciliation of actual net income to actual Adjusted EBIT for the three months ended February 25, 2018.
| Three Months Ended | ||||||||||||
| February 24, 2019 (Estimated) |
February 25, 2018 (Actual) |
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| (in millions) | Low | High | ||||||||||
| Net income |
$ | 130 | $ | 146 | $ | (18.6 | ) | |||||
| Income tax expense |
35 | 39 | 167.6 | |||||||||
| Interest expense |
19 | 16 | 15.5 | |||||||||
| Loss on early extinguishment of debt |
— | — | — | |||||||||
| Other (income) expense, net (1) |
3 | — | 9.6 | |||||||||
| Charges related to the transition to being a public company (2) |
2 | — | — | |||||||||
| Impact of changes in fair value on cash-settled stock based compensation (3) |
6 | 4 | 5.0 | |||||||||
| Restructuring and related charges, severance and asset impairment charges, net |
— | — | 0.3 | |||||||||
| Pension and postretirement benefit plan curtailment and net settlement losses (gains) (4) |
— | — | — | |||||||||
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| Adjusted EBIT |
$ | 195 | $ | 205 | $ | 179.4 | ||||||
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| (1) | For the three months ended February 24, 2019, other (income) expense, net includes an estimated $4 million of net periodic benefit costs, primarily interest cost and expected return on plan assets as a result of our adoption of ASU No. 2017-10 in the three months ended February 24, 2019. For the three months ended February 25, 2018, the adoption of ASU No. 2017-10 has not been reflected. Upon adoption of ASU No. 2017-10, the impact to Adjusted EBIT for the three months ended February 25, 2018 will be an increase of $0.8 million. |
| (2) | Includes fees and expenses in connection with our transition to being a public company, including incremental consulting fees associated with being a public company. |
| (3) | Includes the impact of the changes in fair value of our Class B common stock following the grant date on cash-settled awards, which are classified as liabilities. Following this offering, we anticipate that we will no longer grant cash-settled awards and will instead grant stock-settled awards to our employees. As a result, the liabilities and stock-based compensation expense subject to the variability of the fair market value at the end of each reporting period would be replaced by stock-based compensation expense based on the grant-date fair value of the awards. |
| (4) | Includes non-cash pension curtailment and settlement charges. |
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The following table provides a preliminary reconciliation of preliminary estimated net income, the most directly comparable financial measure calculated in accordance with GAAP, to preliminary estimated Adjusted Net Income for the three months ended February 24, 2019, and a reconciliation of actual net income to actual Adjusted Net Income for the three months ended February 25, 2018.
| Three Months Ended | ||||||||||||
| February 24, 2019 (Estimated) |
February 25, 2018 (Actual) |
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| (in millions) | Low | High | ||||||||||
| Net income |
$ | 130 | $ | 146 | $ | (18.6 | ) | |||||
| Loss on early extinguishment of debt |
— | — | — | |||||||||
| Charges related to the transition to being a public company (1) |
2 | — | ||||||||||
| Impact of changes in fair value on cash-settled stock based compensation (2) |
6 | 4 | 5.0 | |||||||||
| Restructuring and related charges, severance and asset impairment charges, net |
— | — | 0.3 | |||||||||
| Pension and postretirement benefit plan curtailment and net settlement losses (gains)(3) |
— | — | — | |||||||||
| Remeasurement of deferred tax assets and liabilities (4) |
— | — | 99.2 | |||||||||
| Tax impact of adjustments (5) |
(2 | ) | (1 | ) | (2.4 | ) | ||||||
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| Adjusted Net Income |
$ | 136 | $ | 149 | $ | 83.5 | ||||||
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| (1) | Includes fees and expenses in connection with our transition to being a public company, including incremental consulting fees associated with being a public company. |
| (2) | Includes the impact of the changes in fair value of our Class B common stock following the grant date on cash-settled awards, which are classified as liabilities. Following this offering, we anticipate that we will no longer grant cash-settled awards and will instead grant stock-settled awards to our employees. As a result, the liabilities and stock-based compensation expense subject to the variability of the fair market value at the end of each reporting period would be replaced by stock-based compensation expense based on the grant-date fair value of the awards. |
| (3) | Includes non-cash pension curtailment and settlement charges. |
| (4) | Represents the impact of the re-measurement of our deferred tax assets and liabilities based on the lower rates at which they are expected to reverse in the future as a result of the Tax Act. |
| (5) | For the three months ended February 24, 2019 income tax impact of such adjustments, we utilize an effective tax rate equal to our estimated income tax expense divided by our estimated income before income taxes. For the three months ended February 25, 2018, we utilize an effective tax rate equal to our income tax expense divided by our income before income taxes, as reflected in our statement of operations for the relevant period, excluding from income tax expense the effect of the $99 million re-measurement described in footnote (4) above. The effective tax rates reflected above are 21% for the three months ended February 24, 2019 and 46% for the three months ended February 25, 2018. |
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The following table sets forth the preliminary calculation of preliminary estimated net revenues for the three months ended February 24, 2019, as compared to net revenues on a constant-currency basis for the three months ended February 25, 2018. We calculate constant-currency amounts by translating local currency amounts in the prior-year period at actual foreign exchange rates for the current period.
| February 24, 2019 (Estimated) |
% Increase (Decrease) Over Prior Year (Estimated) |
February 25, 2018 (Actual) |
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| (in millions) | Low | High | Low | High | ||||||||||||||||
| Total net revenues: |
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| As reported |
$ | 1,420 | $ | 1,435 | 6 | % | 7 | % | $ | 1,343.7 | ||||||||||
| Impact of foreign currency exchange rates |
— | — | — | — | (47.7 | ) | ||||||||||||||
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| Constant-currency net revenues |
$ | 1,420 | $ | 1,435 | 10 | % | 11 | % | $ | 1,296.0 | ||||||||||
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