Levi Strauss & Co. Announces Second-Quarter 2009 Financial Results

* Net Revenues Down 3%, Up 5% Excluding Effects of Currency
* Cash Flow Enhances Liquidity Position

SAN FRANCISCO--(Business Wire)--
Levi Strauss & Co. (LS&CO.) today announced financial results for the second
quarter ended May 31, 2009, and filed its second-quarter 2009 results on Form
10-Q with the Securities and Exchange Commission.

Highlights include:

Three Months Ended
($ millions) May 31, 2009 May 25, 2008
Net revenues $905 $936
Net income (loss) $(4) $1

The company`s reported results reflected a challenging global economy and the
adverse effect of currency exchange rates compared to the prior year. Net
revenues declined 3 percent. On a constant currency basis, net revenues
increased 5 percent for the quarter largely due to the prior period`s loss of
sales related to shipping issues during the stabilization of a new enterprise
resource planning system (ERP) in the U.S. business.

The company reported an improved liquidity position with approximately $503
million of cash, cash equivalents and availability under its credit facility.
The company`s cash position reflected strong operating cash flows in the
quarter. Inventory was down $29 million compared to the end of last year.

"We are focusing on the fundamentals and operating our business with discipline
and rigor in this challenging retail environment," said John Anderson, president
and chief executive officer. "Our cash flow is robust and our liquidity position
will support the business and our investment in strategic initiatives. We
acquired 73 outlet stores in the United States this week, complementing our
existing retail network and building our brands. We continue to focus on
strengthening our business during these difficult times so we can capitalize on
our position when the economy improves."

Second-Quarter 2009 Highlights

* Gross profit in the second quarter decreased to $415 million compared with
$437 million for the same period in 2008, primarily due to the effect of
currencies. Gross margin for the quarter was 45.9 percent compared with 46.7
percent in the same quarter of 2008. Gross margin was adversely impacted by
currencies but benefited from lower inventory markdowns.
* Selling, general and administrative (SG&A) expenses for the second quarter
decreased to $359 million from $386 million in the same period of 2008. The
reduction in SG&A expense was largely driven by the effects of currency. The
company also incurred lower ERP-related, distribution and marketing costs,
offset by higher selling costs associated with additional company-operated
stores and increased pension expense.
* Operating income for the second quarter increased to $56 million compared with
$52 million for the same period of 2008, primarily reflecting the lower SG&A
expenses.

Regional Overview

Regional net revenues for the quarter were as follows:

% Increase (Decrease)
Net Revenues ($ millions) May 31, 2009 May 25, 2008 As Reported Constant Currency
Americas $518 $477 8% 12%
Europe $221 $268 (17)% 1%
Asia Pacific $166 $191 (13)% (6)%

* The increase in net revenues in the Americas region primarily reflected lower
sales in the second quarter of 2008 due to the shipping issues related to the
U.S. ERP system stabilization. This increase was partially offset by declines in
net sales in the 2009 period due to the bankruptcy of a significant U.S.
customer in the third quarter of last year.
* Net revenues in Europe decreased on a reported basis and were stable excluding
the impact of currency. Weaker wholesale performance in the company`s mature
markets, reflecting the declining retail environment in the region, was offset
by sales from new company-operated stores.
* Net revenues in Asia Pacific decreased on both a reported and constant
currency basis. Lower net sales in wholesale channels in mature markets
reflected the continuing impact of the slowing global economy, particularly in
Japan. The decline was partially offset by increased sales from continued retail
store expansion in developing markets.

Balance Sheet and Cash Flow

The company ended the second quarter with cash and cash equivalents of $270
million and available liquidity of $233 million under the company`s credit
facility. Cash provided by operating activities was $159 million for the
three-month period, compared with $121 million for the same period in 2008. Net
debt at the end of the quarter was $1.6 billion compared to $1.8 billion at the
end of the second quarter of 2008.

Investor Conference Call

The company`s second-quarter 2009 investor conference call will be available
through a live audio Webcast at
www.levistrauss.com/Financials/EarningsWebcasts.aspx today, July 14, 2009, at 1
p.m. PST/4 p.m. EST. A replay is available on the Web site the same day and will
be archived for one month. A telephone replay also is available through July 21,
2009, at 800-642-1687 in the United States and Canada, or 706-645-9291
internationally; I.D. No. 16477579.

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 ended 2008, especially in the "Management`s Discussion and Analysis of
Financial Condition and Results of Operations" and "Risk Factors" sections, our
Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K.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.

LEVI STRAUSS & CO. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)
May 31, November 30,
2009 2008
ASSETS (Dollars in thousands)
Current Assets:
Cash and cash equivalents $ 269,621 $ 210,812
Restricted cash 3,037 2,664
Trade receivables, net of allowance for doubtful accounts of $19,616 and $16,886 388,882 546,474
Inventories:
Raw materials 9,551 15,895
Work-in-process 8,278 8,867
Finished goods 495,402 517,912
Total inventories 513,231 542,674
Deferred tax assets, net 116,027 114,123
Other current assets 105,298 88,527
Total current assets 1,396,096 1,505,274
Property, plant and equipment, net of accumulated depreciation of $630,818 and $596,967 404,358 411,908
Goodwill 231,850 204,663
Other intangible assets, net 46,638 42,774
Non-current deferred tax assets, net 539,655 526,069
Other assets 78,566 86,187
Total assets $ 2,697,163 $ 2,776,875

LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS` DEFICIT
Current Liabilities:
Short-term borrowings $ 32,904 $ 20,339
Current maturities of long-term debt 35,437 70,875
Current maturities of capital leases 1,750 1,623
Accounts payable 174,619 203,207
Restructuring liabilities 4,567 2,428
Other accrued liabilities 198,155 251,720
Accrued salaries, wages and employee benefits 163,175 194,289
Accrued interest payable 28,599 29,240
Accrued income taxes 10,696 17,909
Total current liabilities 649,902 791,630
Long-term debt 1,788,045 1,761,993
Long-term capital leases 6,045 6,183
Postretirement medical benefits 125,754 130,223
Pension liability 248,366 240,701
Long-term employee related benefits 94,087 87,704
Long-term income tax liabilities 48,476 42,794
Other long-term liabilities 44,390 46,590
Minority interest and related liability 36,624 17,982
Total liabilities 3,041,689 3,125,800

Commitments and contingencies (Note 8)
Temporary equity 589 592

Stockholders' Deficit:
Common stock - $.01 par value; 270,000,000 shares authorized; 37,280,038 shares issued and outstanding 373 373
Additional paid-in capital 36,719 53,057
Accumulated deficit (231,091 ) (275,032 )
Accumulated other comprehensive loss (151,116 ) (127,915 )
Total stockholders' deficit (345,115 ) (349,517 )
Total liabilities, temporary equity and stockholders' deficit $ 2,697,163 $ 2,776,875

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 OPERATIONS

Three Months Ended Six Months Ended
May 31, May 25, May 31, May 25,
2009 2008 2009 2008
(Dollars in thousands)
(Unaudited)

Net sales $ 886,519 $ 915,090 $ 1,817,773 $ 1,976,010
Licensing revenue 17,999 21,247 38,209 43,195
Net revenues 904,518 936,337 1,855,982 2,019,205
Cost of goods sold 489,141 498,938 995,484 1,036,607
Gross profit 415,377 437,399 860,498 982,598
Selling, general and administrative expenses 359,268 385,640 698,349 744,293
Operating income 56,109 51,759 162,149 238,305
Interest expense (40,027 ) (41,070 ) (74,717 ) (81,750 )
Other expense, net (20,476 ) (9,596 ) (17,408 ) (5,717 )
Income (loss) before income taxes (4,394 ) 1,093 70,024 150,838
Income tax (benefit) expense (266 ) 392 26,083 53,030
Net income (loss) $ (4,128 ) $ 701 $ 43,941 $ 97,808

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

Six Months Ended
May 31, May 25,
2009 2008
(Dollars in thousands)
(Unaudited)
Cash Flows from Operating Activities:
Net income $ 43,941 $ 97,808
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 36,445 37,187
Asset impairments 568 316
Loss on disposal of property, plant and equipment 174 282
Unrealized foreign exchange losses 4,791 2,751
Realized loss on settlement of foreign currency contracts not designated for hedge accounting 18,147 8,196
Employee benefit plans' amortization from accumulated other comprehensive loss (9,894 ) (17,981 )
Employee benefit plans' curtailment gain, net (2,028 ) (3,825 )
Write-off of unamortized costs associated with early extinguishment of debt - 329
Amortization of deferred debt issuance costs 2,131 1,939
Stock-based compensation 3,660 2,815
Allowance for doubtful accounts 3,196 6,731
Change in operating assets and liabilities (excluding assets and liabilities acquired):
Trade receivables 134,784 112,440
Inventories 12,382 (63,649 )
Other current assets (2,576 ) (26,334 )
Other non-current assets 1,468 (10,440 )
Accounts payable and other accrued liabilities (60,461 ) 7,657
Income tax liabilities (5,629 ) 24,540
Restructuring liabilities 1,075 (3,181 )
Accrued salaries, wages and employee benefits (48,770 ) (44,111 )
Long-term employee related benefits 27,780 (13,248 )
Other long-term liabilities (3,710 ) 1,069
Other, net 1,461 (33 )
Net cash provided by operating activities 158,935 121,258
Cash Flows from Investing Activities:
Purchases of property, plant and equipment (26,688 ) (41,009 )
Proceeds from sale of property, plant and equipment 176 1,272
Payments on settlement of foreign currency contracts not designated for hedge accounting (18,147 ) (8,196 )
Acquisitions, net of cash acquired (5,423 ) -
Deposits and deferred costs on proposed acquisition from Anchor Blue Retail Group (6,947 ) -
Net cash used for investing activities (57,029 ) (47,933 )
Cash Flows from Financing Activities:
Repayments of long-term debt and capital leases (36,406 ) (55,434 )
Short-term borrowings, net 10,995 3,519
Debt issuance costs - (395 )
Restricted cash (143 ) (1,269 )
Dividends to minority interest shareholders of Levi Strauss Japan K.K. (978 ) (1,114 )
Dividend to stockholders (20,001 ) (49,953 )
Net cash used for financing activities (46,533 ) (104,646 )
Effect of exchange rate changes on cash and cash equivalents 3,436 (777 )
Net increase (decrease) in cash and cash equivalents 58,809 (32,098 )
Beginning cash and cash equivalents 210,812 155,914
Ending cash and cash equivalents $ 269,621 $ 123,816

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 66,463 $ 80,642
Income taxes 30,283 37,095

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

Levi Strauss & Co.
Roger Fleischmann, 800-438-0349 (Investors)
rfleischmann@levi.com
Jeff Beckman, 415-501-3317 (Media)
jbeckman@levi.com

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