Q4 Net Revenues Up 3% Reflecting Growth in
the U.S. and Global DTC Up 11% Gross Margin of 57.8% Up 200
Basis Points Over Prior Year Driven by Lower Product Costs
Q4 Diluted EPS of $0.32 and Adj Diluted EPS of $0.44 Up 29% to
Prior Year Inventory Down 17% on a Comparable Basis, Strong
Cash Flow Expected to Continue Announces Details on Global
Productivity Initiative Provides Fiscal Year 2024
Guidance
Levi Strauss & Co. (NYSE: LEVI) today announced financial
results for the fourth quarter and fiscal year ended November 26,
2023.
"I am proud of what we have accomplished over the past twelve
years. By putting the Levi’s brand at the center of culture, we
revitalized this iconic brand and transformed our financials
putting us in a position where we are stronger today,” said Chip
Bergh, president and chief executive officer of Levi Strauss &
Co. “While 2023 was a challenging year, we ended on a strong
note and I am optimistic about the future. I couldn't be more
confident in Michelle as my successor, and together with the rest
of our team, they position the company to thrive in its next phase
of growth.”
"I am honored to take the role of chief executive officer of
this iconic company and thank Chip for his exceptional leadership
in having built a solid foundation for future growth,” said
Michelle Gass, president and incoming chief executive officer of
Levi Strauss & Co. “We have a strong pipeline of newness
and innovation launching this year to fuel consumer demand. And I
am confident in the significant growth opportunities ahead for this
company- including accelerating international growth, becoming a
denim apparel lifestyle business, and leading with DTC. The success
of these strategic initiatives drove our growth in the fourth
quarter and position us to create outsized long-term shareholder
value in the years ahead.”
Global Productivity Initiative
In the first quarter of 2024, the company’s Board of Directors
endorsed a multi-year global productivity initiative, Project FUEL,
designed to accelerate the execution of our Brand Led and DTC First
strategies while fueling long-term profitable growth. This is
expected to be a two-year initiative with a focus on optimizing the
operating model and structure, redesigning business processes and
identifying opportunities to reduce costs while simplifying
processes across the organization. In fiscal 2024, it is expected
this initiative will generate net cost savings of $100 million.
The first phase of the global productivity initiative is
expected to occur in the first half of 2024 and is expected to
include a 10% to 15% reduction of our global corporate workforce.
As a result, the Company expects to record estimated restructuring
charges of $110 to $120 million in the first quarter. Additional
restructuring charges may be incurred as the company progresses
further with this initiative.
“We achieved a strong Q4 performance, inflecting to growth along
with substantial margin expansion, generation of positive free cash
flow and closing the year with record net store openings,” said
Harmit Singh, Chief Financial and Growth Officer. “Looking
forward, we are focused on margin execution supported by gross
margin expansion and by our global productivity initiative, which
gives us clear line of sight to significant annual cost
savings.”
Financial Highlights for the Fourth-Quarter
- Net Revenues of $1.6 billion increased 3% on a reported
basis and 2% on a constant-currency basis versus Q4 2022.
- DTC (Direct to Consumer) net revenues increased 11% on a
reported basis and 10% on a constant-currency basis, driven by
broad-based growth in both company-operated mainline and outlet
stores and e-commerce. Net revenues from e-commerce grew 19% on a
reported basis and 17% on a constant-currency basis primarily
reflecting double-digit growth across regions for the Levi’s®
brand. As a percentage of fourth quarter net revenues, DTC
comprised 42% of total net revenues as compared to 39% in the
fourth quarter of 2022.
- Wholesale net revenues declined 2% on a reported basis
and 3% on a constant-currency basis, as growth of the Levi’s brands
in the U.S. and Asia was offset by a decline in Europe.
- In the Americas, net revenues increased 6% on a reported
basis and 4% on a constant-currency basis inclusive of 4% growth in
the U.S. DTC net revenues increased 12% on a reported basis and 10%
on a constant-currency basis driven by company-operated mainline
and outlet stores and e-commerce. Wholesale net revenues increased
3% on a reported basis and 1% on a constant-currency basis
reflecting growth in the U.S. from Levi’s® and Signature. Operating
income for the segment increased 50% due to higher net revenues and
gross margin, and lower SG&A expenses.
- In Europe, net revenues increased 2% on a reported basis
and decreased 2% on a constant-currency basis; excluding Russia,
net revenues increased 1% on a constant-currency basis. DTC net
revenues increased 12% on a reported basis and 7% on a
constant-currency basis, and 10% excluding Russia, driven by
company-operated mainline and outlet stores and e-commerce.
Wholesale net revenues decreased 7% on a reported basis and 10% on
a constant-currency basis, and 7% excluding Russia, reflecting the
cautious order environment among wholesale partners. Operating
income for the segment increased 5% on a reported basis due to
higher net revenues and gross margin, partially offset by higher
SG&A expenses.
- Asia net revenues increased 4% on a reported basis and
7% on a constant-currency basis, reflecting growth across almost
all markets, including China. DTC net revenues increased 7% on a
reported basis and 11% on a constant-currency basis, driven by
strength in company-operated mainline and outlet stores and
e-commerce. Wholesale net revenues increased 1% on a reported basis
and 3% on a constant-currency basis. Operating income for the
segment increased 7% due to higher net revenues and gross margin,
partially offset by higher SG&A expenses.
- Other Brands net revenues decreased 11% on a reported
basis and 13% on a constant-currency basis. Dockers® decreased 18%
on a reported basis and 20% on a constant-currency basis as growth
internationally and in DTC was offset by continued softness in U.S.
wholesale. Beyond Yoga® increased 14% on reported and
constant-currency bases.
Net Revenues
Operating Income (loss) *
Three Months Ended
Increase
(Decrease)
As
Reported
Increase
(Decrease)
Constant
Currency
Three Months Ended
Increase
(Decrease)
As
Reported
Increase
(Decrease)
Constant
Currency
($ millions)
November 26, 2023
November 27, 2022
November 26, 2023
November 27, 2022
Americas
$
888
$
840
6
%
4
%
$
212
$
141
50
%
47
%
Europe
$
379
$
370
2
%
(2
)%
$
65
$
62
5
%
4
%
Asia
$
262
$
251
4
%
7
%
$
31
$
29
7
%
13
%
Other Brands
$
113
$
127
(11
)%
(13
)%
$
—
$
1
(100
)%
(75
)%
- Operating margin of 9.2% was up from 8.6% in Q4 2022 as
a result of higher net revenues and gross margin, partially offset
by higher SG&A expenses. Adjusted EBIT margin increased
320 basis points to 12.2% from 9.0% last year.
- Gross margin and Adjusted gross margin expanded 200
basis points to 57.8% from 55.8% in Q4 2022. The expansion in Gross
margin and Adjusted gross margin was primarily driven by lower
product costs, favorable channel mix and higher full-price
sales.
- Selling, general and administrative (SG&A) expenses
were $799 million compared to $750 million in Q4 2022. Adjusted
SG&A was $750 million compared to $745 million last year,
reflecting higher planned expenses to support DTC expansion, mostly
offset by lower advertising and promotion expenses and incentive
compensation.
- Interest and other expenses, which include foreign
exchange losses, were $15 million compared to interest and other
income of $3 million in Q4 2022.
- The effective tax rate was 7.2% compared to (7.7)% in Q4
2022.
- Net income was $127 million compared to $151 million in
Q4 2022. Adjusted net income was $179 million compared to
$137 million in Q4 2022.
- Diluted earnings per share was $0.32 compared to $0.38
in Q4 2022. Adjusted diluted earnings per share was $0.44
compared to $0.34 in Q4 2022.
Fiscal-year 2023 results are included in the company’s
Annual Report on Form 10-K for the year ended November 26,
2023.
Financial Highlights for the Full Year
- Reported net revenues of $6.2 billion were flat to FY 2022,
and flat on a constant-currency basis
- Gross margin was 56.9%; Adjusted gross margin was 56.9%,
70 basis points below FY 2022
- Operating margin was 5.7%; Adjusted EBIT margin was
9.0%, compared to 11.6% in FY 2022
- Net income was $250 million; Adjusted net income
was $441 million, down from $604 million in FY 2022
- Diluted EPS was $0.62; Adjusted diluted EPS was $1.10,
down from $1.50 in FY 2022
- The Company returned $199 million in capital to
shareholders
Highlights include:
Three Months Ended
Increase
(Decrease)
As
Reported
Increase
(Decrease)
Constant
Currency
Year Ended
Increase
(Decrease)
As
Reported
Increase
(Decrease)
Constant
Currency
($ millions, except per-share amounts)
November 26, 2023
November 27, 2022
November 26, 2023
November 27, 2022
Net revenues
$
1,642
$
1,589
3
%
2
%
$
6,179
$
6,169
—
%
—
%
Net income
$
127
$
151
(16
)%
(23
)%
$
250
$
569
(56
)%
(57
)%
Adjusted net income
$
179
$
137
31
%
16
%
$
441
$
604
(27
)%
(29
)%
Adjusted EBIT
$
200
$
142
41
%
36
%
$
555
$
713
(22
)%
(23
)%
Diluted earnings per share
$
0.32
$
0.38
(6
)¢
(9
)¢
$
0.62
$
1.41
(79
)¢
(82
)¢
Adjusted diluted earnings per share
$
0.44
$
0.34
10
¢
6
¢
$
1.10
$
1.50
(40
)¢
(45
)¢
Additional information regarding Adjusted gross margin, Adjusted
SG&A, Adjusted EBIT, Adjusted EBIT margin, Adjusted net income,
Adjusted diluted earnings per share, Adjusted free cash flow as
well as amounts presented on a constant-currency basis, all of
which are non-GAAP financial measures, is provided at the end of
this press release.
Balance Sheet Review as of November 26, 2023
- Cash and cash equivalents were $399 million, while total
liquidity was approximately $1.3 billion.
- The company’s leverage ratio was 1.4, as compared to 1.1
at the end of Q4 2022.
- Total inventories decreased 9% on a reported basis and
17% excluding the impact of the modification of terms with the
majority of our suppliers that results in the company taking
ownership of inventory for goods being brought into the Americas
closer to the point of shipment rather than destination.
Additional information regarding leverage ratio, which is a
non-GAAP financial measure, is provided at the end of this press
release.
Shareholder Returns
In the fourth quarter, the company returned $48 million to
shareholders in the form of dividends representing a dividend of
$0.12 per share, up 1% from prior year. The company did not
repurchase any shares in the quarter.
For the full year, the company returned $199 million to
shareholders including:
- Dividends of $191 million, representing annual dividends of
$0.48 per share, up 9% from prior year, and
- Share repurchases of $8 million reflecting 0.5 million shares
retired.
As of November 26, 2023, the company had $680 million remaining
under its current share repurchase authorization, which has no
expiration date.
The company declared a dividend of $0.12 per share totaling
approximately $48 million, payable in cash on February 23, 2024 to
the holders of record of Class A common stock and Class B common
stock at the close of business February 7, 2024.
Guidance
The company’s expectations for fiscal 2024 are as follows:
- Reported net revenues growth of 1% to 3% year-over-year. This
includes an expected 2-point negative impact primarily attributable
to the strategic decision to exit the Denizen business, planned
lower off-price sales and FX partially offset by a 53rd week.
- Adjusted diluted EPS of $1.15 to $1.25, which incorporates an
adverse impact of $0.05 from the net revenue items noted above and
$0.12 from a higher, normalized tax rate versus prior year.
This outlook also assumes no significant worsening of
macro-economic pressures on the consumer, inflationary pressures,
supply chain disruptions, or currency impacts. A reconciliation of
non-GAAP forward looking information to the corresponding GAAP
measures cannot be provided without unreasonable efforts due to the
challenge in quantifying various items including but not limited
to, the effects of foreign currency fluctuations, taxes, and any
future restructuring, restructuring-related, severance and other
charges.
Investor Conference Call
To access the conference call, please pre-register on
https://register.vevent.com/register/BI4e588db46bfc40c48ebd8becc83fe297
and you will receive confirmation with dial-in details. A live
webcast of the event can be accessed on
https://edge.media-server.com/mmc/p/9dtmakyz/.
A replay of the webcast will be available on
http://investors.levistrauss.com starting approximately two hours
after the event and archived on the site for one quarter.
About Levi Strauss & Co.
Levi Strauss & Co. (LS&Co.) is one of the world's
largest brand-name apparel companies and a global leader in
jeanswear. The company designs and markets jeans, casual wear and
related accessories for men, women and children under the Levi's®,
Signature by Levi Strauss & Co.™, Denizen®, Dockers® and Beyond
Yoga® brands. Its products are sold in more than 110 countries
worldwide through a combination of chain retailers, department
stores, online sites, and a global footprint of approximately 3,200
retail stores and shop-in-shops. Levi Strauss & Co.'s reported
2023 net revenues were $6.2 billion. For more information, go to
http://levistrauss.com, and for financial news and announcements go
to http://investors.levistrauss.com.
Forward-Looking Statements
This press release and related conference call contains, in
addition to historical information, forward-looking statements,
including statements related to: progress against strategic
priorities; the ongoing restructuring of our operations and our
ability to achieve any anticipated cost savings associated with
such restructuring; the continued impact of the COVID-19 pandemic
on the company’s business; emerging from the pandemic as a stronger
company; trajectory of direct-to-consumer business; macroeconomic
conditions; impacts of foreign exchange; future financial results,
including net revenues, adjusted EBIT margins, return on invested
capital levels, adjusted gross margins, adjusted SG&A, tax
rate, and adjusted diluted EPS; capital expenditures; pricing
initiatives; inventory growth; new store openings; investments in
high growth initiatives; future dividend payments and share
repurchases; and efforts to diversify product categories and
distribution channels, and the related revenue projections. The
company has based these forward-looking statements on its current
assumptions, expectations and projections about future events.
Words such as, but not limited to, “believe,” “will,” “so we can,”
“when,” “anticipate,” “intend,” “estimate,” “expect,” “project” and
similar expressions are used to identify forward-looking
statements, although not all forward-looking statements contain
these words. These forward-looking statements are necessarily
estimates reflecting the best judgment of senior management and
involve a number of risks and uncertainties that could cause actual
results to differ materially from those suggested by the
forward-looking statements. Investors should consider the
information contained in the company's filings with the U.S.
Securities and Exchange Commission (SEC), including its Annual
Report on Form 10-K for fiscal 2023, especially in the
“Management's Discussion and Analysis of Financial Condition and
Results of Operations” and “Risk Factors” sections. Other unknown
or unpredictable factors also could have material adverse effects
on future results, performance or achievements. In light of these
risks, uncertainties, assumptions and factors, the forward-looking
events discussed in this press release and related conference call
may not occur. You are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date
stated or, if no date is stated, as of the date of this press
release and related conference call. The company is not under any
obligation and does not intend to update or revise any of the
forward-looking statements contained in this press release and
related conference call to reflect circumstances existing after the
date of this press release and related conference call or to
reflect the occurrence of future events, even if such circumstances
or future events make it clear that any expected results expressed
or implied by those forward-looking statements will not be
realized.
Non-GAAP Financial Measures
The company reports its financial results in accordance with
generally accepted accounting principles in the United States
(GAAP) and the rules of the SEC. To supplement its financial
statements prepared and presented in accordance with GAAP, the
company uses certain non-GAAP financial measures, such as Adjusted
gross profit, Adjusted gross margin, Adjusted SG&A, Adjusted
SG&A margin, Adjusted EBIT (both reported and on a
constant-currency basis), Adjusted EBIT margin (both reported and
on a constant-currency basis), Adjusted net income (both reported
and on a constant-currency basis), Adjusted diluted earnings per
share (both reported and on a constant-currency basis),
constant-currency net revenues, net debt, leverage ratio, Adjusted
free cash flow, and return on invested capital to provide investors
with additional useful information about its financial performance,
to enhance the overall understanding of its past performance and
future prospects and to allow for greater transparency with respect
to important metrics used by management for financial and operating
decision-making. The company presents these non-GAAP financial
measures to assist investors in seeing its financial performance
from management's view and because it believes they provide an
additional tool for investors to use in computing the company's
core financial performance over multiple periods with other
companies in its industry. The tables found below present Adjusted
gross profit, Adjusted gross margin, Adjusted SG&A, Adjusted
SG&A margin, Adjusted EBIT (both reported and on a
constant-currency basis), Adjusted EBIT margin (both reported and
on a constant-currency basis), Adjusted net income (both reported
and on a constant-currency basis), Adjusted diluted earnings per
share (both reported and on a constant-currency basis),
constant-currency net revenues, net debt, leverage ratio, Adjusted
free cash flow, and return on invested capital and corresponding
reconciliations of these non-GAAP financial measures to the most
directly comparable financial measures calculated in accordance
with GAAP. Non-GAAP financial measures have limitations in their
usefulness to investors because they have no standardized meaning
prescribed by GAAP and are not prepared under any comprehensive set
of accounting rules or principles. Certain items that may be
excluded or included in non-GAAP financial measures may be
significant items that could impact the company’s financial
position, results of operations and cash flows and should therefore
be considered in assessing the company’s actual financial condition
and performance. Non-GAAP financial measures are subject to
inherent limitations as they reflect the exercise of judgment by
management in determining how they are formulated. Some specific
limitations include but are not limited to, the fact that such
non-GAAP financial measures: (a) do not reflect cash outlays for
capital expenditures, contractual commitments or liabilities
including pension obligations, post-retirement health benefit
obligations and income tax liabilities; (b) do not reflect changes
in, or cash requirements for, working capital requirements; and (c)
do not reflect the interest expense, or the cash requirements
necessary to service interest or principal payments, on
indebtedness. In addition, non-GAAP financial measures may be
calculated differently from, and therefore may not be directly
comparable to, similarly titled measures used by other companies.
As a result, non-GAAP financial measures should be viewed as
supplementing, and not as an alternative or substitute for, the
company's financial results prepared in accordance with GAAP. The
company urges investors to review the reconciliation of these
non-GAAP financial measures to the most directly comparable GAAP
financial measures included in this press release, and not to rely
on any single financial measure to evaluate its business. See
“RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES” below for
reconciliation to the most comparable GAAP financial measures. A
reconciliation of non-GAAP forward looking information to the
corresponding GAAP measures cannot be provided without unreasonable
efforts due to the challenge in quantifying various items including
but not limited to, the effects of foreign currency fluctuations,
taxes, and any future restructuring, restructuring-related,
severance and other charges.
Constant-currency
The company reports certain operating results on a
constant-currency basis in order to facilitate period-to-period
comparisons of its results without regard to the impact of
fluctuating foreign currency exchange rates. The term foreign
currency exchange rates refers to the exchange rates used to
translate the company's operating results for all countries where
the functional currency is not the U.S. Dollar into U.S. Dollars.
Because the company is a global company, foreign currency exchange
rates used for translation may have a significant effect on its
reported results. In general, the company's financial results are
affected positively by a weaker U.S. Dollar and are affected
negatively by a stronger U.S. Dollar as compared to the foreign
currencies in which it conducts its business. References to
operating results on a constant-currency basis mean operating
results without the impact of foreign currency translation
fluctuations.
The company believes disclosure of constant-currency results is
helpful to investors because it facilitates period-to-period
comparisons of its results by increasing the transparency of the
underlying performance by excluding the impact of fluctuating
foreign currency exchange rates. However, constant-currency results
are non-GAAP financial measures and are not meant to be considered
in isolation or as a substitute for comparable measures prepared in
accordance with GAAP. Constant-currency results have no
standardized meaning prescribed by GAAP, are not prepared under any
comprehensive set of accounting rules or principles and should be
read in conjunction with the company's consolidated financial
statements prepared in accordance with GAAP. Constant-currency
results have limitations in their usefulness to investors and may
be calculated differently from, and therefore may not be directly
comparable to, similarly titled measures used by other
companies.
The company calculates constant-currency amounts by translating
local currency amounts in the prior-year period at actual foreign
exchange rates for the current period. Constant-currency results do
not eliminate the transaction currency impact, which primarily
include the realized and unrealized gains and losses recognized
from the measurement and remeasurement of purchases and sales of
products in a currency other than the functional currency and of
forward foreign exchange contracts. Additionally, gross margin and
Adjusted gross margin are impacted by gains and losses related to
the procurement of inventory, primarily products sourced in EUR and
USD, by our global sourcing organization on behalf of our foreign
subsidiaries.
Source: Levi Strauss & Co. Investor Relations
LEVI STRAUSS & CO. AND
SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
November 26,
2023
November 27,
2022
(Dollars in millions)
ASSETS
Current Assets:
Cash and cash equivalents
$
398.8
$
429.6
Short-term investments in marketable
securities
—
70.6
Trade receivables, net
752.7
697.0
Inventories
1,290.1
1,416.8
Other current assets
196.0
213.9
Total current assets
2,637.6
2,827.9
Property, plant and equipment, net
680.7
622.8
Goodwill
303.7
365.7
Other intangible assets, net
267.6
286.7
Deferred tax assets, net
729.5
625.0
Operating lease right-of-use assets,
net
1,033.9
970.0
Other non-current assets
400.6
339.7
Total assets
$
6,053.6
$
6,037.8
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Accounts payable
567.9
657.2
Accrued salaries, wages and employee
benefits
214.9
246.7
Accrued sales returns and allowances
189.8
180.0
Short-term operating lease liabilities
245.5
235.7
Other accrued liabilities
569.4
662.0
Total current liabilities
1,787.5
1,981.6
Long-term debt
1,009.4
984.5
Postretirement medical benefits
33.6
36.3
Pension liabilities
111.1
113.1
Long-term employee related benefits
102.2
104.9
Long-term operating lease liabilities
913.1
859.1
Other long-term liabilities
50.3
54.6
Total liabilities
4,007.2
4,134.1
Commitments and contingencies
Stockholders’ Equity:
Common stock — $0.001 par value;
1,200,000,000 Class A shares authorized; 102,104,670 shares and
96,028,351 shares issued and outstanding as of November 26, 2023
and November 27, 2022, respectively; and 422,000,000 Class B shares
authorized, 295,243,353 shares and 297,703,442 shares issued and
outstanding, as of November 26, 2023 and November 27, 2022,
respectively
0.4
0.4
Additional paid-in capital
686.7
625.6
Accumulated other comprehensive loss
(390.9
)
(421.7
)
Retained earnings
1,750.2
1,699.4
Total stockholders’ equity
2,046.4
1,903.7
Total liabilities and stockholders’
equity
$
6,053.6
$
6,037.8
The notes accompanying our consolidated
financial statements in our Form 10-K are an integral part of these
consolidated financial statements.
LEVI STRAUSS & CO. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
Twelve Months Ended
November 26,
2023
November 27,
2022
November 26,
2023
November 27,
2022
(Dollars in millions, except
per share amounts)
Net revenues
$
1,642.3
$
1,588.7
$
6,179.0
$
6,168.6
Cost of goods sold
692.6
701.4
2,663.3
2,619.8
Gross profit
949.7
887.3
3,515.7
3,548.8
Selling, general and administrative
expenses
798.5
750.3
3,072.2
2,890.7
Goodwill and other intangible asset
impairment charges
—
—
90.2
11.6
Operating income
151.2
137.0
353.3
646.5
Interest expense
(10.5
)
(9.4
)
(45.9
)
(25.7
)
Other (expense) income, net
(4.1
)
12.2
(42.2
)
28.8
Income before income taxes
136.6
139.8
265.2
649.6
Income tax expense (benefit)
9.8
(10.8
)
15.6
80.5
Net income
$
126.8
$
150.6
$
249.6
$
569.1
Earnings per common share attributable to
common stockholders:
Basic
$
0.32
$
0.38
$
0.63
$
1.43
Diluted
$
0.32
$
0.38
$
0.62
$
1.41
Weighted-average common shares
outstanding:
Basic
398,058,884
395,098,017
397,208,535
397,341,137
Diluted
401,583,297
400,201,539
401,723,167
403,844,782
The notes accompanying our consolidated
financial statements in our Form 10-K are an integral part of these
consolidated financial statements.
LEVI STRAUSS & CO. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended
November 26,
2023
November 27,
2022
(Dollars in millions)
Cash Flows from Operating
Activities:
Net income
$
249.6
$
569.1
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
165.3
158.9
Goodwill and other intangible asset
impairment
90.2
11.6
Property, plant, equipment and
right-of-use asset impairment, and gain/loss on early lease
terminations, net
66.4
26.2
Stock-based compensation
74.4
60.8
Benefit from deferred income taxes
(104.3
)
(59.8
)
Loss on early extinguishment of debt
—
—
Other, net
2.4
11.6
Net change in operating assets and
liabilities
(108.5
)
(550.3
)
Net cash provided by operating
activities
435.5
228.1
Cash Flows from Investing
Activities:
Purchases of property, plant and
equipment
(315.5
)
(268.3
)
Payments for business acquisition
(12.1
)
—
Proceeds (payments) on settlement of
forward foreign exchange contracts not designated for hedge
accounting
16.1
12.4
Payments to acquire short-term
investments
—
(72.8
)
Proceeds from sale, maturity and
collection of short-term investments
70.8
93.0
Net cash used for investing activities
(240.7
)
(235.7
)
Cash Flows from Financing
Activities:
Proceeds from senior revolving credit
facility
200.0
404.0
Repayments of senior revolving credit
facility
(200.0
)
(404.0
)
Repurchase of common stock
(8.1
)
(175.7
)
Tax withholdings on equity awards
(22.5
)
(29.0
)
Dividend to stockholders
(190.5
)
(174.3
)
Other financing, net
7.0
13.6
Net cash used for financing activities
(214.1
)
(365.4
)
Effect of exchange rate changes on cash
and cash equivalents and restricted cash
(11.6
)
(7.6
)
Net decrease in cash and cash equivalents
and restricted cash
(30.9
)
(380.6
)
Beginning cash and cash equivalents, and
restricted cash
430.0
810.6
Ending cash and cash equivalents, and
restricted cash
399.1
430.0
Less: Ending restricted cash
(0.3
)
(0.4
)
Ending cash and cash
equivalents
$
398.8
$
429.6
Noncash Investing Activity:
Property, plant and equipment acquired and
not yet paid at end of period
$
59.6
$
93.3
Supplemental disclosure of cash flow
information:
Cash paid for interest during the
period
$
42.8
$
37.5
Cash paid for income taxes during the
period, net of refunds
89.3
129.3
The notes accompanying our consolidated
financial statements in our Form 10-K are an integral part of these
consolidated financial statements.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL
MEASURES
FOR THE FOURTH QUARTER AND FISCAL YEAR
2023
The following information relates to non-GAAP financial
measures, and should be read in conjunction with the investor call
held on January 25, 2024, discussing the company’s financial
condition and results of operations as of and for the quarter and
year ended November 26, 2023.
We define the following non-GAAP measures as follows:
Most comparable GAAP measure
Non-GAAP measure
Non-GAAP measure definition
Gross profit
Adjusted gross profit
Gross profit excluding COVID-19 and
acquisition related inventory costs
Gross margin
Adjusted gross margin
Adjusted gross profit as a percentage of
net revenues
Selling, general and administration
(“SG&A”) expenses
Adjusted SG&A
SG&A expenses excluding changes in
fair value on COVID-19 related charges, acquisition and integration
related charges, impairment charges and early termination gains,
net and restructuring related charges, severance and other,
net.
SG&A margin
Adjusted SG&A margin
Adjusted SG&A as a percentage of net
revenues
Net income
Adjusted EBIT
Net income excluding income tax expense,
interest expense, other (income) expense, net, loss on early
extinguishment of debt, impact of changes in fair value on
cash-settled stock-based compensation, COVID-19 related inventory
costs and other charges, acquisition and integration related
charges, and restructuring and restructuring related charges,
severance and other, net.
Net income margin
Adjusted EBIT margin
Adjusted EBIT as a percentage of net
revenues.
Net income
Adjusted net income
Net income excluding loss on early
extinguishment of debt, COVID-19 government subsidy gains,
unrealized gains on marketable securities originating in prior
years, charges related to the impact of changes in fair value on
cash-settled stock-based compensation, COVID-19 related inventory
costs and other charges, acquisition and integration related
charges, and restructuring and restructuring related charges,
severance and other, net, and re-measurement of our deferred tax
assets and liabilities based on the lower rates as a result of the
Tax Cuts and Jobs Act (“Tax Act”), adjusted to give effect to the
income tax impact of such adjustments.
Net income
Adjusted EBITDA
Adjusted EBIT excluding depreciation and
amortization expense
Net income margin
Adjusted net income margin
Adjusted net income as a percentage of net
revenues
Diluted earnings per share
Adjusted diluted earnings per share
Adjusted net income per weighted-average
number of diluted common shares outstanding
Adjusted Gross Profit:
Three Months Ended
Twelve Months Ended
November 26,
2023
November 27,
2022
November 26,
2023
November 27,
2022
(Dollars in millions)
Most comparable GAAP measure:
Gross profit
$
949.7
$
887.3
$
3,515.7
$
3,548.8
Non-GAAP measure:
Gross profit
$
949.7
$
887.3
$
3,515.7
$
3,548.8
COVID-19 related inventory costs
—
—
—
1.4
Acquisition related charges(1)
—
—
—
2.0
Adjusted gross profit
$
949.7
$
887.3
$
3,515.7
$
3,552.2
Gross margin
57.8
%
55.8
%
56.9
%
57.5
%
Adjusted gross margin
57.8
%
55.8
%
56.9
%
57.6
%
_____________
(1)
Acquisition related charges include the
inventory markup above historical carrying value associated with
the Beyond Yoga acquisition.
Adjusted SG&A:
Three Months Ended
Twelve Months Ended
November 26,
2023
November 27,
2022
November 26,
2023
November 27,
2022
(Dollars in millions)
Most comparable GAAP measure:
Selling, general and administrative
expenses
$
798.5
$
750.3
$
3,072.2
$
2,890.7
Non-GAAP measure:
Selling, general and administrative
expenses
798.5
750.3
3,072.2
2,890.7
Impact of changes in fair value on
cash-settled stock-based compensation
—
—
—
(0.6
)
COVID-19 related charges
—
—
—
(3.9
)
Acquisition and integration related
charges(1)
(1.3
)
(1.4
)
(5.0
)
(6.0
)
Property, plant, equipment, right-of-use
asset impairment, and early lease terminations, net(2)
(38.7
)
10.3
(63.4
)
(21.6
)
Restructuring and restructuring related
charges, severance and other, net(3)
(8.9
)
(14.2
)
(42.9
)
(19.4
)
Adjusted SG&A
$
749.6
$
745.0
$
2,960.9
$
2,839.2
SG&A margin
48.6
%
47.2
%
49.7
%
46.9
%
Adjusted SG&A margin
45.6
%
46.9
%
47.9
%
46.0
%
_____________
(1)
Acquisition and integration related
charges includes SG&A expenses associated with the Beyond Yoga
acquisition, including acquisition-related compensation subject to
the continued employment of certain Beyond Yoga® employees.
(2)
For the three months ended November 26,
2023, property, plant, equipment, right-of-use asset impairment,
and early lease terminations, net primarily includes charges of
$24.4 million related to the impairment of capitalized internal-use
software as a result of the decision to discontinue certain
technology projects and $14.3 million of impairment related to
certain store assets, primarily in the U.S. and as the result of
poor store performance. For the three months ended November 27,
2022, property, plant, equipment, right-of-use asset impairment,
and early lease terminations, net primarily includes charges gains
on early termination of store leases in Russia.
For the year ended November 26, 2023,
property, plant, equipment, right-of-use asset impairment, and
early lease terminations, net primarily includes charges of $49.3
million related to the impairment of capitalized internal-use
software as a result of the decision to discontinue certain
technology projects, $14.3 million of impairment related to certain
store assets, primarily in the U.S. and as the result of poor store
performance, a $3.9 million gain on the early termination of store
leases in Russia, and $3.7 million of impairment related to other
discontinued projects. For the year ended November 27, 2022,
property, plant, equipment, right-of-use asset impairment, and
early lease terminations, net primarily includes impairment of $4.1
million related to property, plant and equipment and $33.3 million
related to certain store right-of-use assets offset by a $15.8
million gain on the early termination of store leases, all related
to the Russia-Ukraine crisis.
(3)
For the three months ended November 26,
2023, restructuring and restructuring related charges, severance
and other, net primarily includes consulting costs associated with
our restructuring initiative of $5.0 million. For the three months
ended November 27, 2022, restructuring and restructuring related
charges, severance and other, net primarily includes net
restructuring charges of $12.4 million.
For the year ended November 26, 2023,
restructuring and restructuring related charges, severance and
other, net primarily relates to net restructuring charges of $20.3
million, other executive severance and separation charges of $9.5
million, consulting costs associated with our restructuring
initiative of $5.0 million, costs associated with the wind-down of
the Russia business, including severance of $3.8 million. For the
year ended November 27, 2022, restructuring and restructuring
related charges, severance and other, net primarily includes net
restructuring charges of $9.1 million and $7.3 million of charges
related to the Russia-Ukraine crisis.
Adjusted EBIT and Adjusted EBITDA:
Three Months Ended
Twelve Months Ended
November 26,
2023
November 27,
2022
November 26,
2023
November 27,
2022
(Dollars in millions)
Most comparable GAAP measure:
Net income
$
126.8
$
150.6
$
249.6
$
569.1
Non-GAAP measure:
Net income
126.8
150.6
249.6
569.1
Income tax (benefit) expense
9.8
(10.8
)
15.6
80.5
Interest expense
10.5
9.4
45.9
25.7
Other (income) expense, net
4.1
(12.2
)
42.2
(28.8
)
Impact of changes in fair value on
cash-settled stock-based compensation
—
—
—
0.6
COVID-19 related inventory costs and other
charges(1)
—
—
—
5.3
Acquisition and integration related
charges(2)
1.3
1.4
5.0
8.0
Property, plant, equipment, right-of-use
asset impairment, and early lease terminations, net(3)
38.7
(10.3
)
63.4
21.6
Goodwill and other intangible asset
impairment charges(4)
—
—
90.2
11.6
Restructuring and restructuring related
charges, severance and other, net(5)
8.9
14.2
42.9
19.4
Adjusted EBIT
$
200.1
$
142.3
$
554.8
$
713.0
Depreciation and amortization(6)
42.1
39.8
160.8
154.5
Adjusted EBITDA
$
242.2
$
182.1
$
715.6
$
867.5
Net income margin
7.7
%
9.5
%
4.0
%
9.2
%
Adjusted EBIT margin
12.2
%
9.0
%
9.0
%
11.6
%
____________
(1)
For the year ended November 27, 2022,
COVID-19 related inventory costs and other charges includes $1.4
million in inventory related charges and $3.9 million in SG&A
related charges.
(2)
Acquisition and integration related
charges include the inventory markup above historical carrying
value as well as SG&A expenses associated with the Beyond Yoga
acquisition, including acquisition-related compensation subject to
the continued employment of certain Beyond Yoga® employees.
(3)
For the three months ended November 26,
2023, property, plant, equipment, right-of-use asset impairment,
and early lease terminations, net primarily includes charges of
$24.4 million related to the impairment of capitalized internal-use
software as a result of the decision to discontinue certain
technology projects and $14.3 million of impairment related to
certain store assets, primarily in the U.S. and as the result of
poor store performance. For the three months ended November 27,
2022, property, plant, equipment, right-of-use asset impairment,
and early lease terminations, net primarily includes charges gains
on early termination of store leases in Russia.
For the year ended November 26, 2023,
property, plant, equipment, right-of-use asset impairment, and
early lease terminations, net primarily includes charges of $49.3
million related to the impairment of capitalized internal-use
software as a result of the decision to discontinue certain
technology projects, $14.3 million of impairment related to certain
store assets, primarily in the U.S. and as the result of poor store
performance, a $3.9 million gain on the early termination of store
leases in Russia, and $3.7 million of impairment related to other
discontinued projects. For the year ended November 27, 2022,
property, plant, equipment, right-of-use asset impairment, and
early lease terminations, net primarily includes impairment of $4.1
million related to property, plant and equipment and $33.3 million
related to certain store right-of-use assets offset by a $15.8
million gain on the early termination of store leases, all related
to the Russia-Ukraine crisis.
(4)
For the year ended November 26, 2023,
goodwill and other intangible asset impairment charges includes
impairment charges of $75.4 million related to Beyond Yoga
reporting unit goodwill and $14.8 million related to the Beyond
Yoga trademark. During the year ended November 27, 2022, we
recognized impairment charges of $11.6 million related to goodwill
assigned to the Russia business.
(5)
For the three months ended November 26,
2023, restructuring and restructuring related charges, severance
and other, net primarily includes consulting costs associated with
our restructuring initiative of $5.0 million. For the three months
ended November 27, 2022, restructuring and restructuring related
charges, severance and other, net primarily includes net
restructuring charges of $12.4 million.
For the year ended November 26, 2023,
restructuring and restructuring related charges, severance and
other, net primarily relates to net restructuring charges of $20.3
million, other executive severance and separation charges of $9.5
million, consulting costs associated with our restructuring
initiative of $5.0 million, costs associated with the wind-down of
the Russia business, including severance of $3.8 million. For the
year ended November 27, 2022, restructuring and restructuring
related charges, severance and other, net primarily includes net
restructuring charges of $9.1 million and $7.3 million of charges
related to the Russia-Ukraine crisis.
(6)
Depreciation and amortization for both the
three months ended November 26, 2023 and November 27, 2022 is net
of $0.1 million of amortization included in Restructuring and
restructuring related charges, severance and other, net.
Depreciation and amortization for the
years ended November 26, 2023 and November 27, 2022 is net of $0.4
million and $0.3 million, respectively, of amortization included in
Restructuring and restructuring related charges, severance and
other, net.
Adjusted Net Income:
Three Months Ended
Twelve Months Ended
November 26,
2023
November 27,
2022
November 26,
2023
November 27,
2022
(Dollars in millions, except
per share amounts)
Most comparable GAAP measure:
Net income
$
126.8
$
150.6
$
249.6
$
569.1
Non-GAAP measure:
Net income
126.8
150.6
249.6
569.1
Impact of changes in fair value on
cash-settled stock-based compensation
—
—
—
0.6
COVID-19 related inventory costs and other
charges(1)
—
—
—
(7.2
)
Acquisition and integration related
charges(2)
1.3
1.4
5.0
8.0
Property, plant, equipment, right-of-use
asset impairment, and early lease terminations, net(3)
38.7
(10.3
)
63.4
21.6
Goodwill and other intangible asset
impairment charges(4)
—
—
90.2
11.6
Restructuring and restructuring related
charges, severance and other, net(5)
8.9
14.2
42.9
19.4
U.S. Pension settlement loss(6)
—
—
19.0
—
Unrealized gain on equity
securities(7)
—
(19.9
)
—
(19.9
)
Tax impact of adjustments(8)
2.9
0.6
(29.4
)
0.7
Adjusted net income
$
178.6
$
136.6
$
440.7
$
603.9
Net income margin
7.7
%
9.5
%
4.0
%
9.2
%
Adjusted net income margin
10.9
%
8.6
%
7.1
%
9.8
%
_____________
(1)
For the year ended November 27, 2022, the
net reduction in costs incurred in connection with COVID-19
includes a $12.5 million gain reflecting a payment received from
the German government as reimbursement for COVID-19 losses incurred
in prior years, $1.4 million in inventory related charges and $3.9
million in SG&A related charges.
(2)
Acquisition and integration related
charges include the inventory markup above historical carrying
value as well as SG&A expenses associated with the Beyond Yoga
acquisition, including acquisition-related compensation subject to
the continued employment of certain Beyond Yoga® employees.
(3)
For the three months ended November 26,
2023, property, plant, equipment, right-of-use asset impairment,
and early lease terminations, net primarily includes charges of
$24.4 million related to the impairment of capitalized internal-use
software as a result of the decision to discontinue certain
technology projects and $14.3 million of impairment related to
certain store assets, primarily in the U.S. and as the result of
poor store performance. For the three months ended November 27,
2022, property, plant, equipment, right-of-use asset impairment,
and early lease terminations, net primarily includes charges gains
on early termination of store leases in Russia.
For the year ended November 26, 2023,
property, plant, equipment, right-of-use asset impairment, and
early lease terminations, net primarily includes charges of $49.3
million related to the impairment of capitalized internal-use
software as a result of the decision to discontinue certain
technology projects, $14.3 million of impairment related to certain
store assets, primarily in the U.S. and as the result of poor store
performance, a $3.9 million gain on the early termination of store
leases in Russia, and $3.7 million of impairment related to other
discontinued projects. For the year ended November 27, 2022,
property, plant, equipment, right-of-use asset impairment, and
early lease terminations, net primarily includes impairment of $4.1
million related to property, plant and equipment and $33.3 million
related to certain store right-of-use assets offset by a $15.8
million gain on the early termination of store leases, all related
to the Russia-Ukraine crisis.
(4)
For the year ended November 26, 2023,
goodwill and other intangible asset impairment charges includes
impairment charges of $75.4 million related to Beyond Yoga
reporting unit goodwill and $14.8 million related to the Beyond
Yoga trademark. During the year ended November 27, 2022, we
recognized impairment charges of $11.6 million related to goodwill
assigned to the Russia business.
(5)
For the three months ended November 26,
2023, restructuring and restructuring related charges, severance
and other, net primarily includes consulting costs associated with
our restructuring initiative of $5.0 million. For the three months
ended November 27, 2022, restructuring and restructuring related
charges, severance and other, net primarily includes net
restructuring charges of $12.4 million.
For the year ended November 26, 2023,
restructuring and restructuring related charges, severance and
other, net primarily relates to net restructuring charges of $20.3
million, other executive severance and separation charges of $9.5
million, consulting costs associated with our restructuring
initiative of $5.0 million, costs associated with the wind-down of
the Russia business, including severance of $3.8 million. For the
year ended November 27, 2022, restructuring and restructuring
related charges, severance and other, net primarily includes net
restructuring charges of $9.1 million and $7.3 million of charges
related to the Russia-Ukraine crisis.
(6)
For the year ended November 26, 2023, the
pension settlement relates to the Company purchasing
nonparticipating annuity contracts in order to transfer certain
retiree liabilities to an insurer, resulting in a one-time
settlement charge of $19.0 million.
(7)
The unrealized gains on marketable equity
securities is related to an out-of-period adjustment recognized in
the fourth quarter of 2022.
(8)
Tax impact calculated using the annual
effective tax rate, excluding discrete costs and benefits, with the
impact of annual rate changes reflected in the current quarter. For
the year ended November 26, 2023 , the tax impact of the Beyond
Yoga impairment charges were calculated using the U.S. specific tax
rate of 24%. Excluding the impact of the Beyond Yoga impairment
charges, the effective tax rate for year ended November 26, 2023 is
approximately 10%. For the year ended November 27, 2022, $4.0
million of incremental tax expense associated with the
out-of-period adjustment recognized in the fourth quarter of 2022
have been excluded. Charges associated with the Russia-Ukraine
crisis are non-deductible and therefore have not been tax
effected.
Adjusted Diluted Earnings per Share:
Three Months Ended
Twelve Months Ended
November 26,
2023
November 27,
2022
November 26,
2023
November 27,
2022
(Dollars in millions, except
per share amounts)
Most comparable GAAP measure:
Diluted earnings per share
$
0.32
$
0.38
$
0.62
$
1.41
Non-GAAP measure:
Diluted earnings per share
$
0.32
$
0.38
$
0.62
$
1.41
COVID-19 related inventory costs and other
charges(1)
—
—
—
(0.02
)
Acquisition and integration related
charges(2)
—
—
0.01
0.02
Property, plant, equipment, right-of-use
asset impairment, and early lease terminations, net(3)
0.09
(0.03
)
0.16
0.06
Goodwill and other intangible asset
impairment charges(4)
—
—
0.22
0.03
Restructuring and restructuring related
charges, severance and other, net(5)
0.02
0.04
0.11
0.05
Pension settlement losses(6)
—
—
0.05
—
Rabbi Trust adjustment(7)
—
(0.05
)
—
(0.05
)
Tax impact of adjustments(8)
0.01
—
(0.07
)
—
Adjusted diluted earnings per
share
$
0.44
$
0.34
$
1.10
$
1.50
_____________
(1)
For the year ended November 27, 2022, the
net reduction in costs incurred in connection with COVID-19
includes a $12.5 million gain reflecting a payment received from
the German government as reimbursement for COVID-19 losses incurred
in prior years, $1.4 million in inventory related charges and $3.9
million in SG&A related charges.
(2)
Acquisition and integration related
charges include the inventory markup above historical carrying
value as well as SG&A expenses associated with the Beyond Yoga
acquisition, including acquisition-related compensation subject to
the continued employment of certain Beyond Yoga® employees.
(3)
For the three months ended November 26,
2023, property, plant, equipment, right-of-use asset impairment,
and early lease terminations, net primarily includes charges of
$24.4 million related to the impairment of capitalized internal-use
software as a result of the decision to discontinue certain
technology projects and $14.3 million of impairment related to
certain store assets, primarily in the U.S. and as the result of
poor store performance. For the three months ended November 27,
2022, property, plant, equipment, right-of-use asset impairment,
and early lease terminations, net primarily includes charges gains
on early termination of store leases in Russia.
For the year ended November 26, 2023,
property, plant, equipment, right-of-use asset impairment, and
early lease terminations, net primarily includes charges of $49.3
million related to the impairment of capitalized internal-use
software as a result of the decision to discontinue certain
technology projects, $14.3 million of impairment related to certain
store assets, primarily in the U.S. and as the result of poor store
performance, a $3.9 million gain on the early termination of store
leases in Russia, and $3.7 million of impairment related to other
discontinued projects. For the year ended November 27, 2022,
property, plant, equipment, right-of-use asset impairment, and
early lease terminations, net primarily includes impairment of $4.1
million related to property, plant and equipment and $33.3 million
related to certain store right-of-use assets offset by a $15.8
million gain on the early termination of store leases, all related
to the Russia-Ukraine crisis.
(4)
For the year ended November 26, 2023,
goodwill and other intangible asset impairment charges includes
impairment charges of $75.4 million related to Beyond Yoga
reporting unit goodwill and $14.8 million related to the Beyond
Yoga trademark. During the year ended November 27, 2022, we
recognized impairment charges of $11.6 million related to goodwill
assigned to the Russia business.
(5)
For the three months ended November 26,
2023, restructuring and restructuring related charges, severance
and other, net primarily includes consulting costs associated with
our restructuring initiative of $5.0 million. For the three months
ended November 27, 2022, restructuring and restructuring related
charges, severance and other, net primarily includes net
restructuring charges of $12.4 million.
For the year ended November 26, 2023,
restructuring and restructuring related charges, severance and
other, net primarily relates to net restructuring charges of $20.3
million, other executive severance and separation charges of $9.5
million, consulting costs associated with our restructuring
initiative of $5.0 million, costs associated with the wind-down of
the Russia business, including severance of $3.8 million. For the
year ended November 27, 2022, restructuring and restructuring
related charges, severance and other, net primarily includes net
restructuring charges of $9.1 million and $7.3 million of charges
related to the Russia-Ukraine crisis.
(6)
For the year ended November 26, 2023, the
pension settlement relates to the Company purchasing
nonparticipating annuity contracts in order to transfer certain
retiree liabilities to an insurer, resulting in a one-time
settlement charge of $19.0 million.
(7)
The unrealized gains on marketable equity
securities is related to an out-of-period adjustment recognized in
the fourth quarter of 2022.
(8)
Tax impact calculated using the annual
effective tax rate, excluding discrete costs and benefit, with the
impact of annual rate changes reflected in the current quarter. For
the year ended November 26, 2023 , the tax impact of the Beyond
Yoga impairment charges were calculated using the U.S. specific tax
rate of 24%. Excluding the impact of the Beyond Yoga impairment
charges, the effective tax rate for year ended November 26, 2023 is
approximately 10%. For the year ended November 27, 2022, $4.0
million of incremental tax expense associated with the
out-of-period adjustment recognized in the fourth quarter of 2022
have been excluded. Charges associated with the Russia-Ukraine
crisis are non-deductible and therefore have not been tax
effected.
Net Debt and Leverage Ratio:
We define net debt, as total debt, excluding finance leases,
less cash and cash equivalents and short-term investments in
marketable securities. We define leverage ratio, as the ratio of
total debt to the last 12 months Adjusted EBITDA. Net debt and
leverage ratio are not financial measures prepared and presented in
accordance with GAAP.
November 26,
2023
November 27,
2022
(Dollars in millions)
Most comparable GAAP measure:
Total debt, excluding finance leases
$
1,021.9
$
996.2
Non-GAAP measure:
Total debt, excluding finance leases
$
1,021.9
$
996.2
Cash and cash equivalents
(398.8
)
(429.6
)
Short-term investments in marketable
securities
—
(70.6
)
Net debt
$
623.1
$
496.0
November 26,
2023
November 27,
2022
(Dollars in millions)
(Unaudited)
Total debt, excluding finance leases
$
1,021.9
$
996.2
Last twelve months Adjusted EBITDA
$
715.6
$
867.5
Leverage ratio
1.4
1.1
Adjusted Free Cash Flow:
In the second quarter of 2022, the definition of Adjusted free
cash flow, a non-GAAP financial measure, was revised to include net
cash flow from operating activities less purchases of property,
plant and equipment. Previously, we defined Adjusted free cash flow
as net cash flow from operating activities less purchases of
property, plant and equipment, plus proceeds on settlement of
forward foreign exchange contracts not designated for hedge
accounting, less payment of debt extinguishment costs, less
repurchases of common stock, tax withholdings on equity award
exercises, and cash dividends to stockholders. We believe this
revised definition is a more representative measure of our free
cash flow, assists in the comparability of results, and is
consistent with how management reviews performance. The table below
includes the recast of prior period results. Additionally, we will
provide updated non-GAAP reconciliations under this revised
definition in future reports for the relevant prior year
periods.
Three Months Ended
Twelve Months Ended
November 26,
2023
November 27,
2022
November 26,
2023
November 27,
2022
(Dollars in millions)
Most comparable GAAP measure:
Net cash provided by operating
activities
$
258.9
$
17.8
$
435.5
$
228.1
Net cash used for investing activities
(79.8
)
(8.6
)
(240.7
)
(235.7
)
Net cash used for financing activities
(75.0
)
(77.7
)
(214.1
)
(365.4
)
Non-GAAP measure:
Net cash provided by operating
activities
$
258.9
$
17.8
$
435.5
$
228.1
Purchases of property, plant and
equipment
(56.5
)
(71.5
)
(315.5
)
(268.3
)
Adjusted free cash flow
$
202.4
$
(53.7
)
$
120.0
$
(40.2
)
Return on Invested Capital:
We define Return on invested capital (“ROIC”) as the trailing
four quarters of Adjusted net income before interest and after
taxes divided by the average trailing five quarters of total
invested capital. We define total invested capital as total debt
plus shareholders' equity less cash and short-term investments. We
believe ROIC is useful to investors as it quantifies how
efficiently we generated operating income relative to the capital
we have invested in the business.
Our calculation of ROIC is considered a non-GAAP financial
measure because we calculate ROIC using the non-GAAP metric
Adjusted net income. Although ROIC is a standard financial metric,
numerous methods exist for calculating a company's ROIC. As a
result, the method we use to calculate our ROIC may differ from the
methods used by other companies. This metric is not defined by GAAP
and should not be considered as an alternative to earnings measures
defined by GAAP.
The table below sets forth the calculation of ROIC for each of
the periods presented.
Trailing Four Quarters
November 26,
2023
November 27,
2022
(Dollars in millions)
Net income
$
249.6
$
569.1
Numerator
Adjusted net income(1)
$
440.7
$
603.9
Interest expense
45.9
25.7
Adjusted Income tax expense
45.0
80.5
Adjusted net income before interest and
taxes
$
531.6
$
710.1
Income tax adjustment(2)
(49.3
)
(88.0
)
Adjusted net income before interest and
after taxes
$
482.3
$
622.1
_____________
(1)
Adjusted net income is reconciled from net
income which is the most comparable GAAP measure. Refer to Adjusted
net income table for more information.
(2)
Tax impact calculated using the adjusted
annual effective tax rate, excluding discrete costs and
benefits.
Average Trailing Five
Quarters
November 26,
2023
November 27,
2022
(Dollars in millions)
Denominator
Total debt
$
2,167.3
$
2,166.2
Shareholders' equity
1,959.4
1,770.1
Cash and Short-term investments
(397.4
)
(695.4
)
Total invested Capital
$
3,729.3
$
3,240.9
Net income to Total invested capital
6.7
%
17.6
%
Return on Invested Capital
12.9
%
19.2
%
Constant-Currency:
We calculate constant-currency amounts by translating local
currency amounts in the comparison period at actual foreign
exchange rates for the current period. Our constant-currency
amounts are not financial measures prepared in accordance with
GAAP.
The table below sets forth the calculation of net revenues for
each of our operating segments on a constant-currency basis for the
prior-year comparison periods applicable to the three-month and
twelve-month periods ended November 26, 2023:
Three Months Ended
Twelve Months Ended
November 26,
2023
November 27,
2022
% Increase
(Decrease)
November 26,
2023
November 27,
2022
% Increase
(Decrease)
(Dollars in millions)
Total revenues
As reported
$
1,642.3
$
1,588.7
3.4
%
$
6,179.0
$
6,168.6
0.2
%
Impact of foreign currency exchange
rates
—
23.9
*
—
(0.7
)
*
Constant-currency net revenues
$
1,642.3
$
1,612.6
1.8
%
$
6,179.0
$
6,167.9
0.2
%
Americas
As reported
$
888.3
$
840.4
5.7
%
$
3,086.9
$
3,187.4
(3.2
) %
Impact of foreign currency exchange
rates
—
11.5
*
—
33.5
*
Constant-currency net revenues -
Americas
$
888.3
$
851.9
4.3
%
$
3,086.9
$
3,220.9
(4.2
) %
Europe
As reported
$
379.0
$
370.4
2.3
%
$
1,579.5
$
1,597.2
(1.1
) %
Impact of foreign currency exchange
rates
—
17.2
*
—
16.5
*
Constant-currency net revenues -
Europe
$
379.0
$
387.6
(2.2
) %
$
1,579.5
$
1,613.7
(2.1
) %
Asia
As reported
$
262.0
$
251.1
4.3
%
$
1,059.7
$
952.1
11.3
%
Impact of foreign currency exchange
rates
—
(7.3
)
*
—
(56.6
)
*
Constant-currency net revenues - Asia
$
262.0
$
243.8
7.5
%
$
1,059.7
$
895.5
18.3
%
Other Brands
As reported
$
113.0
$
126.8
(10.9
) %
$
452.9
$
431.9
4.9
%
Impact of foreign currency exchange
rates
—
2.6
*
—
5.8
*
Constant-currency net revenues - Other
Brands
$
113.0
$
129.4
(12.7
) %
$
452.9
$
437.7
3.5
%
_____________
* Not meaningful
Constant-Currency Adjusted EBIT and Constant-Currency
Adjusted EBIT Margin:
The table below sets forth the calculation of Adjusted EBIT and
Adjusted EBIT margin on a constant-currency basis for each of the
periods presented and represents Adjusted EBIT and Adjusted EBIT
margin without the impact of foreign currency exchange rate
fluctuations.
Three Months Ended
Twelve Months Ended
November 26,
2023
November 27,
2022
% Increase
November 26,
2023
November 27,
2022
% Decrease
(Dollars in millions)
Adjusted EBIT(1)
$
200.1
$
142.3
40.6
%
$
554.8
$
713.0
(22.2
)%
Impact of foreign currency exchange
rates
—
4.8
*
—
5.7
*
Constant-currency Adjusted EBIT
$
200.1
$
147.1
36.0
%
$
554.8
$
718.7
(22.8
)%
Adjusted EBIT margin
12.2
%
9.0
%
35.6
%
9.0
%
11.6
%
(22.4
)%
Impact of foreign currency exchange
rates
—
%
0.3
%
*
—
%
0.1
%
*
Constant-currency Adjusted EBIT
margin(2)
12.2
%
9.3
%
31.2
%
9.0
%
11.7
%
(23.1
)%
_____________
(1)
Adjusted EBIT is reconciled from net
income which is the most comparable GAAP measure. Refer to Adjusted
EBIT and Adjusted EBITDA table for more information.
(2)
We define constant-currency Adjusted EBIT
margin as constant-currency Adjusted EBIT as a percentage of
constant-currency net revenues
* Not meaningful
Constant-Currency Adjusted Net Income and Adjusted Diluted
Earnings per Share:
The table below sets forth the calculation of Adjusted net
income and Adjusted diluted earnings per share on a
constant-currency basis for each of the periods presented.
Constant-currency Adjusted net income represents Adjusted net
income without the impact of foreign currency exchange rate
fluctuations. Constant-currency Adjusted diluted earnings per share
represents Adjusted diluted earnings per share without the impact
of foreign currency exchange rate fluctuations.
Three Months Ended
Twelve Months Ended
November 26,
2023
November 27,
2022
% Increase
November 26,
2023
November 27,
2022
% Decrease
(Dollars in millions, except
per share amounts)
Adjusted net income(1)
$
178.6
$
136.6
30.7
%
$
440.7
$
603.9
(27.0
)%
Impact of foreign currency exchange
rates
—
16.9
*
—
20.1
*
Constant-currency Adjusted net income
$
178.6
$
153.5
16.4
%
$
440.7
$
624.0
(29.4
)%
Constant-currency Adjusted net income
margin(2)
10.9
%
9.7
%
7.1
%
10.1
%
Adjusted diluted earnings per share
$
0.44
$
0.34
29.4
%
$
1.10
$
1.50
(26.7
)%
Impact of foreign currency exchange
rates
—
0.04
*
—
0.05
*
Constant-currency adjusted diluted
earnings per share
$
0.44
$
0.38
15.8
%
$
1.10
$
1.55
(29.0
)%
_____________
(1)
Adjusted net income is reconciled from net
income which is the most comparable GAAP measure. Refer to Adjusted
net income table for more information.
(2)
We define constant-currency Adjusted net
income margin as constant-currency Adjusted net income as a
percentage of constant-currency net revenues.
* Not meaningful
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240125474931/en/
Investor Contact: Aida Orphan Levi Strauss & Co. (415)
501-6194 Investor-relations@levi.com
Media Contact: Elizabeth Owen Levi Strauss & Co. (415)
501-7777 newsmediarequests@levi.com
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