8-K 1 q2finalpress.txt Q2 PRESS RELEASE SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 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): June 20, 2002 Levi Strauss & Co. (Exact name of registrant as specified in its charter) DELAWARE 333-36234 94-0905160 (State of Incorporation) (Commission File Number) (IRS Employer Identification Number) 1155 Battery Street San Francisco, California 94111 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (415) 501-6000 ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE. Attached hereto as Exhibit 99 is a copy of Levi Strauss & Co.'s press release dated June 20, 2002 titled "Levi Strauss & Co. Announces Second-Quarter 2002 Financial Results." ITEM 7. EXHIBIT. 99 Press Release dated June 20, 2002. SIGNATURE 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. Date: June 20, 2002 LEVI STRAUSS & CO. By /s/ William B. Chiasson ------------------- William B. Chiasson Title: Senior Vice President and Chief Financial Officer EXHIBIT INDEX Exhibit Number Description -------------- ----------- 99 Press Release dated June 20, 2002 EXHIBIT 99 LEVI 1155 Battery Street, San Francisco, CA 94111 STRAUSS & Co. NEWS Investor Contact: Christine Greany, Tidal Communications, Inc. (203) 866-4401 For Immediate Release --------------------- Media Contact: Linda Butler, Levi Strauss & Co. (415) 501-3317 LEVI STRAUSS & CO. ANNOUNCES SECOND-QUARTER 2002 FINANCIAL RESULTS SAN FRANCISCO (June 20, 2002) - Levi Strauss & Co. today announced financial results for the second fiscal quarter ended May 26, 2002. Although sales were affected by difficult market conditions worldwide, the company turned in a good performance against several key financial measures and expects to meet its previously stated financial targets for the full year, including stabilizing sales. Second-quarter net sales declined 12 percent to $924 million compared to $1,044 million in the second quarter of 2001. Had currency rates remained constant at 2001 levels, net sales would have declined approximately 11 percent for the period. "We said the quarter would be tough and it was, but we are still on track to stabilize our sales by year-end," said chief executive officer Phil Marineau. "We were hit by stiff price competition in Europe, but our U.S. and Asia Pacific businesses met our expectations. Despite the difficult retail environment throughout most of our markets, we sustained solid profit margins, generated strong cash flow and brought down debt. "This is the inflection point for our company turnaround," said Marineau. "From now through the end of the year, we expect to see significant improvement in sales trends. We have excellent bookings with our retail customers, and are launching new products and marketing programs around the world to drive sales. This includes the introduction of lower-priced Levi's(R) jeans and Dockers(R) khakis in Europe and a revamped Levi's(R) jeans line in the United States. When you look at our products, retail relationships and operations, we are more competitive today than we have been in years." -- more-- LS&CO. Q2/Add One June 20, 2002 During the second quarter, the company announced the closure of six manufacturing plants in the United States and two plants in Scotland. These actions resulted in a one-time pre-tax restructuring charge of $150 million in the second quarter of 2002. This was partially offset by a $9 million reversal of restructuring charges taken in earlier years. The $150 million charge includes $26 million of non-cash asset write-offs, as well as costs related to items such as severance and outplacement services. Marineau said, "Increasing the variable nature of our cost structure will help us maintain our strong margins and cash flow while reinvesting in the business. The savings we realize as a result of these plant closures will allow us to direct more resources to the product, marketing and retail initiatives that are driving our business turnaround." Second-quarter gross profit, which includes restructuring related expenses of $30 million primarily for workers' compensation and pension enhancements, was $370 million, or 40.0 percent of sales. Excluding restructuring related expenses, gross profit in the second quarter of 2002 was $400 million, or 43.3 percent of sales, which compares to $453 million, or 43.3 percent of sales, in the second quarter of 2001. The strength of gross margin this quarter reflects the company's favorable sourcing arrangements. Operating loss for the quarter, including restructuring charges and related expenses of $171 million, was $82 million. Excluding restructuring charges and related expenses, operating income in the second quarter of 2002 declined 28 percent to $89 million compared to $124 million in the prior year period. EBITDA, which the company defines as operating income excluding depreciation and amortization, was a loss of $64 million, which includes restructuring charges and related expenses of $171 million. Excluding restructuring charges and related expenses, EBITDA in the second quarter of 2002 was $107 million, or 11.6 percent of sales, compared to $145 million, or 13.9 percent of sales, in the second quarter of 2001. -more- LS&CO. Q2/Add Two June 20, 2002 Second-quarter net loss, including restructuring charges and related expenses of $171 million, was $81 million. Excluding restructuring charges and related expenses, second-quarter net income in 2002 declined 65 percent to $15 million versus $43 million in the second quarter of 2001. As of May 26, 2002, total debt stood at $1.86 billion, which compares to $1.96 billion as of the fiscal year ended November 25, 2001. "Strong control over costs and inventories helped us further reduce debt in what was a particularly challenging quarter. In fact, year-to-date, debt has been reduced by $100 million," said Bill Chiasson, chief financial officer. "For the full year, we continue to expect gross margins and EBITDA margins to be within our previously stated target ranges of 40-42 percent and 11-13 percent, respectively, before restructuring and related charges." Levi Strauss & Co. is one of the world's leading branded apparel companies, marketing its products in more than 100 countries worldwide. The company designs and markets jeans and jeans-related pants, casual and dress pants, shirts, jackets and related accessories for men, women and children under the Levi's(R) and Dockers(R) brands. The company's second-quarter investor conference call, featuring Philip Marineau, chief executive officer; Bill Chiasson, chief financial officer; and Joe Maurer, treasurer, will be available through a live audio Webcast at www.levistrauss.com on June 20, 2002 at 10 a.m. EDT. A replay is available on the Web site the same day beginning at approximately 1 p.m. EDT and will remain until July 5, 2002. A telephone replay also is available at (706) 645-9291, I.D. #4364249 from approximately 1 p.m. EDT through June 27, 2002. This news release includes forward-looking statements about sales performance and trends; customer bookings and orders; gross margins and EBITDA margins; new product introductions; marketing and advertising initiatives; and other matters. We have based these forward-looking statements on our current assumptions, expectations and projections about future events. When used in this discussion, the words "believe," "anticipate," "intend," "estimate," "expect," "project" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these words. These forward-looking statements and the discussion are subject to risks and uncertainties including, without limitation, risks related to the impact of changing domestic and international retail environments; changes in the level of consumer spending or preferences in apparel; dependence on key distribution channels, customers and suppliers; order completion by customers; competitive products; changing fashion trends; our supply chain executional performance; the effectiveness of our promotion and marketing funding programs with retailers; ongoing competitive pressures in the apparel industry; trade restrictions; consumer and customer reactions to new products and retailers; political or financial instability in countries where our products are manufactured; and other risks detailed in our annual report on Form 10-K, registration statements and other filings with the Securities and Exchange Commission. Our actual results might differ materially from historical performance or current expectations. We do not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. ###
LEVI STRAUSS & CO. CONSOLIDATED STATEMENTS OF INCOME (Dollars in Thousands) (Unaudited) Three Months Ended Six Months Ended ------------------- --------------------- May 26, May 27, May 26, May 27, ------- ------- ------- ------- 2002 2001 2002 2001 ---- ---- ---- ---- Net sales........................................................... $ 923,518 $1,043,937 $1,858,802 $2,040,320 Cost of goods sold.................................................. 553,974 591,442 1,090,674 1,147,891 --------- ---------- ---------- ---------- Gross profit..................................................... 369,544 452,495 768,128 892,429 Marketing, general and administrative expenses...................... 318,804 336,128 617,739 662,224 Other operating (income)............................................ (8,511) (7,365) (14,624) (14,539) Restructuring charges, net of reversals............................. 141,078 -- 141,078 -- --------- ---------- ---------- ---------- Operating income (loss).......................................... (81,827) 123,732 23,935 244,744 Interest expense.................................................... 42,510 53,898 90,533 123,103 Other (income) expense, net......................................... 19,569 899 8,104 5,767 --------- ---------- ---------- ---------- Income (loss) before taxes....................................... (143,906) 68,935 (74,702) 115,874 Income tax expense (benefit)........................................ (62,957) 25,507 (37,351) 42,874 --------- ---------- ---------- ---------- Net income (loss)................................................ $ (80,949) $ 43,428 $ (37,351) $ 73,000 ========= ========== =========== ========== EBITDA margin................................................... (6.9)% 13.9% 3.2% 14.1% ==== ==== === ==== NET SALES BY REGION (in millions) (Unaudited) Three Months Ended Six Months Ended ------------------ ---------------- Net Sales May 26, May 27, Percent May 26, May 27, Percent --------- ------- ------- ------- ------- ------- ------- 2002 2001 Change 2002 2001 Change ---- ---- ------ ---- ---- ------ Americas $596.7 $ 682.1 (12.5%) $1,198.0 $1,344.3 (10.9%) Europe 241.4 276.7 (12.8%) 502.0 534.0 (6.0%) Asia 85.5 85.1 0.4% 158.8 162.0 (2.0%) Total Company $923.5 $1,043.9 (11.5%) $1,858.8 $2,040.3 (8.9%) Three Months Ended Six Months Ended ------------------ ---------------- Net Sales at Prior Year May 26, May 27, Percent May 26, May 27, Percent Currency Exchange Rates ------- ------- ------- ------- ------- ------- 2002 2001 Change 2002 2001 Change ---- ---- ------ ---- ---- ------ (Restated) (Restated) Americas $598.7 $ 682.1 (12.2%) $1,201.1 $1,344.3 (10.7%) Europe 245.8 276.7 (11.2%) 517.5 534.0 (3.1%) Asia 89.1 85.1 4.7% 168.5 162.0 4.0% Total Company $933.7 $1,043.9 (10.6%) $1,887.2 $2,040.3 (7.5%)
LEVI STRAUSS & CO. The following supplemental consolidated statements of income present the effects of excluding restructuring charges and related expenses. The "Restructuring" columns reflect the amounts of the restructuring charges and related expenses. The "As Adjusted" columns reflect consolidated statements of income for the periods in 2002 excluding the effects of the restructuring charges and related expenses.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MAY 26, 2002 AND MAY 27, 2001 (Dollars in Thousands) (Unaudited) As As As Reported Restructuring Adjusted Reported -------- ------------- -------- -------- May 26, May 26, May 26, May 27, ------- ------- ------- ------- 2002 2002 2002 2001 ---- ---- ---- ---- Net sales.................................................... $ 923,518 $ -- $923,518 $1,043,937 Cost of goods sold........................................... 553,974 (30,099) 523,875 591,442 --------- -------- -------- ---------- Gross profit.............................................. 369,544 30,099 399,643 452,495 Marketing, general and administrative expenses............... 318,804 -- 318,804 336,128 Other operating (income)..................................... (8,511) -- (8,511) (7,365) Restructuring charges, net of reversals...................... 141,078 (141,078) -- -- --------- -------- -------- ---------- Operating income (loss)................................... (81,827) 171,177 89,350 123,732 Interest expense............................................. 42,510 -- 42,510 53,898 Other (income) expense, net.................................. 19,569 -- 19,569 899 --------- -------- -------- ---------- Income (loss) before taxes................................ (143,906) 171,177 27,271 68,935 Income tax expense (benefit)................................. (62,957) 74,976 12,019 25,507 --------- -------- -------- ---------- Net income (loss)......................................... $ (80,949) $ 96,201 $ 15,252 $ 43,428 ========= ======== ======== ========== EBITDA margin............................................ (6.9)% 11.6% 13.9% ==== ==== ==== SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED MAY 26, 2002 AND MAY 27, 2001 (Dollars in Thousands) (Unaudited) As As As Reported Restructuring Adjusted Reported -------- ------------- -------- -------- May 26, May 26, May 26, May 27, ------- ------- ------- ------- 2002 2002 2002 2001 ---- ---- ---- ---- Net sales.................................................... $1,858,802 $ -- $1,858,802 $2,040,320 Cost of goods sold........................................... 1,090,674 (30,099) 1,060,575 1,147,891 ---------- -------- ---------- ---------- Gross profit.............................................. 768,128 30,099 798,227 892,429 Marketing, general and administrative expenses............... 617,739 -- 617,739 662,224 Other operating (income)..................................... (14,624) -- (14,624) (14,539) Restructuring charges, net of reversals...................... 141,078 (141,078) -- -- ---------- -------- ---------- ---------- Operating income.......................................... 23,935 171,177 195,112 244,744 Interest expense............................................. 90,533 -- 90,533 123,103 Other (income) expense, net.................................. 8,104 -- 8,104 5,767 ---------- -------- ---------- ---------- Income (loss) before taxes................................ (74,702) 171,177 96,475 115,874 Income tax expense (benefit)................................. (37,351) 74,976 37,625 42,874 ---------- -------- ---------- ---------- Net income (loss)......................................... $ (37,351) $ 96,201 $ 58,850 $ 73,000 ========== ======== ========== ========== EBITDA margin............................................ 3.2% 12.4% 14.1% === ==== ====
LEVI STRAUSS & CO. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) May 26, November 25, 2002 2001 ---- ---- (Unaudited) ASSETS ------ Cash and cash equivalents........................................................... $ 115,603 $ 102,831 Trade receivables, net.............................................................. 473,006 621,224 Total inventories .................................................................. 673,536 610,177 Property, plant and equipment, net.................................................. 469,559 514,711 Other assets ....................................................................... 1,164,981 1,134,543 ---------- ---------- Total Assets...................................................... $2,896,685 $2,983,486 ========== ========== LIABILITIES AND STOCKHOLDERS' DEFICIT ------------------------------------- Current maturities of long-term debt and short-term borrowings...................... $ 178,588 $ 162,944 Accounts payable.................................................................... 188,050 234,199 Restructuring reserves.............................................................. 135,065 45,220 Other current liabilities........................................................... 717,258 540,823 ---------- ---------- Total current liabilities.................................................... 1,218,961 983,186 Long-term debt, less current maturities............................................. 1,683,209 1,795,489 Long-term employee related benefits................................................. 364,296 384,751 Postretirement medical benefits..................................................... 540,749 544,476 Other long-term liabilities......................................................... 62,098 211,527 ---------- ---------- Total liabilities................................................. 3,869,313 3,919,429 ---------- ---------- Total stockholders' deficit....................................... (972,628) (935,943) ---------- ---------- Total Liabilities and Stockholders' Deficit....................... $2,896,685 $2,983,486 ========== ==========