EX-99.1 2 exhibit991-1q2013pressrele.htm PRESS RELEASE Exhibit 99.1 - 1Q 2013 Press Release


Exhibit 99.1


FOR IMMEDIATE RELEASE 
Investor Contact:
  
Chris Ogle
  
Media Contact:
  
Kris Marubio
 
  
Levi Strauss & Co.
  
 
  
Levi Strauss & Co.
 
  
(800) 438-0349
  
 
  
(415) 501-6709
 
  
Investor-relations@levi.com
  
 
  
kmarubio@levi.com
LEVI STRAUSS & CO. ANNOUNCES FIRST-QUARTER 2013 FINANCIAL RESULTS
Reports Higher Net Income on Improved Margins, Strong Cash Flow and Lower Net Debt
SAN FRANCISCO (April 9, 2013) – Levi Strauss & Co. (LS&Co.) announced financial results today for the first quarter ended February 24, 2013.
Highlights include:

  
 
Three Months Ended
 
% Increase (Decrease)
($ millions)
 
February 24, 2013
 
February 26, 2012
 
As Reported
Net revenues
 
$
1,147

 
$
1,165

 
(2
)%
Net income
 
$
107

 
$
49

 
117
 %

Net revenues decreased 2 percent on both reported and constant-currency bases, due to lower sales in Asia Pacific and the impact from licensing the Levi's® brand boys business. First quarter net income increased 117 percent to $107 million compared with $49 million in the first quarter of 2012, driven by a stronger gross margin and improved operating margin.

“In the first quarter, we generated strong cash flow and posted a higher gross margin and net income, despite slightly lower revenues,” said Chip Bergh, president and chief executive officer. “We're committed to reducing debt and strengthening the balance sheet. Our cash flow and a successful debt refinancing we executed after the quarter closed have allowed us to pay down $185 million of our debt this year.”

-more-




LS&Co. Q1 2013 Results/Add One
April 9, 2013

First-Quarter 2013 Highlights

▪
Gross profit in the first quarter increased to $592 million compared with $549 million for the same period in 2012. Gross margin for the first quarter was 52 percent of revenues compared with 47 percent of revenues in the same quarter of 2012. The gross margin improvement reflected the lower cost of cotton, increased sales from the company's retail stores and a favorable currency impact.

▪
Selling, general and administrative expenses (SG&A) for the first quarter decreased to $410 million from $439 million in the same period of 2012. The decline in SG&A was primarily driven by lower advertising reflecting shifts in the timing of the company's campaigns to a later part of the year and lower severance expenses.

▪
Operating income of $181 million grew from $110 million the prior year due to the higher gross margin and lower SG&A.

Reported regional net revenues and operating income for the quarter were as follows:
 
 
Net Revenues
 
Operating Income
 
 
Three Months Ended
 
 
 
Three Months Ended
 
 
($ millions)
 
February 24, 2013
 
February 26, 2012
 
% Increase (Decrease)
 
February 24, 2013
 
February 26, 2012
 
% Increase (Decrease)
Americas
 
$647
 
$647
 
—
 
$132
 
$80
 
66%
Europe
 
$297
 
$289
 
2%
 
$63
 
$52
 
21%
Asia Pacific
 
$203
 
$228
 
(11)%
 
$49
 
$41
 
19%

•
Net revenues in the Americas were flat, as increased sales from company-operated Levi's® retail stores were offset by lower wholesale revenues reflecting the company's 2012 decision to license the Levi's® brand boys business. Higher operating income primarily reflected the region's higher gross margin.

•
Net revenues in Europe increased, reflecting continued growth from the company-operated retail network; this was partially offset by a decline in traditional wholesale channels, most notably in Southern Europe. Higher operating income primarily reflected the region's lower SG&A and improved gross margin.

•
Net revenues in Asia Pacific declined, reflecting lower sales at both company-operated retail network and wholesale channels, due to challenging conditions in most markets in the region, most notably China. Operating income increased, primarily reflecting lower SG&A and the decision to phase out the Denizen® brand in the region.

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LS&Co. Q1 2013 Results/Add Two
April 9, 2013

Cash Flow and Balance Sheet

At February 24, 2013, cash and cash equivalents of $450 million were complemented by $574 million available under the company's revolving credit facility, resulting in a total liquidity position of $1.0 billion. Cash provided by operating activities of $143 million represented a $38 million increase compared with the same period in 2012, reflecting a tax refund and lower pension plan funding.

During the quarter, the company prepaid $50.0 million of its senior term loan due 2014 and paid a $25 million dividend. Net debt declined to $1.2 billion at the end of the first quarter of 2013, compared to $1.3 billion at the end of 2012.

Subsequent to quarter close, the company completed an offering of $140 million of 6.875 percent senior notes due 2022 and used the net proceeds along with cash on hand to prepay the remaining $275 million outstanding on the senior term loan due in 2014.

Investor Conference Call
The company's first-quarter 2013 investor conference call will be available through a live audio webcast at http://us.meeting-stream.com/levistraussco_041211 today, April 9, 2013, at 1 p.m. Pacific / 4 p.m. Eastern. A replay is available on the website the same day and will be archived for one month. A telephone replay also is available through April 15, 2013, at 800-642-1687.

Forward Looking Statement

This news release contains, in addition to historical information, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current assumptions, expectations and projections about future events. We use words like “believe,” “will,” “so we can,” “when,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions 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 our 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 our filings with the U.S. Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for the fiscal year 2012, 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 our future results, performance or achievements. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this news release 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 news release. We are not under any obligation and do not intend to make publicly available any update or other revisions to any of the forward-looking statements contained in this news release to reflect circumstances existing after the date of this news release or to reflect the occurrence of future events even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized.

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LS&Co. Q1 2013 Results/Add Three
April 9, 2013

About Levi Strauss & Co.

Levi Strauss & 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®, Dockers®, Signature by Levi Strauss & Co.™, and Denizen® 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 2,300 franchised and company-operated stores. Levi Strauss & Co.'s reported fiscal 2012 net revenues were $4.6 billion. For more information, go to http://levistrauss.com.

# # #






LEVI STRAUSS & CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
(Unaudited)
 
 
 
February 24,
2013
 
November 25,
2012
 
(Dollars in thousands)
ASSETS
Current Assets:
 
 
 
Cash and cash equivalents
$
449,596

 
$
406,134

Trade receivables, net of allowance for doubtful accounts of $21,939 and $20,738
398,990

 
500,672

Inventories:
 
 
 
Raw materials
4,677

 
5,312

Work-in-process
5,788

 
9,558

Finished goods
561,583

 
503,990

Total inventories
572,048

 
518,860

Deferred tax assets, net
114,341

 
116,224

Other current assets
125,557

 
136,483

Total current assets
1,660,532

 
1,678,373

Property, plant and equipment, net of accumulated depreciation of $785,626 and $782,766
451,027

 
458,807

Goodwill
240,499

 
239,971

Other intangible assets, net
57,126

 
59,909

Non-current deferred tax assets, net
615,075

 
612,916

Other non-current assets
122,570

 
120,101

Total assets
$
3,146,829

 
$
3,170,077

 
 
 
 
LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIT
Current Liabilities:
 
 
 
Short-term debt
$
81,424

 
$
59,759

Current maturities of capital leases
1,395

 
1,760

Accounts payable
246,277

 
225,726

Other accrued liabilities
219,398

 
263,575

Accrued salaries, wages and employee benefits
165,126

 
223,850

Accrued interest payable
30,068

 
5,471

Accrued income taxes
50,378

 
16,739

Total current liabilities
794,066

 
796,880

Long-term debt
1,598,270

 
1,669,452

Long-term capital leases
210

 
262

Postretirement medical benefits
138,316

 
140,958

Pension liability
471,030

 
492,396

Long-term employee related benefits
63,874

 
62,529

Long-term income tax liabilities
35,764

 
40,356

Other long-term liabilities
59,477

 
60,869

Total liabilities
3,161,007

 
3,263,702

Commitments and contingencies


 


Temporary equity
10,102

 
7,883

 
 
 
 
Stockholders’ Deficit:
 
 
 
Levi Strauss & Co. stockholders’ deficit
 
 
 
Common stock — $.01 par value; 270,000,000 shares authorized; 37,398,181 shares and 37,392,343 shares issued and outstanding
374

 
374

Additional paid-in capital
32,582

 
33,365

Retained earnings
355,919

 
273,975

Accumulated other comprehensive loss
(417,762
)
 
(414,635
)
Total Levi Strauss & Co. stockholders’ deficit
(28,887
)
 
(106,921
)
Noncontrolling interest
4,607

 
5,413

Total stockholders’ deficit
(24,280
)
 
(101,508
)
Total liabilities, temporary equity and stockholders’ deficit
$
3,146,829

 
$
3,170,077

The notes accompanying our consolidated financial statements in our Form 10-Q are an integral part of these consolidated financial statements.




LEVI STRAUSS & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
 
 
Three Months Ended
 
February 24,
2013
 
February 26,
2012
 
(Dollars in thousands)
(Unaudited)
Net revenues
$
1,146,678

 
$
1,164,961

Cost of goods sold
554,800

 
616,167

Gross profit
591,878

 
548,794

Selling, general and administrative expenses
410,423

 
438,583

Operating income
181,455

 
110,211

Interest expense
(32,157
)
 
(38,573
)
Loss on early extinguishment of debt
(114
)
 
—

Other income, net
6,066

 
1,172

Income before income taxes
155,250

 
72,810

Income tax expense
48,375

 
23,513

Net income
106,875

 
49,297

Net loss (income) attributable to noncontrolling interest
145

 
(79
)
Net income attributable to Levi Strauss & Co.
$
107,020

 
$
49,218


The notes accompanying our consolidated financial statements in our Form 10-Q are an integral part of these consolidated financial statements.




LEVI STRAUSS & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
 
Three Months Ended
 
February 24,
2013
 
February 26,
2012
 
(Dollars in thousands)
(Unaudited)
Net income
$
106,875

 
$
49,297

Other comprehensive income (loss), net of related income taxes:
 
 
 
Pension and postretirement benefits
3,909

 
296

Net investment hedge (losses) gains
(3,638
)
 
525

Foreign currency translation (losses) gains
(3,097
)
 
7,424

Unrealized (loss) gain on marketable securities
(962
)
 
1,268

Total other comprehensive (loss) income
(3,788
)
 
9,513

Comprehensive income
103,087

 
58,810

Comprehensive loss attributable to noncontrolling interest
(806
)
 
(254
)
Comprehensive income attributable to Levi Strauss & Co.
$
103,893

 
$
59,064


The notes accompanying our consolidated financial statements in our Form 10-Q are an integral part of these consolidated financial statements.




LEVI STRAUSS & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Three Months Ended
 
February 24,
2013
 
February 26,
2012
 
(Dollars in thousands)
(Unaudited)
Cash Flows from Operating Activities:
 
 
 
Net income
$
106,875

 
$
49,297

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
28,368

 
31,218

Asset impairments
835

 
58

Gain on disposal of property, plant and equipment
(149
)
 
(88
)
Unrealized foreign exchange gains
(6,189
)
 
(1,639
)
Realized loss on settlement of forward foreign exchange contracts not designated for hedge accounting
2,710

 
3,485

Employee benefit plans’ amortization from accumulated other comprehensive loss
5,767

 
373

Employee benefit plans’ curtailment gain, net
—

 
(773
)
Noncash loss on extinguishment of debt
114

 
—

Amortization of deferred debt issuance costs
1,066

 
1,110

Stock-based compensation
1,435

 
1,214

Allowance for doubtful accounts
2,153

 
2,919

Change in operating assets and liabilities:
 
 
 
Trade receivables
97,437

 
118,185

Inventories
(56,050
)
 
(29,961
)
Other current assets
12,471

 
(17,713
)
Other non-current assets
(6,629
)
 
(1,744
)
Accounts payable and other accrued liabilities
2,859

 
26,711

Income tax liabilities
34,212

 
11,764

Accrued salaries, wages and employee benefits and long-term employee related benefits
(83,244
)
 
(90,766
)
Other long-term liabilities
(1,093
)
 
1,049

Other, net
106

 
94

Net cash provided by operating activities
143,054

 
104,793

Cash Flows from Investing Activities:
 
 
 
Purchases of property, plant and equipment
(20,883
)
 
(17,291
)
Proceeds from sale of property, plant and equipment
45

 
117

Payments on settlement of forward foreign exchange contracts not designated for hedge accounting
(2,710
)
 
(3,485
)
Net cash used for investing activities
(23,548
)
 
(20,659
)
Cash Flows from Financing Activities:
 
 
 
Repayments of long-term debt and capital leases
(50,450
)
 
(458
)
Proceeds from senior revolving credit facility
—

 
50,000

Repayments of senior revolving credit facility
—

 
(110,000
)
Short-term borrowings, net
(347
)
 
7,754

Debt issuance costs
—

 
(51
)
Restricted cash
(127
)
 
(305
)
Repurchase of common stock
—

 
(479
)
Dividend to stockholders
(25,076
)
 
—

Net cash used for financing activities
(76,000
)
 
(53,539
)
Effect of exchange rate changes on cash and cash equivalents
(44
)
 
3,183

Net increase in cash and cash equivalents
43,462

 
33,778

Beginning cash and cash equivalents
406,134

 
204,542

Ending cash and cash equivalents
$
449,596

 
$
238,320

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid (received) during the period for:
 
 
 
Interest
$
4,580

 
$
5,796

Income taxes
(15,376
)
 
4,077

The notes accompanying our consolidated financial statements in our Form 10-Q are an integral part of these consolidated financial statements.