EX-99 3 a4422639ex99.txt EXHIBIT 99 PRESS RELEASE Exhibit 99 Levi Strauss & Co. Announces Second-Quarter 2003 Financial Results SAN FRANCISCO--(BUSINESS WIRE)--June 26, 2003--Levi Strauss & Co. today announced financial results for the second fiscal quarter ended May 25, 2003. Despite weak market conditions, the company's sales trends improved in the second quarter from the first quarter. The company also continues to expect growth in the second half of the year. Second-quarter net sales rose 1 percent to $930 million from $924 million in the second quarter of 2002. On a constant-currency basis, net sales decreased approximately 5 percent for the period. "The second quarter was difficult because of stagnant economies and retail markets worldwide," said chief executive officer Phil Marineau. "However, I'm very pleased with our revamped product lines and our marketing strategies. Despite the persistently tough market conditions, including deflationary apparel trends in the United States and Europe, there is still an opportunity for modest growth in the second half of this year. "Our new Levi Strauss Signature(TM) brand will be a key driver of growth as it rolls out to all 3,000 U.S. Wal-Mart locations. We'll have full lines of men's, women's and kids' apparel in stores next month," said Marineau. "Later this year, the brand will be introduced into the mass channel in Canada and several countries in the Asia Pacific region, and in 2004 we're launching in Europe. In our core Levi's(R) and Dockers(R) businesses, we're continuing to introduce new products and marketing programs globally, including updated fits for our classic 501(R) jeans; new, mainstream finishes and fabrics for Levi's(R) apparel in the United States; and a new line of khakis for young men -- the Dockers(R) D-Series." Second-quarter gross profit was $385 million, or 41.3 percent of sales, which compares to $370 million, or 40.0 percent of sales, in the second quarter of 2002. Included in 2002 gross profit is $30 million of restructuring-related expenses associated with the closure of manufacturing plants. Excluding restructuring-related expenses, gross profit in the second quarter of 2002 was $400 million, or 43.3 percent of sales. Operating income for the quarter was $56 million, or 6.1 percent of net sales, compared to an operating loss of $82 million, or 8.9 percent of net sales, in the second quarter of 2002. Included in 2003 operating income is a reversal of $6 million of restructuring charges for prior years' restructuring initiatives. Included in 2002 operating income is $171 million of restructuring charges, net of reversals and related expenses, primarily associated with the closure of manufacturing plants that year. Second-quarter operating income excluding restructuring charges, net of reversals and related expenses, was $51 million, or 5.5 percent of net sales in 2003 and $89 million, or 9.7 percent of net sales in 2002. Net loss in the second quarter was $13 million compared to a net loss of $76 million in 2002. Impacting the 2003 period are net losses from the company's foreign exchange management activities and higher interest expense. Excluding restructuring charges, net of reversals and related expenses, net loss was $17 million in 2003 versus net income of $21 million in 2002. As of May 25, 2003, total debt was $2.31 billion compared to $2.56 billion as of February 23, 2003 and $1.85 billion as of the fiscal year ended November 24, 2002. At quarter-end, total debt, less cash, stood at $2.17 billion compared to $1.94 billion as of February 23, 2003 and $1.75 billion at the end of fiscal year 2002. "The rise in net debt levels reflects higher inventories associated with seasonal working capital needs and our entry into the mass channel, as well as a scheduled tax payment," said Bill Chiasson, chief financial officer. "Although we are expecting modest growth in the second half, we're not anticipating improvement in the external environment, so we're taking a more conservative view of our full-year sales. We now expect to be essentially flat versus 2002 on a constant-currency basis. Nonetheless, we remain comfortable with our prior gross margin guidance of 40-42 percent and expect operating margins to be in the range of 8-10 percent. Additionally, we anticipate net debt will peak in the third quarter, up $600 million from year-end, and expect to close the year $250-$300 million above year-end 2002 levels. As a result, we have obtained an amendment to our senior secured credit facility to reflect anticipated earnings and debt levels." 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), Dockers(R) and Levi Strauss Signature(TM) brands. The company's second-quarter investor conference call, featuring Phil Marineau, chief executive officer; Bill Chiasson, chief financial officer; and Joe Maurer, treasurer, will be available through a live audio Webcast at http://levistrauss.com/news/webcast.htm on June 26, 2003 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 be archived for one year. A telephone replay also is available at (706) 645-9291; I.D. #1143239 from approximately 1 p.m. EDT through July 25, 2003. Explanatory Notes Restructuring charges, net of reversals and related expenses Throughout this news release, references have been made to certain financial items that exclude restructuring charges, net of reversals and related expenses. This relates to charges the company has taken relating to prior years' restructuring initiatives, specifically plant closures and workforce reductions that the company has initiated since 1997. In the current quarter, reversals from the restructuring reserves equaled $6 million. In the past we have provided guidance with respect to EBITDA and adjusted EBITDA margins. Because these are non-GAAP measures, rather than continuing to provide these figures along with tabular comparisons to the comparable GAAP measure -- as required by recent SEC rules -- we will be providing guidance on operating margins going forward. This news release contains, in addition to historical information, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements relating to our anticipated sales performance and trends; gross margins and operating margins; new product introductions; marketing and advertising initiatives; the impact of plant closures; and other matters. 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 2002, especially in the Risk Factors and Management's Discussion and Analysis 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. LEVI STRAUSS & CO. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands) (Unaudited) Three Months Ended Six Months Ended ------------------- ----------------------- May 25, May 26, May 25, May 26, 2003 2002 2003 2002 --------- --------- ----------- ----------- Net sales $930,030 $923,518 $1,805,119 $1,858,802 Cost of goods sold 545,480 553,974 1,061,121 1,090,674 --------- --------- ----------- ----------- Gross profit 384,550 369,544 743,998 768,128 Marketing, general and administrative expenses 343,399 318,804 666,932 617,739 Other operating (income) (9,752) (8,511) (17,068) (14,624) Restructuring charges, net of reversals (5,509) 141,078 (9,719) 141,078 --------- --------- ----------- ----------- Operating income (loss) 56,412 (81,827) 103,853 23,935 Interest expense 63,346 42,510 123,026 90,533 Other (income) expense, net 14,994 9,499 42,904 (178) --------- --------- ----------- ----------- Income (loss) before taxes (21,928) (133,836) (62,077) (66,420) Income tax expense (benefit) (8,552) (58,154) (24,210) (33,210) --------- --------- ----------- ----------- Net income (loss) $(13,376) $(75,682) $(37,867) $(33,210) ========= ========= =========== =========== SUPPLEMENTAL INFORMATION (Dollars in Thousands) (Unaudited) Three Months Ended Six Months Ended --------------------- --------------------- May 25, May 26, May 25, May 26, 2003 2002 2003 2002 ---------- ---------- ---------- ---------- Operating income (loss) $56,412 $(81,827) $103,853 $23,935 Restructuring charges, net of reversals (5,509) 141,078 (9,719) 141,078 Restructuring related expenses - 2002 plant closures -- 30,099 -- 30,099 ---------- ---------- ---------- ---------- Operating income, excluding restructuring charges, net of reversals and related expenses $ 50,903 $ 89,350 $ 94,134 $195,112 ========== ========== ========== ========== Operating income margin, excluding restructuring charges, net of reversals and related expenses 5.5% 9.7% 5.2% 10.5% ========== ========== ========== ========== Operating income (loss) margin(a) 6.1% (8.9)% 5.8% 1.3% ========== ========== ========== ========== Advertising expense $86,677 $69,638 $155,452 $135,712 ========== ========== ========== ========== Depreciation and amortization expense $16,368 $18,010 $31,276 $36,238 ========== ========== ========== ========== (a) We expect operating income margin for fiscal year 2003 to be in the range of 8-10%. LEVI STRAUSS & CO. NET SALES BY REGION (Dollars in millions) (Unaudited) Three Months Ended Six Months Ended ----------------------- --------------------------- Net Sales (as May 25, May 26, Percent May 25, May 26, Percent reported) 2003 2002 Change 2003 2002 Change ------- ------- ------- --------- --------- ------- Region ------ Americas $560.6 $596.7 (6.0%) $1,074.8 $1,198.0 (10.3%) Europe 261.2 241.4 8.2% 535.5 502.0 6.7% Asia 108.2 85.4 26.7% 194.8 158.8 22.7% Total $930.0 $923.5 0.7% $1,805.1 $1,858.8 (2.9%) Three Months Ended Six Months Ended ------------------------- --------------------------- Net Sales (at May 25, May 26, Percent May 25, May 26, Percent Prior Year 2003 2002 Change 2003 2002 Change Currency At 2002 At 2002 Exchange Rates) Currency Currency Rates Rates --------- ------- ------- --------- --------- ------- Region ------ Americas $563.7 $596.7 (5.5%) $1,080.4 $1,198.0 (9.8%) Europe 216.5 241.4 (10.3%) 448.2 502.0 (10.7%) Asia 100.1 85.4 17.2% 181.9 158.8 14.6% Total $880.3 $923.5 (4.7%) $1,710.5 $1,858.8 (8.0%) LEVI STRAUSS & CO. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) (Unaudited) May 25, November 24, 2003 2002 ------------ ------------- ASSETS Cash and cash equivalents $120,965 $96,478 Restricted cash 23,427 -- Trade receivables, net 499,104 660,516 Total inventories 834,336 591,714 Other current assets 433,724 310,185 ------------ ------------- Total current assets 1,911,556 1,658,893 Property, plant and equipment, net 496,322 482,446 Other long-term assets 902,596 875,945 ------------ ------------- Total Assets $3,310,474 $3,017,284 ============ ============= LIABILITIES AND STOCKHOLDERS' DEFICIT Current maturities of long-term debt and short-term borrowings $45,686 $95,225 Accounts payable 324,873 292,383 Restructuring reserves 24,079 65,576 Other current liabilities 549,905 631,606 ------------ ------------- Total current liabilities 944,543 1,084,790 Long-term debt, less current maturities 2,268,730 1,751,752 Long-term employee related benefits 448,925 527,418 Post-retirement medical benefits 560,545 548,930 Other long-term liabilities 123,819 99,978 ------------ ------------- Total liabilities 4,346,562 4,012,868 ------------ ------------- Total stockholders' deficit (1,036,088) (995,584) ------------ ------------- Total Liabilities and Stockholders' Deficit $3,310,474 $3,017,284 ============ ============= CONTACT: Levi Strauss & Co. Eileen VanEss, 415/501-2477 (Investors) Linda Butler, 415/501-3317 (Media)