Levi Strauss remains focused on trimming debt, investing in business

By Jennifer Lanning Drey

Savannah, Ga., Oct. 12 - Levi Strauss & Co.'s long-term financial strategy remains focused on reducing its debt level over time while investing in the business, Blake Jorgensen, Levi Strauss' chief financial officer, said Tuesday during its earnings conference call for the third quarter.

"We are comfortable that our current liquidity and cash flow are sufficient to fund our strategic objectives," Jorgensen said.

Levi Strauss ended the third quarter with cash of $261 million and $283 million available under its revolving credit facility at Aug. 29.

"We maintained our focus on working capital management and ended the quarter with a solid liquidity position," he said.

The company had $1.6 billion of net debt at the end of the third quarter, which it said was comparable to its net debt position at the end of 2009.

Levi Strauss generated $96 million of cash from operating activities in the first nine months of 2010, compared with $174 million for the same period of 2009.

During the call, Jorgensen noted that the third quarter is typically one of seasonal investment in working capital. However, the company aggressively lowered its inventory levels in 2009 in response to difficult market conditions.

The company returned to a more traditional seasonal investment cycle in the third quarter, he added.

Levi Strauss is targeting being in a position to pay a dividend to its shareholders in 2011, Jorgensen said.

The company reported third-quarter net revenues of $1.11 billion, compared with net revenues of $1.04 billion for the same period in 2009.

"Despite persistent global economic challenges, all three regions generated increased constant-currency net revenues," Jorgensen said.

The company said the growth was driven by the strength of the Levi's brand in the Americas, the company's acquisitions in 2009 and the expansion of its dedicated store network worldwide.

Operating income declined to $86 million in the third quarter, down from $98 million in the comparable prior-year period. The company said the benefits from the increase in net revenues and higher gross margin were offset by continued investment in its retail network and increased advertising and promotion activities.

Levi Strauss is a San Francisco-based clothing company.

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