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LEVI STRAUSS & CO. ANNOUNCES FOURTH-QUARTER & FISCAL-YEAR 2014
FINANCIAL RESULTS SAN FRANCISCO (February 12, 2015) – Levi Strauss & Co. (LS&Co.) announced financial results today for the fourth quarter and fiscal year ended November 30, 2014. Highlights include: For table view, click here: http://www.levistrauss.com/wp-content/uploads/2015/02/Exhibit-99.1-4Q-2014-Press-Release1.pdf Three Months Ended Fiscal Year Ended Fourth-quarter revenues grew seven percent on a reported basis, and ten percent without the impact of currency. Full-year net revenues increased two percent on a reported basis and three percent on a constant currency basis. Higher revenues primarily reflected the Black Friday sales week, which due to the timing of the company's fiscal year-end was an additional week in the company's fourth fiscal quarter as compared to the prior year. Higher revenues also reflected growth in the company's retail network. Adjusted EBIT growth in the fourth-quarter and full-year was driven primarily by the higher revenues and savings from the company's global productivity initiative, partially offset by increased expenditures reflecting the company’s retail network growth. Fourth-quarter and full-year net income declined primarily due to restructuring and other related charges associated with the company's global productivity initiative of $53 million and $156 million, respectively, and a $31 million non-cash loss associated with the settlement of a portion of the company’s pension obligations. "In fiscal 2014 we executed against our strategies amidst a challenging promotional environment. We grew the top-line, improved our structural economics, and further strengthened the balance sheet by reducing our debt," said Chip Bergh, president and chief executive officer. "We saw progress in key international markets, growth in our direct-to-consumer channel globally, and early success in the productivity initiative that we launched early in the year. In 2015 we will continue to invest in our retail and ecommerce operations and reduce our controllable costs to drive profitable growth over the long-term." Fourth Quarter 2014 Highlights Gross profit in the fourth quarter was $680 million compared with $637 million for the same period in 2013 due to the company's higher net revenues. Gross margin for the fourth quarter declined 20 basis-points to 49 percent of net revenues. The promotional environment pressured margins, although margin benefited from higher retail revenues and savings in the company’s sourcing organization. Selling, general and administrative (SG&A) expenses for the fourth quarter increased to $581 million compared with $571 million in the same period of 2013. A $31 million non-cash loss associated with the settlement of a portion of the company’s pension obligations, and the impact of the additional week in the fiscal quarter, were partially offset by savings from the company’s global productivity initiative. Adjusted EBIT, which excludes the charges associated with the company’s global productivity initiative and the pension charge, was $134 million, an increase of $62 million compared with the same quarter of 2013. The increase reflected the company’s higher revenues and savings from the productivity initiative. A reconciliation of Adjusted EBIT is provided at the end of this press release. Operating income for the fourth quarter declined to $50 million from $66 million for the same period in 2013, as the higher Adjusted EBIT was offset by $53 million in restructuring and other related charges associated with the company’s global productivity initiative and the $31 million pension settlement charge. Regional Overview Reported regional net revenues and operating income for the fourth quarter were as follows (note that results for the fourth quarter of 2013 have been revised in the table below to combine our Middle East and North Africa markets, previously managed by our Europe region, with our Asia region, in order to conform with the 2014 presentation): For table view, click here: http://www.levistrauss.com/wp-content/uploads/2015/02/Exhibit-99.1-4Q-2014-Press-Release1.pdf Net Revenues Operating Income*
In Europe, the net revenues increase reflected the inclusion of the additional week in the fourth quarter of 2014 as well as expansion of the company-operated store network in the region. Operating income growth from the higher revenues was offset by increased investment in the retail network and advertising. In Asia, net revenues grew in the company-operated retail network and at wholesale, primarily driven by pricepromotional activity. Operating income declined due to the region's lower gross margin, reflecting the highlypromotional environment. Fiscal Year 2014 Highlights • Gross profit for the fiscal year was $2,348 million compared with $2,350 million in 2013. Gross margin of 49 percent of revenues in 2014 declined 80 basis points as compared to 2013, primarily attributable to higher discounted sales reflecting the promotional environment and the company's efforts to manage inventory levels. The margin benefits of higher retail revenues and savings in the company’s sourcing organization were partially offset by cost inflation. • SG&A expenses increased to $1,906 million for 2014 compared with $1,885 million in the prior year. SG&A in 2014 included $59 million comprised of $28 million in charges related to the company’s productivity initiative and the $31 million pension settlement charge. Excluding these increases, SG&A as a percentage of revenue declined 140 basis-points, as savings from the productivity initiative more than offset higher retail expenses related to the company’s store network. • Adjusted EBIT for 2014 was $504 million compared to $467 million in the prior year, reflecting savings from the productivity initiative. A reconciliation of Adjusted EBIT is provided at the end of this press release. • Operating income for 2014 was $314 million compared to $466 million the prior year due to $156 million in restructuring and other related charges associated with the productivity initiative and the $31 million pension settlement charge. Cash Flow and Balance Sheet The company strengthened the balance sheet during 2014 by reducing net debt to $0.9 billion at the end of 2014, compared to $1.1 billion at the end of 2013. The reduction in net debt reflected the company’s redemption of its 7.75% Euro senior notes through a combination of cash on-hand and borrowings under its revolving credit facility. Free cash flow for 2014 was $123 million. At November 30, 2014, cash and cash equivalents of $298 million were complemented by $665 million available under the company's revolving credit facility, resulting in a total liquidity position of approximately $1 billion. During the year, the company paid a cash dividend of $30 million to common stockholders. Subsequent to the end of the company's fiscal year, the company's Board of Directors declared a cash dividend of $50 million. Global Productivity Initiative Restructuring and related charges associated with the company's global productivity initiative primarily reflect severance benefit costs, pension plan curtailment gains and losses, other expenses associated with staffing reductions, and consulting fees primarily related to centrally-led cost-savings and procurement projects. Actions taken throughout 2014 for the global productivity initiative resulted in aggregate restructuring and related charges of $156 million, and are expected to deliver net annualized savings of $125-150 million. The company anticipates that it will incur additional restructuring charges in 2015 related to the global productivity initiative, and continues to expect net annualized savings in the range of $175-200 million upon completion. The company expects additional savings in future periods to come from streamlining its planning and go-to-market strategies,
implementing efficiencies across its retail, supply chain and distribution network, and continuing to pursue improved
procurement practices. Investor Conference Call The company’s fourth-quarter and full-year 2014 financial results conference call will be available through a live audio webcast at http://www.levistrauss.com/investors February 12, 2015, at 1 p.m. PST/4 p.m. EST or via the following phone numbers: 800-891-4735 in the United States and Canada, or 973-200-3066 internationally; I.D. No. 72233474. A replay is available on the website and will be archived for one month. A telephone replay also is available through February 19, 2015, at 800-585-8367 in the United States and Canada, or 404-537-3406 internationally; I.D. No. 72233474. Please see http://www.levistrauss.com/investors/earnings-webcast for a discussion and reconciliation of non-GAAP measures referenced on the investor conference call. Source: http://www.levistrauss.com/wp-content/uploads/2015/02/Exhibit-99.1-4Q-2014-Press-Release1.pdf
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