Levi Strauss & Co. announced financial results for the first quarter ended February 27, 2005 and filed its first-quarter 2005 Form 10-Q with the Securities and Exchange Commission.
Results for the quarter, compared to the same quarter in the prior year, reflect continued improvements in financial performance, including net sales, gross margin, gross profit, operating income and net income.
First-quarter 2005 net sales were $1,006 million compared to $962 million for the first quarter of 2004, representing an increase of $44 million or 5 percent on a reported basis and 2 percent on a constant-currency basis. The sales increase was driven primarily by the improved performance of more premium Levi’s brand products in Europe and continued growth of the Levi’s business in Asia, partially offset by an expected decrease in North America as a result of streamlining the number of U.S. Levi’s and Dockers product offerings in 2004. Net sales were also helped by lower sales allowances in North America and earlier delivery of spring products in Europe as a result of a change in the spring/summer sell-in calendar to meet customers’ requirements.
Net income for the first quarter increased to $47 million compared to a net loss of $2 million in the same quarter of 2004. The improvement was due primarily to a $123 million increase in operating income, partially offset by a $23 million loss on the early retirement of debt related to refinancing activities and higher income taxes.
“We had a solid first quarter, building on last year’s success,” said Phil Marineau, chief executive officer. “Each of our three regions turned in a strong profit performance. A focus on premium products in Europe and Asia continues to drive sales for those regions. I am also pleased that the U.S. Dockers brand performance improved this quarter. Revitalizing this important part of the business is one of our highest priorities. Company wide, we remain sharply focused on profitability and building all three of our brands. We are also very mindful that we are in a difficult and intensely competitive retail environment worldwide.”
First-Quarter 2005 Results
As of February 27, 2005, total debt, less cash was $2.11 billion compared to $2.02 billion at the end of fiscal year 2004, an increase of approximately $92 million. The increased net debt is primarily attributable to interest payments, employee incentive compensation payouts and payments related to debt refinancing. As of April 3, 2005, the company had total available liquidity of approximately $377 million, reflecting availability of $300 million under its credit facility and liquid short-term investments of $77 million. In March and April 2005, the company took actions to address its near-term debt maturities by issuing $380 million in floating-rate senior notes due 2012 and EUR 150 million senior notes at 8.625 percent due 2013 and using the proceeds to repurchase or redeem all of its U.S.- and Euro-denominated notes due 2008.
“The improved financial results for the first quarter demonstrate that continued efforts to streamline our businesses, improve product ranges and reduce operating costs are having a positive impact,” said Hans Ploos van Amstel, chief financial officer. “We are now operating a more profitable and efficient business. Our successful bond offering in March extends the bond maturities to 2012 and enables us to lower interest expense. This was a good start to the year; however, we remain keenly aware of the challenges we face for the balance of the year. There is still much more work to do to achieve our financial goals for 2005.”
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