EX-99.1 2 f29111exv99w1.htm EXHIBIT 99.1 exv99w1
 

Exhibit 99.1

(levis)
1155 Battery Street, San Francisco, CA 94111


         
 
  Investor Contact:   Allison Malkin
Integrated Corporate Relations, Inc.
203) 682-8200
 
        
 
  Media Contact:   Jeff Beckman
Levi Strauss & Co.
(415) 501-3317
LEVI STRAUSS & CO. ANNOUNCES FIRST-QUARTER FINANCIAL RESULTS
· Net revenue up 7%
· Net income increases 61%
SAN FRANCISCO (April 10, 2007) — Levi Strauss & Co. (LS&CO.) today announced financial results for the first quarter ended February 25, 2007 and filed its first-quarter 2007 Form 10-Q with the Securities and Exchange Commission.
First-quarter results reflect continued improvements in the company’s key operating measures, including net revenues and net income.
Net revenues for the first quarter were $1,037 million compared to $968 million for the same quarter in 2006, a 7 percent increase. Net revenues grew in each of the company’s three regions. The increase primarily reflects growth in the Levi’s® brand across all regions due to a higher proportion of premium-priced product sales, strong growth in emerging markets and additional brand-dedicated retail stores. Net revenues also benefited from favorable currency exchange rates.
Net income for the first quarter increased 61 percent to $87 million compared to $54 million in the same quarter of 2006. The improvement reflects an 11 percent increase in operating income, mostly driven by a $25 million benefit-plan curtailment gain related to the closure of a U.S. distribution center, lower interest expense and a lower effective tax rate, partially offset by higher restructuring expenses.
“We’re off to a good start this year,” said John Anderson, chief executive officer. “Our sales grew for the second consecutive quarter, reflecting a broad-based improvement worldwide. Our premium products are doing well with consumers in many markets. At the same time, some businesses, including Japan and the U.S. Levi Strauss Signature® brand, need considerable improvement. Overall, we made very good progress in the quarter.”
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LS&CO. Q1 2007 Results/Add One
April 10, 2006
First-Quarter 2007 Results
     •   Gross profit increased 7 percent to $498 million compared to $465 million in the first quarter of 2006. Gross margin was stable at 48.0 percent of net revenues for the first quarter of 2007 compared to 48.1 percent of net revenues in the same period last year.
     •   Selling, general and administrative expenses increased 2 percent to $296 million in the first quarter of 2006 from $291 million in same period of 2006. SG&A as a percent of net revenues was lower at 29 percent compared to 30 percent for the same period last year. Higher SG&A expenses in the 2007 period were primarily attributable to increased selling expense related to new company-operated stores, higher distribution and marketing expenses in line with the improved net revenues for the quarter, and higher corporate expense. These increases were partially offset by the benefit-plan curtailment gain, and lower advertising and promotion expenses.
     •   Operating income for the quarter increased 11 percent to $189 million compared to $171 million for the first quarter of 2006. The increase was primarily driven by the benefit-plan curtailment gain, partially offset by restructuring charges related to a planned distribution center closure in Europe.
     •   Interest expense for the first quarter of 2007 decreased 13 percent to $58 million compared to $66 million in the prior year period. The decrease was primarily attributable to lower average debt balances during the 2007 quarter, reflecting debt refinancing and debt reduction actions taken during 2006.
“We continue to build our financial strength,” said Hans Ploos van Amstel, chief financial officer. “Our margins remained strong and our revenues grew. We are delivering more profit to the bottom line as a result of our lower debt, and lower interest and tax rates. In addition, we will continue to focus on ensuring our cost structure is competitive.”
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LS&CO. Q1 2007 Results/Add Two
April 10, 2007
Investor Conference Call
The company’s first-quarter investor conference call will be available through a live audio Webcast at http://levistrauss.com/news/webcast.htm today, April 10, 2007, at 1 p.m. PDT/4 p.m. EDT. A replay is available on the Web site the same day and will be archived for one month. A telephone replay also is available through April 17, 2007, at 800-642-1687 in the United States and Canada, or 706-645-9291 internationally; I.D. No. 4529229.
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,” “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 ended 2006, especially in the Management’s Discussion and Analysis - “Financial Condition and Results of Operations” and “Risk Factors” sections, our most recent Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K. 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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LEVI STRAUSS & CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
                 
    (Unaudited)        
    February 25,     November 26,  
    2007     2006  
ASSETS   (Dollars in thousands)  
Current Assets:
                
Cash and cash equivalents
   $ 237,229     $ 279,501  
Restricted cash
     4,340       1,616  
Trade receivables, net of allowance for doubtful accounts of $16,578 and $17,998
     566,987       589,975  
Inventories:
                
Raw materials
     15,081       13,543  
Work-in-process
     11,009       13,479  
Finished goods
     572,815       523,041  
 
            
Total inventories
     598,905       550,063  
Deferred tax assets, net
     101,221       101,823  
Other current assets
     74,184       86,292  
 
            
Total current assets
     1,582,866       1,609,270  
Property, plant and equipment, net of accumulated depreciation of $544,767 and $530,413
     394,342       404,429  
Goodwill
     206,190       203,989  
Other intangible assets, net
     42,809       42,815  
Non-current deferred tax assets, net
     454,752       457,105  
Other assets
     84,112       86,457  
 
            
Total assets
   $ 2,765,071     $ 2,804,065  
 
            
 
                
LIABILITIES AND STOCKHOLDERS’ DEFICIT
                
Current Liabilities:
                
Current maturities of long-term debt and short-term borrowings
   $ 4,920     $ 11,089  
Current maturities of capital leases
     1,632       1,608  
Accounts payable
     230,037       245,629  
Restructuring liabilities
     15,890       13,080  
Other accrued liabilities
     179,421       194,601  
Accrued salaries, wages and employee benefits
     201,082       261,234  
Accrued interest payable
     50,258       61,827  
Accrued income taxes
     57,314       14,226  
 
            
Total current liabilities
     740,554       803,294  
Long-term debt, less current maturities
     2,199,077       2,206,323  
Long-term capital leases, less current maturities
     2,583       3,086  
Postretirement benefits
     339,473       379,188  
Pension liability
     185,241       184,090  
Long-term employee related benefits
     117,582       136,408  
Long-term income tax liabilities
     23,802       19,994  
Other long-term liabilities
     44,267       46,635  
Minority interest
     16,457       17,138  
 
            
Total liabilities
     3,669,036       3,796,156  
 
            
 
                
Commitments and contingencies (Note 5)
                
Temporary equity
     3,446       1,956  
 
            
 
                
Stockholders’ deficit:
                
Common stock—$.01 par value; 270,000,000 shares authorized; 37,278,238 shares issued and outstanding
     373       373  
Additional paid-in capital
     89,266       89,837  
Accumulated deficit
     (872,843 )     (959,478 )
Accumulated other comprehensive loss
     (124,207 )     (124,779 )
 
            
Total stockholders’ deficit
     (907,411 )     (994,047 )
 
            
Total liabilities, temporary equity and stockholders’ deficit
   $ 2,765,071     $ 2,804,065  
 
            
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 25,     February 26,  
    2007     2006  
    (Dollars in thousands)  
    (Unaudited)  
 
                
Net sales
   $ 1,016,299     $ 947,874  
Licensing revenue
     21,106       19,767  
 
            
Net revenues
     1,037,405       967,641  
Cost of goods sold
     539,790       502,522  
 
            
Gross profit
     497,615       465,119  
Selling, general and administrative expenses
     295,562       291,295  
Restructuring charges, net
     12,815       3,187  
 
            
Operating income
     189,238       170,637  
Interest expense
     57,725       66,297  
Other income, net
     (13,558 )     (1,141 )
 
            
Income before income taxes
     145,071       105,481  
Income tax expense
     58,436       51,667  
 
            
Net income
   $ 86,635     $ 53,814  
 
            
          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 25,     February 26,  
    2007     2006  
    (Dollars in thousands)  
    (Unaudited)  
Cash Flows from Operating Activities:
                
Net income
   $ 86,635     $ 53,814  
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
                
Depreciation and amortization
     16,231       16,330  
Asset impairments associated with reorganization initiatives
     7,008       —  
Loss (gain) on disposal of property, plant and equipment
     36       (1,243 )
Unrealized foreign currency exchange (gains) losses
     (9,780 )     650  
Postretirement benefit plan curtailment gain
     (25,321 )     —  
Amortization of deferred debt issuance costs
     1,465       3,012  
Stock-based compensation
     920       —  
Provision for doubtful accounts
     331       391  
Change in operating assets and liabilities:
                
Trade receivables
     21,370       112,988  
Inventories
     (51,973 )     10,457  
Other current assets
     12,946       (3,791 )
Other non-current assets
     1,034       (1,332 )
Accounts payable and other accrued liabilities
     (36,772 )     (99,697 )
Income tax liabilities
     46,668       35,056  
Restructuring liabilities
     1,694       (896 )
Accrued salaries, wages and employee benefits
     (78,180 )     (56,255 )
Long-term employee related benefits
     (13,142 )     (13,274 )
Other long-term liabilities
     (1,693 )     (1,744 )
Other, net
     82       (82 )
 
            
Net cash (used for) provided by operating activities
     (20,441 )     54,384  
 
            
Cash Flows from Investing Activities:
                
Purchases of property, plant and equipment
     (9,607 )     (9,740 )
Proceeds from sale of property, plant and equipment
     179       1,778  
Acquisition of retail stores
     (2,502 )     (1,032 )
 
            
Net cash used for investing activities
     (11,930 )     (8,994 )
 
            
Cash Flows from Financing Activities:
                
Repayments of long-term debt
     (472 )     (2,910 )
Net decrease in short-term borrowings
     (6,866 )     (1,894 )
Debt issuance costs
     —       (41 )
Increase in restricted cash
     (2,734 )     (649 )
 
            
Net cash used for financing activities
     (10,072 )     (5,494 )
 
            
Effect of exchange rate changes on cash
     171       1,953  
 
            
Net (decrease) increase in cash and cash equivalents
     (42,272 )     41,849  
Beginning cash and cash equivalents
     279,501       239,584  
 
            
Ending cash and cash equivalents
   $ 237,229     $ 281,433  
 
            
 
                
Supplemental disclosure of cash flow information:
                
Cash paid during the period for:
                
Interest
   $ 64,748     $ 80,496  
Income taxes
     5,595       17,946  
Restructuring initiatives
     4,082       4,256  
         The notes accompanying our consolidated financial statements in our Form 10-Q are an integral part of these consolidated financial statements.