Levi Strauss reports $278 million of cash, $1.5 billion of debt in Q2

By Lisa Kerner

Charlotte, N.C., July 10 - Levi Strauss & Co. reported cash and cash equivalents of $278 million as of May 27 and $587 million available under its revolving credit facility during its second-quarter 2012 earnings call on Tuesday.

The San Francisco-based apparel maker ended the quarter with $1.5 billion of net debt, compared with $1.7 billion at the end of the first quarter and $1.8 billion at the end of 2011, said chief financial officer Blake Jorgensen.

In May, Levi Strauss refinanced ¥5.1 billion of its 4¼% eurobonds due 2016, extending that portion of its debt to 2022 and locking in a 200 basis point interest rate reduction, said Jorgensen. The company's 2016 maturities now solely consist of the $50 million balance of the eurobonds.

Also during the quarter, Levi Strauss paid $20 million of dividends to shareholders.

Jorgensen said the company is "comfortable" with its liquidity position, which is supported by its increased operating cash flow and "significant availability" under its credit facility.

Cash from operating activities was up for the first six months of the year at $328 million, versus $85 million for the prior-year period, reflecting tighter inventory positioning and the timing of account receivable collections, according to Jorgensen.

Net income for the quarter was $13 million, compared with $21 million during the same quarter of 2011. The decreased net income reflected the impact of higher cotton prices and a debt extinguishment charge of $8 million, partially offset by lower selling, general and administrative expenses.

Levi Strauss may see some relief from cotton pricing in the third quarter and will continue to focus on profitability over growth, according to Jorgensen.

The company will continue to be pressured by organization transitional costs as it makes necessary changes to move toward its historical profitability. Near-term costs will include those such as severance associated with streamlining and corporate reorganization, Jorgensen said.

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