EX-99.1 2 exhibit991-3q2013pressrele.htm EXHIBIT 99.1 Exhibit 99.1 - 3Q 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 THIRD-QUARTER 2013 FINANCIAL RESULTS
Net Revenues Increase Four Percent and Net Income more than Doubles
SAN FRANCISCO (October 4, 2013) – Levi Strauss & Co. (LS&Co.) announced financial results today for the third quarter ended August 25, 2013.
Highlights include:

  
 
Three Months Ended
 
% Increase
($ millions)
 
August 25, 2013
 
August 26, 2012
 
As Reported
Net revenues
 
$
1,141

 
$
1,101

 
4
%
Net income
 
$
57

 
$
28

 
101
%

Net revenues increased four percent on a reported basis and three percent without the effect of currency, driven by strong performance from the Levi's® and Dockers® brands, particularly in the Americas with continued growth across both wholesale and retail channels. Third quarter net income increased to $57 million as compared to $28 million in the third quarter of 2012, primarily reflecting non-recurring charges the company incurred in the third quarter of 2012 related to strategic business choices made in that period relating to operations in our Asia Pacific region; and a $14 million tax benefit related to the settlement of U.S. Federal tax audits. These improvements were partially offset by higher Selling, general and administrative expenses in 2013.

“Our positive first-half momentum continued in the third quarter, with top- and bottom-line growth,” said Chip Bergh, president and chief executive officer of Levi Strauss & Co.   “In a challenging consumer and economic environment, we are laser-focused on what's within our control to drive sustained profitable growth: innovative products, compelling marketing, engaging retail experiences, talent and cost management.”

-more-




LS&Co. Q3 2013 Results/Add One
October 4, 2013


Third-Quarter 2013 Highlights

▪
Gross profit in the third quarter increased to $573 million compared with $521 million for the same period in 2012. Gross margin for the third quarter was 50 percent of revenues compared with 47 percent of revenues in the same quarter of 2012. The gross margin improvement primarily reflected a currency benefit of $14 million and an unfavorable impact of approximately $25 million of customer support and inventory markdown taken in 2012 in conjunction with the decision to phase out the Denizen® brand in Asia Pacific.

▪
Selling, general and administrative expenses (SG&A) for the third quarter increased to $455 million from $434 million in the same period in 2012. The increase in SG&A was driven by higher incentive compensation expense, related to improved achievement against the company's internally-set objectives. Advertising expenses also increased reflecting new campaigns that were launched during the quarter. The increase was partially offset by a decline in distribution expense reflecting a $19 million impairment charge the company recorded in the third quarter of 2012 on its owned distribution center in Japan due to a decision to outsource to a third-party in that market.

▪
Operating income for the third quarter increased to $118 million compared with $87 million for the same period in 2012.

Reported regional net revenues and operating income for the quarter were as follows:
 
 
Net Revenues
 
Operating Income
 
 
Three Months Ended
 
% Increase (Decrease)
 
Three Months Ended
 
% Increase (Decrease)
($ millions)
 
August 25, 2013
 
August 26, 2012
 
 
August 25, 2013
 
August 26, 2012
 
Americas
 
$710
 
$679
 
5%
 
$125
 
$137
 
(8)%
Europe
 
$275
 
$266
 
3%
 
$46
 
$48
 
(5)%
Asia Pacific
 
$156
 
$156
 
0%
 
$23
 
$(5)
 
580%

•
Net revenues increased 5 percent in the Americas primarily due to improved performance of the Levi's®, Dockers® and Signature brands at key customers in the wholesale channel, and of the Levi's® brand in the company's retail stores. Lower operating income primarily reflected higher SG&A.

•
Net revenues in Europe increased 3 percent on a reported basis, but decreased one percent without the effect of currency, as improved performance and expansion from the company-operated retail network was offset by a decline in sales to franchisees, most notably in Southern Europe. Operating income declined slightly reflecting higher SG&A.

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LS&Co. Q3 2013 Results/Add Two
October 4, 2013


•
Net revenues in Asia Pacific were flat on a reported basis. Excluding the impact of currency, a six percent increase in revenues reflected the company's decision in the third quarter of 2012 to phase out the Denizen® brand in Asia, which reduced revenues in that period. Sales of the Levi's® brand declined at retail and wholesale due to challenging conditions in most markets in the region. Higher operating income primarily reflected the Denizen® phase-out.


Cash Flow and Balance Sheet

At August 25, 2013, cash and cash equivalents of $382 million were complemented by $522 million available under the company's revolving credit facility, resulting in a total liquidity position of $904 million. Cash provided by operating activities of $274 million for the first nine months of 2013 were $142 million lower than the same period in 2012, reflecting the company's higher inventory levels and lower accounts receivable beginning balance.

Net debt – which the company defines as gross debt less cash and cash equivalents – was less than $1.2 billion at the end of the third quarter of 2013, compared to more than $1.3 billion at the end of 2012.


Investor Conference Call

The third-quarter 2013 investor conference call will be available through a live audio webcast today, October 4, 2013, at 1 p.m. Pacific/4 p.m. Eastern, at http://www.levistrauss.com/investors/earnings-webcast or dial-in to listen to the live call at: 800-954-1053 in the United States, or 1-212-231-2939 internationally. A replay is available on the website the same day and will be archived for one month. A telephone replay also is available through October 11, 2013, at 800-633-8284 in the United States or 1-402-977-9140 internationally; Reservation No. 21673675. Please see http://www.levistrauss.com/investors/earnings-webcast for a discussion and reconciliation of non-GAAP measures referenced on the investor conference call.

-more-




LS&Co. Q3 2013 Results/Add Three
October 4, 2013


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 and our Quarterly Reports on Form 10-Q for the quarters ended February 24, 2013, May 26, 2013, and August 25, 2013, 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.


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 2,800 retail stores and shop-in-shops. 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)
 
 
 
August 25,
2013
 
November 25,
2012
 
(Dollars in thousands)
ASSETS
Current Assets:
 
 
 
Cash and cash equivalents
$
382,328

 
$
406,134

Trade receivables, net of allowance for doubtful accounts of $20,471 and $20,738
419,788

 
500,672

Inventories:
 
 
 
Raw materials
4,689

 
5,312

Work-in-process
6,583

 
9,558

Finished goods
613,359

 
503,990

Total inventories
624,631

 
518,860

Deferred tax assets, net
126,398

 
116,224

Other current assets
128,821

 
136,483

Total current assets
1,681,966

 
1,678,373

Property, plant and equipment, net of accumulated depreciation of $771,344 and $782,766
436,394

 
458,807

Goodwill
240,658

 
239,971

Other intangible assets, net
51,329

 
59,909

Non-current deferred tax assets, net
618,747

 
612,916

Other non-current assets
116,113

 
120,101

Total assets
$
3,145,207

 
$
3,170,077

 
 
 
 
LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
 
 
 
Short-term debt
$
38,153

 
$
59,759

Current maturities of capital leases
843

 
1,760

Accounts payable
249,643

 
225,726

Other accrued liabilities
186,700

 
263,575

Accrued salaries, wages and employee benefits
186,883

 
223,850

Accrued interest payable
32,886

 
5,471

Accrued income taxes
72,700

 
16,739

Total current liabilities
767,808

 
796,880

Long-term debt
1,501,912

 
1,669,452

Long-term capital leases
10,274

 
262

Postretirement medical benefits
134,825

 
140,958

Pension liability
465,737

 
492,396

Long-term employee related benefits
67,804

 
62,529

Long-term income tax liabilities
34,252

 
40,356

Other long-term liabilities
58,390

 
60,869

Total liabilities
3,041,002

 
3,263,702

Commitments and contingencies


 


Temporary equity
29,429

 
7,883

 
 
 
 
Stockholders’ Equity (Deficit):
 
 
 
Levi Strauss & Co. stockholders’ equity (deficit)
 
 
 
Common stock — $.01 par value; 270,000,000 shares authorized; 37,467,935 shares and 37,392,343 shares issued and outstanding
375

 
374

Additional paid-in capital
17,566

 
33,365

Retained earnings
460,765

 
273,975

Accumulated other comprehensive loss
(407,699
)
 
(414,635
)
Total Levi Strauss & Co. stockholders’ equity (deficit)
71,007

 
(106,921
)
Noncontrolling interest
3,769

 
5,413

Total stockholders’ equity (deficit)
74,776

 
(101,508
)
Total liabilities, temporary equity and stockholders’ equity (deficit)
$
3,145,207

 
$
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
 
Nine Months Ended
 
August 25,
2013
 
August 26,
2012
 
August 25,
2013
 
August 26,
2012
 
(Dollars in thousands)
(Unaudited)
Net revenues
$
1,141,284

 
$
1,100,856

 
$
3,386,860

 
$
3,312,974

Cost of goods sold
568,448

 
580,108

 
1,673,435

 
1,762,746

Gross profit
572,836

 
520,748

 
1,713,425

 
1,550,228

Selling, general and administrative expenses
454,750

 
433,961

 
1,314,247

 
1,307,600

Operating income
118,086

 
86,787

 
399,178

 
242,628

Interest expense
(30,903
)
 
(32,160
)
 
(95,943
)
 
(103,144
)
Loss on early extinguishment of debt
—

 
—

 
(689
)
 
(8,206
)
Other income (expense), net
(10,661
)
 
(5,747
)
 
(5,425
)
 
6,122

Income before income taxes
76,522

 
48,880

 
297,121

 
137,400

Income tax expense
20,077

 
23,802

 
85,592

 
49,782

Net income
56,445

 
25,078

 
211,529

 
87,618

Net loss attributable to noncontrolling interest
630

 
3,273

 
715

 
3,184

Net income attributable to Levi Strauss & Co.
$
57,075

 
$
28,351

 
$
212,244

 
$
90,802


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
 
Nine Months Ended
 
August 25,
2013
 
August 26,
2012
 
August 25,
2013
 
August 26,
2012
 
(Dollars in thousands)
(Unaudited)
Net income
$
56,445

 
$
25,078

 
$
211,529

 
$
87,618

Other comprehensive income, net of related income taxes:
 
 
 
 
 
 
 
Pension and postretirement benefits
3,718

 
474

 
10,826

 
1,091

Net investment hedge (losses) gains
(8,329
)
 
(1,006
)
 
(5,928
)
 
14,839

Foreign currency translation gains (losses)
9,823

 
4,040

 
1,650

 
(13,604
)
Unrealized (loss) gain on marketable securities
(171
)
 
677

 
(541
)
 
1,496

Total other comprehensive income
5,041

 
4,185

 
6,007

 
3,822

Comprehensive income
61,486

 
29,263

 
217,536

 
91,440

Comprehensive loss attributable to noncontrolling interest
(451
)
 
(3,152
)
 
(1,644
)
 
(3,353
)
Comprehensive income attributable to Levi Strauss & Co.
$
61,937

 
$
32,415

 
$
219,180

 
$
94,793


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
 
Nine Months Ended
 
August 25,
2013
 
August 26,
2012
 
(Dollars in thousands)
(Unaudited)
Cash Flows from Operating Activities:
 
 
 
Net income
$
211,529

 
$
87,618

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
86,600

 
91,577

Asset impairments
1,917

 
19,413

Gain on disposal of assets
(2,120
)
 
(303
)
Unrealized foreign exchange losses (gains)
323

 
(14,666
)
Realized loss (gain) on settlement of forward foreign exchange contracts not designated for hedge accounting
2,547

 
(3,559
)
Employee benefit plans’ amortization from accumulated other comprehensive loss
17,478

 
1,175

Employee benefit plans’ curtailment gain, net
(815
)
 
(1,730
)
Noncash loss (gain) on extinguishment of debt
689

 
(3,643
)
Amortization of deferred debt issuance costs
3,232

 
3,268

Stock-based compensation
6,303

 
4,815

Allowance for doubtful accounts
2,394

 
5,243

Change in operating assets and liabilities:
 
 
 
Trade receivables
95,373

 
187,520

Inventories
(87,434
)
 
16,919

Other current assets
6,989

 
28,056

Other non-current assets
873

 
(3,554
)
Accounts payable and other accrued liabilities
(42,640
)
 
83,469

Income tax liabilities
37,660

 
11,287

Accrued salaries, wages and employee benefits and long-term employee related benefits
(75,322
)
 
(102,991
)
Other long-term liabilities
8,845

 
5,437

Other, net
(605
)
 
423

Net cash provided by operating activities
273,816

 
415,774

Cash Flows from Investing Activities:
 
 
 
Purchases of property, plant and equipment
(63,002
)
 
(54,308
)
Proceeds from sale of assets
2,168

 
519

(Payments) proceeds on settlement of forward foreign exchange contracts not designated for hedge accounting
(2,547
)
 
3,559

Net cash used for investing activities
(63,381
)
 
(50,230
)
Cash Flows from Financing Activities:
 
 
 
Proceeds from issuance of long-term debt
140,000

 
385,000

Repayments of long-term debt and capital leases
(326,198
)
 
(407,651
)
Proceeds from senior revolving credit facility
—

 
50,000

Repayments of senior revolving credit facility
—

 
(250,000
)
Short-term borrowings, net
(13,815
)
 
1,633

Debt issuance costs
(2,557
)
 
(7,368
)
Restricted cash
123

 
671

Repurchase of common stock
(365
)
 
(479
)
Excess tax benefits from stock-based compensation
165

 
—

Dividend to stockholders
(25,076
)
 
(20,036
)
Net cash used for financing activities
(227,723
)
 
(248,230
)
Effect of exchange rate changes on cash and cash equivalents
(6,518
)
 
(7,088
)
Net (decrease) increase in cash and cash equivalents
(23,806
)
 
110,226

Beginning cash and cash equivalents
406,134

 
204,542

Ending cash and cash equivalents
$
382,328

 
$
314,768

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid during the period for:
 
 
 
Interest
$
61,209

 
$
74,153

Income taxes
26,441

 
28,814

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