Thursday, April 10, 2008

Levi Strauss Could Provide Some More Color

Levi Strauss announced earnings which beat some street estimates. Levi is privately held but has publicly traded bonds and files with the SEC. Net income increased by 12% which is very decent and the shareholder is getting a $50 million dollar dividend. The dividend is about 25% of the current cash position and approximately 50% of last quarter’s net profits. Nice to be private.

Should the bond holders be concerned? Here are two things to think about.

1. They report sales as up in Asia with the exception of a few mature markets. Most companies that have Asia figured out do well. But what portions are mature and what does that mean for the future? No explanation or discussion is offered on this point.

2. They shipped some jeans in Feb which would make it Q1 instead of Q2. The press release said “Operating income benefited approximately $9 million from these shipments.” So we took a few numbers from the next quarter. No comment on where in the world this happened. No comment if sales are doing well somewhere and accelerating. Just thought we would disclose how we moved a few numbers forward from one Q to the other.

It’s nice to be private from an equity point of view. But would the bond holders not be monitoring interest coverage ratios and starting to ask a few questions just for the sake of clarity? They should be.