Levi Strauss & Co today announced financial results for the second quarter and first six months ended May 28, 2000, which reflect solid progress in the company's business turnaround. The company reported improvements across several performance measures, including sales trends, gross margins, operating income and debt reduction.

Net sales for the quarter declined 6 per cent to $1.149 billion from $1.228 billion in the year-ago period -- a significant improvement from the 15 per cent decline in net sales reported for the first quarter of this year. Had the US dollar remained at 1999 levels, net sales would have declined 5 per cent. Product innovation and marketing initiatives, as well as supply chain execution, contributed to the improved sales trend.

``I'm very pleased with where we are in our business turnaround,'' said Philip Marineau, president and chief executive officer of San Francisco-based Levi Strauss & Co. ``We are doing what we said we would do to stabilize the business. Our performance measures are improving -- the rate of our sales decline has slowed, gross margins are up, our net income is rising and we are decreasing our debt. In addition, we have maintained strict and effective cost controls.''

Second-quarter gross margin rose to 42.4 pecent versus 40.0 pecent in the second quarter of last year, reflecting the company's improved product mix and sourcing arrangements. Gross profit for the quarter totaled $487.6 compared with $490.6 million in the year-ago period.

During the quarter, operating income improved to $120.2 million compared with $71.1 million in last year's second quarter. Operating income for the 1999 period includes a restructuring charge of $11.8 million. Excluding the effects of the restructuring charge, operating income would have increased 45 pecent over the same period last year. EBITDA, which the company defines as operating income excluding depreciation, amortization, special compensation and restructuring charges, increased to $143.8 million or 12.5 percent of sales. In the second quarter of 1999, EBITDA totaled $121.8 million or 10 percent of sales. Net income for the second quarter rose 48 percent to $45.0 million from $30.4 million in the same period last year.

Net sales for the six-month period ended May 28, 2000 declined 11 pecent to $2.231 billion from $2.506 billion in the same period last year. Had the US dollar remained at 1999 levels, net sales would have declined 9 per cent. Gross margin for the first six months rose to 42.0 per cent compared with 38.1 per cent in 1999, while gross profit for the period was $937.6 million compared to $954.3 million in the first half of last year.

Operating income for the six-month period rose to $248.0 million compared with an operating loss of $278.4 million in the first half of 1999. Operating income for the 1999 period included restructuring charges of $405.9 million. Excluding the effects of restructuring charges, operating income would have increased 95 percent over the prior-year period, due primarily to gross margin improvements and effective management of marketing, general and administrative expenses. As a result, EBITDA increased to $292.3 million or 13.1 percent of sales compared with an EBITDA of $200.4 million or 8.0 percent of sales in the first half of 1999. For the six-month period ended May 28, net income increased sharply to $110.1 million compared with a net loss of $206.8 million in the year-earlier period, which included the effects of the restructuring initiatives.

As of May 28, 2000, total debt was $2.303 billion, a significant reduction from $2.665 billion at the end of fiscal year 1999.

``My experience with business turnarounds has shown me that they happen on a wide arc,'' said Marineau. ``Our progress to date reinforces my belief that we are in position to stabilize the business by the end of the year, setting the stage to restore growth. Our improvements in products, marketing, retail collaboration and operations are having a positive impact on consumers and retailers. We still have a great deal of work to accomplish, but I believe the turnaround is under way.''

Levi Strauss & Co is one of the world's leading branded apparel companies with operations in more than 40 countries. The company designs and markets jeans and jeans-related pants, casual and dress pants, shirts, jackets and related accessories for men, women and children under the Levi's, Dockers and Slates brands.

The company's second-quarter investor conference call, featuring Phil Marineau, chief executive officer; Bill Chiasson, chief financial officer; and Joe Maurer, treasurer, will be available through a live audio Webcast at www.levistrauss.com on June 20 at 10 a.m. Eastern Daylight Time. A replay is available on the Web site the same day beginning at approximately 2 p.m. Eastern Daylight Time and will remain until August 20. A telephone replay also is available at 402/530-7824 from approximately noon Eastern Daylight Time until June 27.

This news release includes forward-looking statements about sales performance and trends, fashion trends, new product development in our three brands, product mix, inventory position and management, expense levels including overhead and advertising expense, debt repayment and liquidity, customer orders, retail relationships and developments including sell-through, presentation of product at retail and marketing collaborations, and marketing and advertising initiatives. We have based these forward-looking statements on our current assumptions, expectations and projections about future events. When used in this announcement, the words ``believe,'' ``anticipate,'' ``intend,'' ``estimate, '' ``expect,'' ``project'' and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these words.

These forward-looking statements are subject to risks and uncertainties including, without limitation, risks related to the impact of competitive products; changing fashion trends; dependence on key distribution channels, customers and suppliers; our supply chain executional performance; ongoing competitive pressures in the apparel industry; changing international retail environments; changes in the level of consumer spending or preferences in apparel; trade restrictions; political or financial instability in countries where our products are manufactured; and other risks detailed in our registration statement on Form S-4 filed with the Securities and Exchange Commission on May 4, 2000 and our other filings with the Securities and Exchange Commission. Our actual results might differ materially from historical performance or current expectations.

LEVI STRAUSS & CO.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Dollars in Thousands)
(Unaudited)
Three Months Ended
Six Months Ended
May 28,
May 30,
May 28,
May 30,
2000
1999
2000
1999
Net sales
$1,149,044
$1,227,910
$2,231,481
$2,506,232
Cost of goods sold
661,469
737,303
1,293,911
1,551,976
Gross profit
487,575
490,607
937,570
954,256
Marketing, general and administrative expenses
367,417
407,677
689,528
826,762
Excess capacity/ restructuring charge
--------
11,780
--------
405,885
Operating income (loss)
120,158
71,150
248,042
(278,391)
Interest expense
60,989
43,819
117,771
86,976
Other income, net
(10,100)
(20,931)
(39,241)
(37,058)
Income (loss) before taxes
69,269
48,262
169,512
(328,309)
Income tax expense (benefit)
24,245
17,857
59,329
(121,474)
Net income (loss)
$ 45,024
$ 30,405
$ 110,183
$(206,835)

NET SALES BY REGION
(in millions)
(Unaudited)
Three Months Ended
Six Months Ended
May 28,
May 30,
Percent
May 28,
May 30,
Percent
2000
1999
Change
2000
1999
Change
Net Sales
Americas
$ 762.1
$ 801.8
(4.9%)
$1,452.6
$1,621.6
(10.4%)
Europe
$ 278.7
$ 337.3
(17.4%)
$ 581.7
$ 714.3
(18.6%)
Asia
$ 108.3
$ 88.8
21.9%
$ 197.2
$ 170.4
15.7%
Total Company
$1,149.0
$1,227.9
(6.4%)
$2,231.5
$2,506.2
(11.0%)
Three Months Ended
Six Months Ended
May 28,
May 30,
Percent
May 28,
May 30,
Percent
2000
1999
Change
2000
1999
Change
(Restated)
(Restated)
Net Sales at Prior-Year Currency Exchange Rates
Americas
$ 761.5
$ 801.8
(5.0%)
$1,450.1
$1,621.6
(10.6%)
Europe
$ 299.1
$ 337.3
(11.3%)
$ 640.9
$ 714.3
(10.3%)
Asia
$ 102.6
$ 88.8
15.5%
$ 187.0
$ 170.4
9.8%
Total Company
$1,163.2
$1,227.9
(5.3%)
$2,277.9
$2,506.2
(9.1%)

LEVI STRAUSS & CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
     
 
May 28,
Nov 28,
 
2000
1999
(Unaudited)
ASSETS
Cash and cash equivalents
$ 128,363
$ 192,816
Trade receivables, net
625,912
759,273
Total inventories
588,131
671,487
Property, plant and equipment, net
579,324
685,026
Other assets
1,234,976
1,356,915
Total Assets
$3,156,706
$ 3,665,517
LIABILITIES AND STOCKHOLDERS' DEFICIT
     
Current maturities of long-term debt and short-term borrowings
$ 232,165
$ 233,992
Accounts payable
201,891
262,389
Restructuring reserves
107,546
258,784
Long-term debt, less current maturities
2,070,556
2,430,617
Long-term employee related benefits
330,334
325,518
Post-retirement medical benefits
549,380
541,815
Other liabilities
858,864
900,964
Total liabilities
4,350,736
4,954,079
Total stockholders' deficit
(1,194,030)
(1,288,562)
Total Liabilities and Stockholders' Deficit
$ 3,156,706
$ 3,665,517