NEW YORK — Levi Strauss & Co. has a splitting accounting headache.
The firm said Thursday in a filing with the Securities and Exchange Commission that it is delaying the filing of its third-quarter earnings report, or Form 10-Q, as well as amending the financial information that was released for fiscal year 2001 and the third quarter of this year because of reporting mistakes.
Thursday’s SEC filing outlined the impact of reporting errors identified in Levi’s 1998 and 1999 tax returns. The company said it had mistakenly taken the same tax deduction twice for losses related to various manufacturing plant closures. The net cash impact to the company is expected to be $3 million in future taxes, Levi’s said.
The company and a lawyer for two former employees who’ve sued Levi’s for wrongful termination disagreed on whether the errors were in any way related to questions raised by the lawsuit.
As for the third quarter, income will be reduced by $4.9 million to $21.8 million from the $26.7 million previously reported. Levi’s said the impact on its third-quarter balance sheet is not expected to be material and that it shouldn’t affect the company’s various financial covenants.
The reporting errors are expected to reduce income for fiscal 2001 by $26 million, with total income for the year now at $125 million, as tax liabilities for the year will increase by $26 million, Levi’s said.
Levi’s will file its Form 10-Q for the third quarter of 2003 following a review by its audit committee. Outside auditors also will reaudit 2001 financial statements.
Levi’s told the SEC that it expects that the independent auditors will file, along with a reaudited 2001 financial statement, a “restated balance sheet for year-end 2002 and such other amended information as is appropriate.”
Privately owned with public debt, Levi’s was required to have filed its quarterly report with the SEC by Oct. 8.
As reported, two employees who were fired in December 2002 filed suit in April alleging unlawful termination. The two —Thomas Schmidt, a tax attorney, and Robert Walsh, an accountant — alleged in California Superior Court in San Francisco that they were fired for refusing to keep financial records from tax authorities and auditors.At the time of the lawsuit’s filing, a Levi’s spokesman said the auditing committee of the firm’s board ordered a complete investigation into the claims when they were made last year and that no evidence of improper account was found.
A Levi’s spokeswoman said Thursday: “That was a wrongful termination suit. There’s absolutely no connection. This was a mistake we found and we’re correcting it.”
Frank Bondonno of Popelka & Allard, the San Jose, Calif.-based firm representing the two former employees, said Thursday, “We filed a lawsuit. There was a further confidential investigation and you can draw your own conclusion about why they restated their earnings.”
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