-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IJpW9CuEhxsB+q3MXFb4Wfqrp/mNW6NZDSP1N+ngYEsLMnyoDesOc+vZqxEVnb5j IJfSUdZTh638R6SJHUKICg== /in/edgar/work/0000094845-00-000023/0000094845-00-000023.txt : 20001003 0000094845-00-000023.hdr.sgml : 20001003 ACCESSION NUMBER: 0000094845-00-000023 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20000827 FILED AS OF DATE: 20000929 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEVI STRAUSS & CO CENTRAL INDEX KEY: 0000094845 STANDARD INDUSTRIAL CLASSIFICATION: [2300 ] IRS NUMBER: 940905160 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06631 FILM NUMBER: 732692 BUSINESS ADDRESS: STREET 1: 1155 BATTERY ST CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4155446000 MAIL ADDRESS: STREET 1: 1155 BATTERY STREET CITY: SAN FRAINCISCO STATE: CA ZIP: 94111 10-Q 1 0001.txt 3RD QUARTER 2000 FORM 10-Q ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED AUGUST 27, 2000 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 333-36234 LEVI STRAUSS & CO. (Exact Name of Registrant as Specified in Its Charter) DELAWARE 94-0905160 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 1155 BATTERY STREET, SAN FRANCISCO, CALIFORNIA 94111 (Address of Principal Executive Offices) (415) 501-6000 (Registrant's Telephone Number, Including Area Code) NONE (Former Name, Former Address, and Former Fiscal Year, if Changed Since Last Report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock $.01 par value ------ 37,278,238 shares outstanding on September 29, 2000 LEVI STRAUSS & CO. INDEX TO FORM 10-Q AUGUST 27, 2000 PAGE NUMBER ------ PART I - FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Balance Sheets as of August 27, 2000 and November 28, 1999.............................................. 3 Consolidated Statements of Income for the Three and Nine Months Ended August 27, 2000 and August 29, 1999............... 4 Consolidated Statements of Cash Flows for the Nine Months Ended August 27, 2000 and August 29, 1999...................... 5 Notes to Consolidated Financial Statements....................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................................... 14 Item 3. Quantitative and Qualitative Disclosures about Market Risk....... 20 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K................................. 21 SIGNATURES.................................................................. 22 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
LEVI STRAUSS & CO. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) August 27, November 28, 2000 1999 ---------- ------------ ASSETS (Unaudited) Current Assets: Cash and cash equivalents...................................................... $ 75,446 $ 192,816 Trade receivables, net of allowance for doubtful accounts of $26,841 in 2000 and $30,017 in 1999.................................................... 652,252 759,273 Income taxes receivable........................................................ -- 70,000 Inventories: Raw materials.............................................................. 120,740 137,082 Work-in-process............................................................ 98,337 100,523 Finished goods............................................................. 427,090 433,882 ---------- ---------- Total inventories....................................................... 646,167 671,487 Deferred tax assets............................................................ 258,348 300,972 Other current assets........................................................... 168,799 172,195 ---------- ---------- Total current assets............................................... 1,801,012 2,166,743 Property, plant and equipment, net of accumulated depreciation of $509,566 in 2000 and $548,437 in 1999......................................................... 556,226 685,026 Goodwill and other intangibles, net of accumulated amortization of $162,161 in 2000 and $158,052 in 1999......................................................... 267,228 275,318 Non-current deferred tax assets...................................................... 473,014 478,235 Other assets ........................................................................ 74,150 60,195 ---------- ---------- Total Assets....................................................... $3,171,630 $3,665,517 ========== ========== LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities: Current maturities of long-term debt and short-term borrowings................. $ 232,159 $ 233,992 Accounts payable............................................................... 211,712 262,389 Accrued liabilities............................................................ 431,149 415,273 Accrued salaries, wages and employee benefits.................................. 199,233 194,130 Restructuring reserves......................................................... 89,741 258,784 Accrued taxes.................................................................. 38,695 2,548 ---------- ---------- Total current liabilities.......................................... 1,202,689 1,367,116 Long-term debt, less current maturities.............................................. 1,967,191 2,430,617 Long-term employee related benefits.................................................. 337,000 325,518 Postretirement medical benefits...................................................... 551,380 541,815 Long-term tax liability.............................................................. 202,848 241,542 Other long-term liabilities.......................................................... 24,852 20,696 Minority interest ................................................................... 23,231 26,775 ---------- ---------- Total liabilities.................................................. 4,309,191 4,954,079 ---------- ---------- Stockholders' Deficit: Common stock--$.01 par value; authorized 270,000,000 shares; issued and outstanding: 37,278,238 shares.............................................. 373 373 Additional paid-in capital..................................................... 88,812 88,812 Accumulated deficit............................................................ (1,247,272) (1,395,256) Accumulated other comprehensive income......................................... 20,526 17,509 ---------- ---------- Total stockholders' deficit........................................ (1,137,561) (1,288,562) ---------- ---------- Total Liabilities and Stockholders' Deficit........................ $3,171,630 $3,665,517 ========== ========== The accompanying notes are an integral part of these financial statements.
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LEVI STRAUSS & CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Dollars in Thousands, Except Per Share Data) (Unaudited) Three Months Ended Nine Months Ended ----------------------- ------------------------ August 27, August 29, August 27, August 29, 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Net sales........................................................ $1,127,740 $1,226,413 $3,359,221 $3,732,645 Cost of goods sold............................................... 663,418 747,766 1,957,328 2,299,742 ---------- ---------- ---------- ---------- Gross profit.................................................. 464,322 478,647 1,401,893 1,432,903 Marketing, general and administrative expenses................... 358,524 338,223 1,048,052 1,164,985 Excess capacity/restructuring charges............................ --- --- --- 405,885 ---------- ---------- ---------- ---------- Operating income (loss)....................................... 105,798 140,424 353,841 (137,967) Interest expense................................................. 59,406 45,742 177,177 132,718 Other (income) expense, net...................................... (11,763) 7,139 (51,003) (29,919) ---------- ---------- ---------- ---------- Income (loss) before taxes.................................... 58,155 87,543 227,667 (240,766) Income tax expense (benefit)..................................... 20,354 32,391 79,683 (89,083) ---------- ---------- ---------- ---------- Net income (loss)............................................. $ 37,801 $ 55,152 $ 147,984 $ (151,683) ========== ========== ========== ========== Earnings (loss) per share--basic and diluted...................... $ 1.01 $ 1.48 $ 3.97 $ (4.07) ========== ========== ========== ========== Weighted-average common shares outstanding....................... 37,278,238 37,278,238 37,278,238 37,278,238 ========== ========== ========== ========== The accompanying notes are an integral part of these financial statements.
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LEVI STRAUSS & CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited) Nine Months Ended ---------------------------- August 27, August 29, 2000 1999 ---------- ---------- Cash Flows from Operating Activities: Net income (loss) .......................................................... $ 147,984 $(151,683) Adjustments to reconcile net cash provided by operating activities: Depreciation and amortization ............................................ 69,563 86,335 Unrealized foreign exchange gains ........................................ (6,877) (4,516) Decrease in trade receivables ............................................ 74,746 179,367 Decrease in income taxes receivables ..................................... 70,000 -- Decrease (increase) in inventories ....................................... 10,836 (54,802) Increase in other current assets ......................................... (5,198) (35,266) Decrease (increase) in net deferred tax assets ........................... 42,836 (129,090) Decrease in accounts payable and accrued liabilities ..................... (13,010) (52,476) Increase (decrease) in accrued salaries, wages and employee benefits...... 9,358 (50,866) (Decrease) increase in restructuring reserves ............................ (169,043) 59,533 Increase (decrease) in accrued taxes ..................................... 37,815 (16,873) Increase in long-term employee benefits .................................. 22,529 24,676 (Decrease) increase in other long-term liabilities ....................... (33,921) 1,073 Other, net ............................................................... (58,326) 19,047 --------- --------- Net cash provided by (used for) operating activities ................... 199,292 (125,541) --------- --------- Cash Flows from Investing Activities: Purchases of property, plant and equipment ............................... (15,799) (39,290) Proceeds from sale of property, plant and equipment....................... 106,965 49,098 Gains on net investment hedges ........................................... 52,884 37,390 Other, net ............................................................... 152 835 --------- --------- Net cash provided by investing activities .............................. 144,202 48,033 --------- --------- Cash Flows from Financing Activities: Proceeds from issuance of long-term debt ................................. 340,500 903,748 Repayments of long-term debt ............................................. (799,238) (772,144) Net decrease in short-term borrowings .................................... 1,549 2,629 Other, net ............................................................... -- 3 --------- --------- Net cash (used for) provided by financing activities.................... (457,189) 134,236 --------- --------- Effect of exchange rate changes on cash .................................... (3,675) 1,208 --------- --------- Net (decrease) increase in cash and cash equivalents ....................... (117,370) 57,936 Beginning cash and cash equivalents ........................................ 192,816 84,565 --------- --------- Ending cash and cash equivalents ........................................... $ 75,446 $ 142,501 ========= ========= Supplemental Disclosures of Cash Flow Information: Cash paid during the year for: Interest ................................................................. $ 135,052 $ 110,126 Income taxes ............................................................. 30,641 59,941 Restructuring initiatives ................................................ 169,043 346,352 The accompanying notes are an integral part of these financial statements.
5 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1: PREPARATION OF FINANCIAL STATEMENTS The unaudited consolidated financial statements of Levi Strauss & Co. and subsidiaries ("LS&CO." or "Company") are prepared in conformity with generally accepted accounting principles for interim financial information. In the opinion of management, all adjustments necessary for a fair presentation of the financial position and operating results for the periods presented have been included. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements of LS&CO. for the year ended November 28, 1999 included in the registration statement on Form S-4 under the Securities Act of 1933 filed by LS&CO. with the Securities and Exchange Commission (the "SEC") on May 4, 2000 as amended by Amendment No. 1 filed by LS&CO. with the SEC on May 17, 2000. The consolidated financial statements include the accounts of LS&CO. and its subsidiaries. All intercompany transactions have been eliminated. Management believes that, along with the following information, the disclosures are adequate to make the information presented herein not misleading. Certain prior year amounts have been reclassified to conform to the current presentation. The results of operations for the three and nine months ended August 27, 2000 may not be indicative of the results to be expected for the year ending November 26, 2000. In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). In June 1999, the FASB delayed the effective date of SFAS 133 to fiscal years beginning after June 15, 2000. The Company will adopt SFAS 133 and its subsequent amendments the first day of fiscal year 2001. SFAS 133 establishes accounting and reporting standards for derivative instruments including certain derivative instruments embedded in other contracts, and for hedging activities. In summary, SFAS 133 requires all derivatives to be recognized as assets or liabilities at fair value. Fair value adjustments are made either through earnings or equity, depending upon the exposure being hedged and the effectiveness of the hedge. The Company has not yet quantified all effects of adopting SFAS 133 on its financial statements. The Company tries to take a long-term view and manage its exposures on an economic basis. The Company uses forecasts to develop exposure positions and engages in active management of those exposures with the objective of protecting future cash flows and mitigating risks. Not all of the Company's exposure management activities will qualify for hedge accounting treatment. The Company would be required to mark-to-market those exposure management instruments that do not qualify for hedge accounting treatment and, as a result, it is possible that the Company will experience increased volatility in its earnings. The Company currently has an implementation team in place that is determining the method of implementation and evaluating all effects of adopting SFAS 133 and its subsequent amendments. NOTE 2: COMPREHENSIVE INCOME The following is a summary of the components of total comprehensive income (loss), net of related income taxes:
Three Months Ended Nine Months Ended ------------------------ ------------------------ August 27, August 29, August 27, August 29, 2000 1999 2000 1999 ---------- ---------- ---------- ---------- (Dollars in Thousands) Net income (loss)................................... $37,801 $55,152 $147,984 $(151,683) Other comprehensive income (loss): Foreign currency translation adjustments......... 18,668 (5,189) 3,017 28,112 ------- ------- -------- --------- Total comprehensive income (loss).................. $56,469 $49,963 $151,001 $(123,571) ======= ======= ======== =========
6 LEVI STRAUSS & CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (UNAUDITED) NOTE 3: EXCESS CAPACITY/RESTRUCTURING RESERVES NORTH AMERICA PLANT CLOSURES In view of declining sales, the need to bring manufacturing capacity in line with sales projections and the need to reduce costs, the Company decided to close some of its owned and operated production facilities in North America starting in 1997. The Company announced in 1997 the closure of ten manufacturing facilities and a finishing center in the U.S., which were closed during 1998 and displaced approximately 6,400 employees. The table below displays the activity and liability balances of this reserve. In 1998, the Company announced the closure of two more finishing centers in the U.S. that were closed during 1999 and displaced approximately 990 employees. The table below displays the activity and liability balances of this reserve. The Company announced in February 1999 plans to close 11 manufacturing facilities in North America that resulted in an initial charge of $394.1 million. The 11 manufacturing facilities were closed during 1999 and approximately 5,900 employees were displaced. The table below displays the activity and liability balances of this reserve.
1997 NORTH AMERICA PLANT CLOSURES Balance Balance 11/28/99 Reductions 8/27/00 -------- ---------- -------- (Dollars in Thousands) Severance and employee benefits................. $ 8,790 $ (7,395) $ 1,395 Asset write-offs................................ 10,655 (2,211) 8,444 Other restructuring costs....................... 1,913 (712) 1,201 -------- -------- -------- Total........................................ $ 21,358 $(10,318) $ 11,040 ======== ======== ======== 1998 NORTH AMERICA PLANT CLOSURES Balance Balance 11/28/99 Reductions 8/27/00 -------- ---------- -------- (Dollars in Thousands) Severance and employee benefits................. $ 2,683 $ (2,683) $ -- Asset write-offs................................ 9,713 (3,635) 6,078 Other restructuring costs....................... 1,193 (1,193) -- -------- -------- -------- Total........................................ $ 13,589 $ (7,511) $ 6,078 ======== ======== ======== 1999 NORTH AMERICA PLANT CLOSURES Balance Balance 11/28/99 Reductions 8/27/00 -------- ---------- ------- (Dollars in Thousands) Severance and employee benefits................. $109,755 $(80,123) $ 29,632 Asset write-offs................................ 37,563 (10,644) 26,919 Other restructuring costs....................... 28,526 (1,998) 26,528 -------- -------- -------- Total........................................ $175,844 $(92,765) $ 83,079 ======== ======== ========
7 LEVI STRAUSS & CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (UNAUDITED) CORPORATE REORGANIZATION INITIATIVES Starting in 1998, the Company instituted various overhead reorganization initiatives to reduce overhead costs and consolidate operations. The reorganization initiative instituted in 1998 displaced approximately 770 employees. The table below displays the activity and liability balances of this reserve. In conjunction with the above plan to institute overhead reorganization initiatives, the Company recorded charges of $11.8 million and $37.1 million during the second and fourth quarters of 1999, respectively, that were estimated to displace approximately 930 employees. As of August 27, 2000, approximately 665 employees were displaced. The table below displays the activity and liability balances of this reserve.
1998 CORPORATE REORGANIZATION INITIATIVES Balance Balance 11/28/99 Reductions 8/27/00 -------- ---------- ------- (Dollars in Thousands) Severance and employee benefits................. $ 3,204 $(2,308) $ 896 Asset write-offs................................ 3,044 (1,997) 1,047 Other restructuring costs....................... 6,412 (2,742) 3,670 -------- ------- -------- Total........................................ $ 12,660 $(7,047) $ 5,613 ======== ======== ======== 1999 CORPORATE REORGANIZATION INITIATIVES Balance Balance 11/28/99 Reductions 8/27/00 -------- ---------- ------- (Dollars in Thousands) Severance and employee benefits................. $ 43,550 $(31,419) $ 12,131 Other restructuring costs....................... 1,680 (412) 1,268 -------- -------- -------- Total........................................ $ 45,230 $(31,831) $ 13,399 ======== ======== ========
EUROPE REORGANIZATION AND PLANT CLOSURES In 1998, the Company announced plans to close two manufacturing and two finishing facilities, and reorganize operations throughout Europe, displacing approximately 1,650 employees. These plans were prompted by decreased demand for denim jeans products and a resulting over-capacity in the Company's European owned and operated plants. The production facilities were closed by the end of 1999 and as of August 27, 2000, approximately 1,635 employees were displaced. The table below displays the activity and liability balances of this reserve. In conjunction with the above plans in Europe, the Company announced in September 1999 plans to close a production facility, and reduce capacity at a finishing facility in the United Kingdom with an estimated displacement of 960 employees. The production facility closed in December 1999 and as of August 27, 2000, approximately 870 employees were displaced. The table below displays the activity and liability balances of this reserve. 8 LEVI STRAUSS & CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (UNAUDITED)
1998 EUROPE REORGANIZATION AND PLANT CLOSURES Balance Balance 11/28/99 Reductions 8/27/00 -------- ---------- ------- (Dollars in Thousands) Severance and employee benefits................. $ 10,653 $ (7,499) $ 3,154 Asset write-offs................................ 3,396 (2,504) 892 -------- -------- -------- Total........................................ $ 14,049 $(10,003) $ 4,046 ======== ======== ======== 1999 EUROPE REORGANIZATION AND PLANT CLOSURES Balance Balance 11/28/99 Reductions 8/27/00 -------- ---------- ------- (Dollars in Thousands) Severance and employee benefits................. $ 38,413 $(29,187) $ 9,226 Asset write-offs................................ 4,474 (4,100) 374 Other restructuring costs....................... 2,012 (1,372) 640 -------- -------- -------- Total........................................ $ 44,899 $(34,659) $ 10,240 ======== ======== ========
Reductions consist of payments for severance and employee benefits and the other restructuring costs, as well as actual losses on disposals of assets. The balance of severance and employee benefits and other restructuring costs are included under restructuring reserves on the balance sheet. The balance of asset write-offs is categorized as a non-cash reduction to property, plant and equipment on the balance sheet. NOTE 4: FINANCING NOTES EXCHANGE OFFER In May 2000, the Company filed a registration statement on Form S-4 under the Securities Act of 1933, as amended (the "Securities Act") with the SEC relating to an exchange offer of its 6.80% notes due 2003 and 7.00% notes due 2006. The exchange offer gave holders of these notes the opportunity to exchange these old notes, which were issued on November 6, 1996 under Rule 144A of the Securities Act, for new notes that are registered under the Securities Act of 1933. The new notes are identical in all material respects to the old notes except that the new notes are registered. The exchange offer ended on June 20, 2000. As a result of the exchange offer, all but $20 thousand of the $350.0 million aggregate principal amount of 6.80% old notes due 2003 were exchanged for the 6.80% exchange notes due 2003; and all $450.0 million aggregate principal amount of the 7.00% old notes due 2006 were exchanged for the 7.00% exchange notes due 2006. The Company was not obligated by any agreement including its credit facility agreements to engage in the exchange offer. The Company initiated the exchange offer to give holders of these notes the opportunity to exchange the old notes for registered notes. 9 LEVI STRAUSS & CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (UNAUDITED) 2000 CREDIT FACILITY AGREEMENTS On January 31, 2000 the Company amended three of its credit facility agreements and entered into one new agreement to reflect its current financial position and extend maturity dates. The new financing package consists of four separate agreements: (1) a new $450.0 million bridge loan to fund working capital and support letters of credit, foreign exchange contracts and derivatives, (2) an amended $300.0 million revolving credit facility, extending the existing bridge facility, (3) an amended $545.0 million 364-day credit facility, and (4) an amended $584.0 million 5-year credit facility. Simultaneously with entering into these agreements, the Company terminated a domestic receivables-backed securitization financing. All four facilities are secured by domestic receivables, domestic inventories, certain domestic equipment, trademarks, other intellectual property, 100% of the stock in domestic subsidiaries, 65% of the stock of certain foreign subsidiaries and other assets. The maturity date for all credit facilities is January 31, 2002. Borrowings under the bank credit facilities bear interest at LIBOR or the agent bank's base rate plus an incremental borrowing spread. For the bridge facility, the spread is 3.00% over LIBOR or 1.75% over the base rate. For each of the three amended facilities, the spread is 3.25% over LIBOR or 2.00% over the base rate. In addition, if by February 1, 2001 the Company has not completed one or more private or public capital-raising transactions yielding net proceeds of at least $300.0 million, which are required to be used to reduce commitments under the bank credit facilities, the Company will be required to pay its lenders an additional borrowing spread of 1.00% on outstanding borrowings under the bank credit facilities, plus a one-time additional fee of 2.00% of total commitments as of January 31, 2001. The Company's borrowing spread will be increased by 0.25% quarterly until those capital-raising transactions are completed. The credit agreements contain customary covenants restricting the Company's activities as well as those of its subsidiaries, including limitations on the Company's and its subsidiaries' ability to sell assets; engage in mergers; enter into operating leases or capital leases; enter into transactions involving related parties, derivatives or letters of credit; enter into intercompany transactions; incur indebtedness or grant liens or negative pledges on the Company's assets; make loans or other investments; pay dividends or repurchase stock or other securities; guaranty third party obligations; make capital expenditures; and make changes in the Company's corporate structure. The credit agreements also contain financial covenants that the Company must satisfy on an ongoing basis, including a maximum leverage ratio, a minimum coverage ratio and a minimum earnings base calculation. The Company was in compliance with financial covenants required by the credit facility agreements as of August 27, 2000. CUSTOMER SERVICE CENTER EQUIPMENT FINANCING In December 1999 the Company entered into a secured financing transaction consisting of a five-year credit facility secured by owned equipment at Customer Service Centers located in Nevada, Mississippi and Kentucky. The amount financed in December 1999 was $89.5 million, comprised of a $59.5 million tranche ("Tranche 1") and a $30.0 million tranche ("Tranche 2"). Borrowings under Tranche 1 have a fixed interest rate equal to the yield of a four-year Treasury note plus an incremental borrowing spread. Borrowings under Tranche 2 have a floating quarterly interest rate equal to the 90 day LIBOR plus an incremental borrowing spread based on the Company's leverage ratio at that time. Proceeds from the borrowings were used to reduce the commitment amounts of the then-existing credit facilities. 10 LEVI STRAUSS & CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (UNAUDITED) RECEIVABLES SECURITIZATION AGREEMENTS In February 2000, several of the Company's European subsidiaries entered into receivable securitization financing agreements with several lenders. The subsidiaries are currently working with the lenders to establish certain reporting and other system functions to support the reporting requirements of the agreement. Once these matters are resolved, those subsidiaries may borrow up to $125.0 million under these agreements. Any borrowings under the facilities must be used to reduce the commitment levels under the Company's bank credit facilities. Borrowings would be collateralized by a security interest in the receivables of these subsidiaries. The Company and its Japanese subsidiary are currently negotiating a similar receivables-backed securitization financing agreement that the Company expects to complete by the end of December 2000. INTEREST RATE SWAPS AND OPTIONS The Company is exposed to interest rate risk. It is the Company's policy and practice to use derivative instruments, primarily interest rate swaps and options, to manage and reduce interest rate exposures. At August 27, 2000, the Company had interest rate swap transactions outstanding with a total notional principal amount of $425.0 million, to convert floating rate liabilities to fixed rates, and $375.0 million to convert fixed rate liabilities to floating rates. These swap transactions effectively change the Company's interest rates on part of its debt to fixed rates that range from 6.25% to 7.00% and floating rates that range from 6.61% to 6.96%, depending on their maturities, the latest of which is in 2006. The Company has also entered into interest rate option structures (caps and floors) to reduce or neutralize the exposure to changes in variable interest rates. The structures represent an outstanding amount of $425.0 million and cover a series of variable cash flows through November 2001. Subsequent to the third quarter of 2000, all interest rate swap transactions outstanding to convert floating rate liabilities to fixed rates matured on August 29, 2000. In addition, subsequent to the third quarter of 2000, the Company terminated $300.0 million of its swap transactions that convert fixed rate liabilities to floating rates. The Company is exposed to credit loss in the event of nonperformance by the counterparties to the interest swap transactions. However, the Company believes these counterparties are creditworthy financial institutions and does not anticipate nonperformance. NOTE 5: COMMITMENTS AND CONTINGENCIES FOREIGN EXCHANGE CONTRACTS At August 27, 2000, the Company had U.S. dollar forward currency contracts to sell the aggregate equivalent of $677.2 million and other contracts to buy the aggregate equivalent of $289.0 million of various foreign currencies. The Company also had Euro forward currency contracts to buy the aggregate equivalent of $14.2 million and other contracts to sell the aggregate equivalent of $10.0 million of various foreign currencies. Additionally, the Company had U.S. dollar option contracts to sell the aggregate equivalent of $2.3 billion and to buy the aggregate equivalent of $1.5 billion of various foreign currencies. The Company also had Euro option contracts to sell the foreign currency aggregate equivalent of $72.2 million and buy the aggregate equivalent of $93.0 million. These contracts are at various exchange rates and expire at various dates through August 2001. Most option transactions, included in the amounts above, are for the exchange of Euro and U.S. dollar. At August 27, 2000, the Company had bought U.S. dollar options to buy the equivalent of $1.3 billion against the Euro. To finance the option premiums related to these options, the Company sold options having the obligation to buy Euro for an equivalent of $530.0 million U.S. dollars. 11 LEVI STRAUSS & CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (UNAUDITED) The Company's market risk is generally related to fluctuations in the currency exchange rates. The Company is exposed to credit loss in the event of nonperformance by the counterparties to the foreign exchange contracts. However, the Company believes these counterparties are creditworthy financial institutions and does not anticipate nonperformance. NOTE 6: FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair value of certain financial instruments has been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The carrying amount and estimated fair value (in each case including accrued interest) of the Company's financial instrument assets and (liabilities) at August 27, 2000 and November 28, 1999 are as follows:
August 27, 2000 November 28, 1999 ------------------------ ----------------------- Carrying Estimated Carrying Estimated Value Fair Value Value Fair Value -------- ---------- -------- ---------- (Dollars in Thousands) DEBT INSTRUMENTS: Credit facilities.................................. $(1,102,941) $(1,102,941) $(1,424,449) $(1,424,449) Yen-denominated eurobond placement................. (186,056) (128,440) (189,274) (148,113) Notes offering..................................... (813,190) (629,500) (798,640) (626,307) Receivables-backed securitization.................. -- -- (215,836) (215,836) Industrial development revenue refunding bond...... (10,035) (10,035) (10,030) (10,030) Customer service center equipment financing........ (88,414) (88,414) -- -- CURRENCY AND INTEREST RATE HEDGES: Foreign exchange forward contracts................. $ 11,700 $ 10,981 $ 16,972 $ 16,932 Foreign exchange option contracts.................. 5,738 6,369 7,806 2,288 Interest rate swap contracts....................... 291 (3,108) (2,224) (4,839) Interest rate option contracts..................... (582) (245) -- --
Quoted market prices or dealer quotes are used to determine the estimated fair value of foreign exchange contracts, option contracts and interest rate swap contracts. Dealer quotes and other valuation methods, such as the discounted value of future cash flows, replacement cost, and termination cost have been used to determine the estimated fair value for long-term debt and the remaining financial instruments. The carrying values of cash and cash equivalents, trade receivables, current assets, current maturities of long-term debt, short-term borrowings and taxes approximate fair value. The fair value estimates presented herein are based on information available to the Company as of August 27, 2000 and November 28, 1999. Although the Company is not aware of any factors that would substantially affect the estimated fair value amounts, such amounts have not been updated since those dates and, therefore, the current estimates of fair value at dates subsequent to August 27, 2000 and November 28, 1999 may differ substantially from these amounts. Additionally, the aggregation of the fair value calculations presented herein do not represent and should not be construed to represent the underlying value of the Company. 12 LEVI STRAUSS & CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (UNAUDITED) NOTE 7: BUSINESS SEGMENT INFORMATION
Asia All Americas Europe Pacific Other Consolidated -------- ------ ------- ----- ------------ (Dollars in Thousands) THREE MONTHS ENDED AUGUST 27, 2000: Net sales....................................... $802,637 $235,869 $89,234 $ -- $1,127,740 Earnings contribution........................... 132,524 33,916 10,623 -- 177,063 Interest expense................................ -- -- -- 59,406 59,406 Corporate and other (income) expense, net....... -- -- -- 59,502 59,502 Income before income taxes...................... -- -- -- -- 58,155 THREE MONTHS ENDED AUGUST 29, 1999: Net sales....................................... $858,785 $289,798 $77,830 $ -- $1,226,413 Earnings contribution........................... 101,334 46,692 2,797 -- 150,823 Interest expense................................ -- -- -- 45,742 45,742 Corporate and other (income) expense, net....... -- -- -- 17,538 17,538 Income before income taxes...................... -- -- -- -- 87,543 Asia All Americas Europe Pacific Other Consolidated -------- ------ ------- ----- ------------ (Dollars in Thousands) NINE MONTHS ENDED AUGUST 27, 2000: Net sales....................................... $2,255,279 $817,529 $286,413 $ -- $3,359,221 Earnings contribution........................... 304,623 175,689 37,176 -- 517,488 Interest expense................................ -- -- -- 177,177 177,177 Corporate and other (income) expense, net....... -- -- -- 53,142 112,644 Income before income taxes...................... -- -- -- -- 227,667 NINE MONTHS ENDED AUGUST 29, 1999: Net sales....................................... $2,480,393 $1,004,053 $248,199 $ -- $3,732,645 Earnings contribution........................... 237,746 206,055 24,170 -- 467,971 Excess capacity/restructuring charge............ -- -- -- 405,885 405,885 Interest expense................................ -- -- -- 132,718 132,718 Corporate and other (income) expense, net....... -- -- -- 152,596 170,134 Loss before income taxes........................ -- -- -- -- (240,766)
13 LEVI STRAUSS & CO. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, selected items in our consolidated statements of operations, expressed as a percentage of net sales (amounts may not total due to rounding).
Three Months Ended Nine Months Ended -------------------------- -------------------------- August 27, August 29, August 27, August 29, 2000 1999 2000 1999 ---------- ---------- ---------- ---------- MARGIN DATA: Net sales............................................. 100.0% 100.0% 100.0% 100.0% Cost of goods sold.................................... 58.8 61.0 58.3 61.6 ---------- ---------- ---------- ---------- Gross profit.......................................... 41.2 39.0 41.7 38.4 Marketing, general and administrative expenses........ 31.8 27.6 31.2 31.2 Excess capacity/restructuring charges................. -- -- -- 10.9 ---------- ---------- ---------- ---------- Operating income (loss)............................... 9.4 11.4 10.5 (3.7) Interest expense...................................... 5.3 3.7 5.3 3.6 Other (income) expense, net........................... (1.0) 0.6 (1.5) (0.8) ---------- ---------- ---------- ---------- Income (loss) before taxes............................ 5.2 7.1 6.8 (6.5) Income tax expense (benefit).......................... 1.8 2.6 2.4 (2.4) ---------- ---------- ---------- ---------- Net income (loss)..................................... 3.4% 4.5% 4.4% (4.1)% ========== ========== ========== ========== NET SALES SEGMENT DATA: GEOGRAPHIC Americas..................................... 71.2% 70.0% 67.1% 66.5% Europe....................................... 20.9 23.6 24.3 26.9 Asia Pacific................................. 7.9 6.3 8.5 6.6
NET SALES. Net sales for the three months ended August 27, 2000 decreased 8.0% to $1.1 billion, as compared to $1.2 billion for the same period in 1999. Net sales for the nine months ended August 27, 2000 decreased 10.0% to $3.4 billion, as compared to $3.7 billion for the same period in 1999. This reflects a combination of factors including volume declines, lower average selling prices caused by a higher percentage of closeout sales, related to our efforts to clear inventories of slow moving and obsolete fashion products, and the impact of the depreciating Euro. If currency exchange rates where unchanged from the prior year periods, net sales for the three months ended August 27, 2000 would have declined approximately 6% compared to the same period in 1999 and net sales for the nine months ended August 27, 2000 would have declined approximately 8% from the same period in 1999. Although net sales levels decreased from the prior year periods, the rate of decrease, particularly for first quality products, shows signs of slowing as indicated by the lower decrease for the three month period ended August 27, 2000, compared to the nine month period ended August 27, 2000. We believe that positive consumer response to our new product lines, stronger demand for our basic products such as 501(R) jeans in the U.S. and upgraded core products in Asia, improved product-focused marketing support, and incremental progress in our shipping execution, contributed to the slowing decline in sales. In addition, we believe that denim fashion trends around the world, which appear to reflect consumer interest in more traditional basic jeans styles, also contributed to the slowing decline of net sales. In addition to volume decreases for the three and nine months ended August 27, 2000 compared to the same periods in 1999, average unit selling prices decreased due to the translation effects of the stronger U.S. dollar versus certain currencies, particularly the Euro, and a higher proportion of closeout sales. The majority of the closeout sales were in line with our efforts to clear inventories of slow-moving or obsolete fashion products. 14 In the Americas, net sales for the three months ended August 27, 2000 of $802.6 million decreased 6.5% from the same period in 1999. This decrease was partially attributable to a weak apparel retail market, a difficult back-to-school season for many of our customers and an inadequate supply of 501(R) jeans resulting from our decision to tightly manage inventories. In addition to demand for our 501(R) jeans, we also experienced increased consumer interest in our new products and core basics such as Levi's(R) Engineered Jeans, Silvertab(R) apparel, 569(R) jeans and Dockers(R) Khakis. Net sales for the nine months ended August 27, 2000 of $2.3 billion decreased 9.1% from the same period in 1999 due primarily to a drop in volume and a higher proportion of closeouts. In Europe, net sales for the three months ended August 27, 2000 decreased 18.6% to $235.9 million, as compared to $289.8 million for the same period in 1999. Net sales for the nine months ended August 27, 2000 decreased 18.6% to $817.5 million, as compared to $1.0 billion for the same period in 1999. The net sales decreases were primarily due to a decline in volume caused by a continued softening of the European apparel market and our supply chain execution issues, lower average unit selling price resulting from a higher percentage of closeout sales and the reporting impact of the depreciating Euro. If exchange rates were unchanged from the prior year periods, the reported net sales decreases would have been approximately 9% for the three months ended August 27, 2000 and 10% for the nine months ended August 27, 2000 compared to the same periods in 1999. In our Asia Pacific region, net sales for the three months ended August 27, 2000 increased 14.7% to $89.2 million, as compared to $77.8 million for the same period in 1999. Net sales for the nine months ended August 27, 2000 increased 15.4% to $286.4 million, as compared to $248.2 million for the same period in 1999. The increase was primarily driven by volume growth in most markets and the effects of translation to U.S. dollar reported results. In Japan, which accounts for just under two-thirds of our business in Asia, we experienced positive retail and consumer response to our new products and upgraded core basics. If exchange rates were unchanged from the prior year periods, the reported net sales increases would have been approximately 11% for the three months ended August 27, 2000 and 10% for the nine months ended August 27, 2000 compared to the same periods in 1999. GROSS PROFIT. Gross profit for the three months ended August 27, 2000 totaled $464.3 million compared with $478.6 million for the same period in 1999. Gross profit as a percentage of net sales, or gross margin, for the three months ended August 27, 2000 increased to 41.2%, as compared to 39.0% for the same period in 1999. Gross profit for the nine months ended August 27, 2000 and the same period in 1999 totaled $1.4 billion. Gross margin increased for the nine months ended August 27, 2000 to 41.7%, as compared to 38.4% for the same period in 1999. The improvement in both periods reflects stronger demand for higher margin basic products, as well as improved sourcing costs and the benefit of cost reductions resulting from plant closures taken in prior years. MARKETING, GENERAL AND ADMINISTRATIVE EXPENSES. Marketing, general and administrative expenses for the three months ended August 27, 2000 increased 6.0% to $358.5 million, as compared to $338.2 million for the same period in 1999. Marketing, general and administrative expenses as a percentage of sales for the three months ended August 27, 2000 increased 4.2 percentage points to 31.8% as compared to 27.6% for the same period in 1999. These increases are due primarily to increased costs for employee incentive plans related to our improving financial performance against our internal targets. The effects of the higher incentive costs were partially offset by our continuing cost containment efforts, lower advertising expenses, lower sales volume-related expenses, and lower information technology expenses associated with minimal year 2000 compliance costs in 2000. For the three months ended August 27, 2000, marketing, general and administrative expenses included a reversal of employee benefit costs of approximately $24.0 million due to changes in the demographic profile of our workforce. For the three months ended August 27, 2000, expenses also included an incremental catch-up accrual of approximately $20.0 million for incentive programs because of improving performance against our internal incentive program targets. The 1999 figures included a reversal of employee benefit costs of approximately $21.0 million and a reversal of incentive compensation accruals of approximately $24.0 million. Excluding these adjustments for both periods, marketing, general and administrative expenses for the three months ended August 27, 2000 would have decreased by approximately 6% compared to the same period in 1999. 15 Marketing, general and administrative expenses for the nine months ended August 27, 2000 decreased 10.0% to $1.0 billion, as compared to $1.2 billion for the same period in 1999. Marketing, general and administrative expenses as a percentage of sales for the nine months ended August 27, 2000 and August 29, 1999 were each 31.2%. The dollar decrease in marketing, general and administrative expenses was primarily due to our continuing cost containment efforts, lower advertising expenses, lower sales volume-related expenses, lower information technology expenses associated with minimal year 2000 compliance costs in 2000 and lower salaries and related expenses resulting from prior year restructuring initiatives. These decreases were partially offset by increased costs for employee incentive plans. We anticipate that costs for employee incentive plans will be higher in the fourth quarter of 2000 compared to the third quarter of 2000 as a result of our improving performance against internal targets. Current year marketing, general and administrative expenses included a reversal of employee benefit costs of approximately $24.0 million due to changes in the demographic profile of our workforce. The 1999 figures included a reversal of employee benefit costs of approximately $21.0 million and a reversal of incentive compensation accruals of approximately $24.0 million. Excluding these adjustments for both periods, marketing, general and administrative expenses for the nine months ended August 27, 2000 would have decreased approximately 11% compared to the same period in 1999. Advertising expense for the three months ended August 27, 2000 decreased 14.7% to $97.3 million, as compared to $114.1 million for the same period in 1999. Advertising expense as a percentage of sales for the three months ended August 27, 2000 decreased 0.7 percentage points to 8.6%, as compared to 9.3% for the same period in 1999. Advertising expense for the nine months ended August 27, 2000 decreased 17.6% to $286.3 million, as compared to $347.6 million for the same period in 1999. Advertising expense as a percentage of sales for the nine months ended August 27, 2000 decreased 0.8 percentage points to 8.5%, as compared to 9.3% for the same period in 1999. The decreases in advertising expense as a percentage of sales for the three and nine month periods of 2000 compared to the same periods in 1999 were consistent with our plans to better focus our marketing support initiatives and to align them more effectively with new product introductions and retail presentation. We anticipate advertising expense to increase as a percentage of sales in the fourth quarter of 2000 compared to the third quarter of 2000 due to new advertising campaigns. We expect marketing, general and administrative expenses as a percentage of sales to be higher in the fourth quarter of 2000 compared to the third quarter of 2000 due to anticipated increased costs for employee incentive plans and advertising expense. EXCESS CAPACITY/RESTRUCTURING CHARGES. For the nine months ended August 27, 2000, we recorded no charges, as compared to charges of $405.9 million for the same period in 1999 that were associated with our plant closures in North America and corporate overhead restructuring initiatives. OPERATING INCOME (LOSS). Operating income for the three months ended August 27, 2000 of $105.8 million decreased 24.7% from the same period in 1999. Excluding certain adjustments in both periods related to benefits and incentive compensation programs, operating income for the three months ended August 27, 2000 would have increased 7% compared to the same period in 1999. Operating income for the nine months ended August 27, 2000 of $353.8 million increased from the same period in 1999 due to an improved gross margin, lower marketing, general and administrative costs and the impact of restructuring initiatives on prior year reported results. Excluding the adjustment items and restructuring initiatives, operating income for the nine months ended August 27, 2000 would have increased approximately 48% compared to the same period in 1999. INTEREST EXPENSE. Interest expense for the three months ended August 27, 2000 increased 29.9% to $59.4 million, as compared to $45.7 million for the same period in 1999. Interest expense for the nine months ended August 27, 2000 increased 33.5% to $177.2 million, as compared to $132.7 million for the same period in 1999. These increases were due to higher interest rates associated with the new credit facilities and equipment financing agreements and higher market interest rates. 16 OTHER INCOME/EXPENSE, NET. Other income/expense, net for the three months ended August 27, 2000 reflected income of $11.8 million, as compared to an expense of $7.1 million for the same period in 1999. Other income, net for the nine months ended August 27, 2000 increased 70.5% to $51.0 million, as compared to $29.9 million for the same period in 1999. The increase in other income for the three months ended August 27, 2000, was primarily due to an increase in licensee income, lower transaction losses on foreign currency contracts and higher interest income. Other expense for the same period in 1999 was primarily due to an increase in net losses on foreign currency contracts. The increase for the nine-month period was primarily attributable to a $26.1 million gain for the sale of two office buildings in San Francisco located next to our corporate headquarters and increases in licensee and interest income, partially offset by net losses in 2000 compared to net gains in 1999 on foreign currency contracts. Net currency gains and losses are primarily due to the fluctuations of various currencies in relation to our foreign currency hedging positions. INCOME TAX EXPENSE (BENEFIT). Income tax expense for the three months ended August 27, 2000 decreased 37.2% to $20.4 million as compared to $32.4 million for the same period in 1999. Income tax expense for the nine months ended August 27, 2000 was $79.7 million as compared to an income tax benefit of $89.1 million for the same period in 1999. Our effective tax rate for the third quarter and nine-month period in 2000 was 35% compared to 37% for the same periods in 1999. The lower tax rate in 2000 was due to a reassessment of potential tax settlements. The income tax benefit for the same period in 1999 was generated primarily from the pre-tax loss that resulted from the restructuring charges of $405.9 million during the period. NET INCOME (LOSS). Net income for the three months ended August 27, 2000 decreased to $37.8 million from $55.2 million for the same period in 1999. Net income for the three months ended August 27, 2000 included higher accruals for incentive costs and interest expense, as compared to the same period in 1999. Net income for the three months ended August 27, 2000 also included a gain from the sale of office buildings and the reversal of employee benefit costs. Net income for the same period in 1999 included the reversal of employee benefit costs and the reversal of incentive compensation accruals. Excluding the non-recurring items in both the 2000 and 1999 three month periods, net income for the three months ended August 27, 2000 would have increased to $35.4 million, as compared to $26.8 million for the same period in 1999. Net income (loss) for the nine months ended August 27, 2000 increased to $148.0 million from a loss of $151.7 million for the same period in 1999. Net income for the nine months ended August 27, 2000 included higher interest expense, compared to the same period in 1999, and a tax expense, compared to a tax benefit for the same period in 1999. In addition, the nine month period of 2000 included a gain from the sale of office buildings and the reversal of employee benefit costs. The net loss for the 1999 period was due to the restructuring charge of $405.9 million, partially offset by the reversal of employee benefit costs and the reversal of incentive compensation accruals. Excluding the non-recurring items in both the 2000 and 1999 nine month periods and the charge for restructuring, net income for the nine months ended August 27, 2000 would have increased to $115.6 million, as compared to $75.7 million for the same period in 1999. RESTRUCTURING AND EXCESS CAPACITY REDUCTION Since 1997, we have closed 29 of our owned and operated production and finishing facilities in North America and Europe and instituted restructuring initiatives in order to reduce costs, eliminate excess capacity and align our sourcing strategy with changes in the industry and in consumer demand. (SEE NOTE 3 TO THE CONSOLIDATED FINANCIAL STATEMENTS.) 17 Following is a table that summarizes plant closures and restructuring charges for the years 1997 - 1999, the resulting cash and non-cash reductions and their balances as of August 27, 2000.
Balance as of Initial Cash Non-Cash August 27, Provision Reductions Reductions 2000 --------- ---------- ---------- -------------- (Dollars in Thousands) 1997 North America Plant Closures.................................. $ 386,792 $336,520 $39,232 $ 11,040 1998 North America Plant Closures.................................. 82,073 56,604 19,391 6,078 1999 North America Plant Closures.................................. 394,105 283,117 27,909 83,079 1998 Corporate Restructuring Initiatives........................... 61,062 52,469 2,980 5,613 1999 Corporate Restructuring Initiatives........................... 48,889 35,490 -- 13,399 1998 Europe Restructuring and Plant Closures....................... 107,523 94,343 9,134 4,046 1999 Europe Restructuring and Plant Closures....................... 54,689 40,323 4,126 10,240 ---------- -------- -------- -------- Total as of August 27, 2000..................................... $1,135,133 $898,866 $102,772 $133,495 ========== ======== ======== ========
The balance of these reserves as of August 27, 2000 was $133.5 million, of which $43.8 million was a non-cash item and categorized as a reduction to property, plant and equipment on the balance sheet, while the remaining balance of $89.7 million was included in restructuring reserves on the balance sheet and will be paid in cash. We expect to pay the remaining balance of $89.7 million in 2001. LIQUIDITY AND CAPITAL RESOURCES Our principal capital requirements have been to fund working capital and capital expenditures. We have historically relied on internally generated funds and bank borrowings to finance our operations. As of August 27, 2000, total cash and cash equivalents were $75.4 million, a $67.1 million decrease from the $142.5 million cash balance reported as of August 29, 1999 and a decrease of $117.4 million from the $192.8 million reported as of November 28, 1999. Our capital spending in the nine months ended August 27, 2000 was $15.8 million, as compared to $39.3 million for the same period in 1999. As a result of our sourcing base shift toward outsourcing, plant closures in 1998 and 1999 and the consolidation of office space, we expect to have reduced capital spending than in the past. We estimate our capital spending for fiscal year 2000 to be approximately $35.0 million, primarily for maintenance and purchase of equipment at our remaining manufacturing facilities and distribution centers and for computer systems. CASH PROVIDED BY/USED FOR OPERATIONS. Cash provided by operating activities for the nine months ended August 27, 2000 was $199.3 million, as compared to a use of cash of $125.5 million for the same period in 1999. Inventory decreased during the nine months ended August 27, 2000 due to our inventory initiatives, which included tighter inventory control, lead-time reduction and sales of second quality and closeout inventory. Income taxes receivable decreased during the nine months ended August 27, 2000 primarily due to income tax refunds of $66.3 million received in March 2000 associated with a carryback of a net operating loss reported on our 1999 income tax return. Net deferred tax assets and restructuring reserves decreased during the nine months ended August 27, 2000 primarily due to spending related to the restructuring initiatives. Accrued salaries, wages, and employee benefits, and long-term employee benefits increased during the nine months ended August 27, 2000 primarily due to increased accruals for employee incentive plans. Accrued taxes increased and other long-term liabilities decreased during the nine months ended August 27, 2000 due to a tentative settlement with the Internal Revenue Service in connection with an examination of our income tax returns for the years 1986 - 1989. The change in other, net during the nine months ended August 27, 2000 was primarily due to the gain attributable to a sale in February 2000 of two office buildings in San Francisco located adjacent to our corporate headquarters. 18 CASH PROVIDED BY INVESTING ACTIVITIES. Cash provided by investing activities during the nine months ended August 27, 2000 increased to $144.2 million, as compared to $48.0 million during the same period in 1999. The increase in 2000 resulted primarily from proceeds received on increased sales of property, plant and equipment, higher realized gains on net investment hedges and lower purchases of property, plant and equipment. The higher proceeds received on the sale of property, plant and equipment was primarily attributable to a sale in February 2000 of two office buildings in San Francisco located adjacent to our corporate headquarters. CASH PROVIDED BY/USED FOR FINANCING ACTIVITIES. Cash used for financing activities for the nine months ended August 27, 2000 was $457.2 million, as compared to a source of cash of $134.2 million for the same period in 1999. The use of cash in 2000 was due to repayments on existing debt. YEAR 2000 We experienced no material disruption in customer or supplier relationships, revenue patterns or customer buying patterns during the nine months ended August 27, 2000 as a result of the year 2000 problem. There have been no losses of revenue and we do not believe that any future contingencies related to year 2000 would have a material impact on our business. NEW ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). In June 1999, the FASB delayed the effective date of SFAS 133 to fiscal years beginning after June 15, 2000. We will adopt SFAS 133 and its subsequent amendments the first day of fiscal year 2001. SFAS 133 establishes accounting and reporting standards for derivative instruments including certain derivative instruments embedded in other contracts, and for hedging activities. In summary, SFAS 133 requires all derivatives to be recognized as assets or liabilities at fair value. Fair value adjustments are made either through earnings or equity, depending upon the exposure being hedged and the effectiveness of the hedge. We have not yet quantified all effects of adopting SFAS 133 on our financial statements. We try to take a long-term view and manage our exposures on an economic basis. We use forecasts to develop exposure positions and engage in active management of those exposures with the objective of protecting future cash flows and mitigating risks. Not all our exposure management activities will qualify for hedge accounting treatment. We would be required to mark-to-market those exposure management instruments that do not qualify for hedge accounting treatment and, as a result, it is possible that we will experience increased volatility in our earnings. We currently have an implementation team in place that is determining the method of implementation and evaluating all effects of adopting SFAS 133 and its subsequent amendments. STATEMENT REGARDING FORWARD-LOOKING DISCLOSURE This Form 10-Q 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, employee compensation and advertising expense, debt repayment and liquidity, capital expenditures, customer orders, retail relationships and developments including sell-through, presentation of product at retail and marketing collaborations, restructuring reserves, 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 document, the words "believe," "anticipate," "intend," "estimate, " "expect," "appear," "project" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these words. 19 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 (the "SEC") on May 4, 2000 as amended by Amendment No. 1 filed on May 17, 2000, and our other filings with the SEC. Our actual results might differ materially from historical performance or current expectations. We do not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK See Note 6 to the Consolidated Financial Statements and the Liquidity and Capital Resources section under Management's Discussion and Analysis of Financial Condition and Results of Operations. 20 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K: (a) EXHIBITS: 10.1 First Amendment to Bridge Credit Agreement and Limited Waiver, dated July 31, 2000, between the Registrant and Bank of America, N.A. 10.2 First Amendment to Amended and Restated 1997 364 Day Credit Agreement and Limited Waiver, dated July 31, 2000, between the Registrant and Bank of America, N.A. 10.3 First Amendment to Amended and Restated 1999 180 Day Credit Agreement and Limited Waiver, dated July 31, 2000, between the Registrant and Bank of America, N.A. 10.4 First Amendment to 1997 Second Amended and Restated Credit Agreement and Limited Waiver, dated July 31, 2000, between the Registrant and Bank of America, N.A. 27 Financial data schedule (a) REPORTS ON FORM 8-K: Current Report on Form 8-K on September 19, 2000 filed, pursuant to Item 5 of the report, containing a copy of the Company's press release titled "Levi Strauss & Co. Third-Quarter and Nine-Month Financial Results Reflect Ongoing Progress in Business Turnaround." Current Report on Form 8-K on September 29, 2000 filed, pursuant to Item 5 of the report, containing a copy of the Company's press release titled "Levi Strauss & Co. to Pursue $350 Million Private Placement of Senior Notes." 21 SIGNATURES ---------- Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: September 29, 2000 Levi Strauss & Co. ------------------ (Registrant) By: /s/ WILLIAM B. CHIASSON ----------------------- William B. Chiasson Senior Vice President and Chief Financial Officer 22 EX-10.1 2 0002.txt 1ST AMENDMENT TO BRIDGE CREDIT AGREEMENT AND LIMIT EXHIBIT 10.1 LEVI STRAUSS & CO. FIRST AMENDMENT TO BRIDGE CREDIT AGREEMENT AND LIMITED WAIVER This FIRST AMENDMENT TO BRIDGE CREDIT AGREEMENT AND LIMITED WAIVER (this "Amendment") is dated as of July 31, 2000 and entered into by and among Levi Strauss & Co., a Delaware corporation ("Company"); the financial institutions party hereto ("Banks"); Bank of America, N.A. as Administrative Agent for Banks ("Administrative Agent"); and Bank of America, N.A. as Collateral Agent for Banks ("Collateral Agent"), and is made with reference to that certain Bridge Credit Agreement dated as of January 31, 2000 (the "Credit Agreement"), by and among Company; Banks; the several financial institutions party thereto as Co-Syndication Agents; the financial institution party thereto as Documentation Agent; Administrative Agent; and Collateral Agent. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement. RECITALS WHEREAS, Company and Banks desire to amend the Credit Agreement as set forth below; and WHEREAS, Company has requested Banks to waive certain provisions of the Credit Agreement as set forth below. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: Section 1. AMENDMENTS TO THE CREDIT AGREEMENT 1.1 AMENDMENTS TO ARTICLE I: DEFINITIONS A. Section 1.1 of the Credit Agreement is hereby amended by deleting the definition of "NOTICE OF LENDER DERIVATIVE/FX CONTRACT" contained therein. B. Section 1.1 of the Credit Agreement is hereby further amended by deleting the definition of "TOTAL AMOUNT OF UNSECURED DEBT" contained therein and substituting the following therefor: "TOTAL AMOUNT OF UNSECURED DEBT" means, as of any date of determi- nation, the sum, without duplication, of (a) the Unsecured Derivative/FX Usage, (b) the Unsecured Letter of Credit Usage, and (c) the aggregate amount of all unsecured Indebtedness of Company and its Subsidiaries (other than Indebtedness permitted under Sections 7.1(a), 7.1(b), 7.1(c), 7.1(d), 7.1(e), 7.1(f), 7.1(g), 7.1(h), 7.1(i), 7.1(j), 7.1(k), 7.1(l), 7.1(m), 7.1(n), 7.1(o), 7.1(p), 7.1(q), 7.1(s), 7.1(t), and 7.1(u))." 1 1.2 AMENDMENT TO ARTICLE II: THE CREDITS Section 2.6(b) of the Credit Agreement is hereby amended to read in its entirety as follows: "ORDINARY COURSE DERIVATIVE/FX CONTRACTS DEEMED LENDER DERIVATIVE FX/ CONTRACTS. On and after the Closing Date, the Ordinary Course Derivative/FX Contracts listed on SCHEDULE 1.1(a) shall be automatically deemed for all purposes to be Lender Derivative/FX Contracts." 1.3 AMENDMENTS TO ARTICLE VI: AFFIRMATIVE COVENANTS A. Section 6.1(a)(vii) of the Credit Agreement is hereby amended to read in its entirety as follows: "(A) As soon as practicable and in any event no later than 10 Business Days after the end of each fiscal month, or more frequently if requested by Administrative Agent, a report setting forth (w) the aggregate Termination Value of all Derivative/FX Contracts to which Company or FinServ is a party, (x) the aggregate Termination Value for each Derivative/FX Lender of all Lender Derivative/FX Contracts to which such Derivative/FX Lender and Company or FinServ is a party, (y) all Derivative/FX Contracts to which Company or FinServ is a party, and (z) all other outstanding unsecured Indebtedness of Company or any of its Subsidiaries (including any letters of credit (other than Lender Bridge Letters of Credit and Lender 180 Day Letters of Credit) issued for the benefit of Company and its Subsidiaries) incurred in accordance with Section 7.1(r), and (B) promptly upon request, any other information concerning such Derivative/FX Contracts reasonably requested by Administrative Agent." B. Section 6.11(c) of the Credit Agreement is hereby amended by deleting the phrase "the date that is 60 days after the Closing Date" contained therein and substituting the phrase "August 31, 2000" therefor. 1.4 AMENDMENTS TO ARTICLE VII: NEGATIVE COVENANTS A. Section 7.1(r) of the Credit Agreement is hereby amended by delet- ing the phrase "Derivative/FX Usage" contained in clause (iii)(B) thereof and substituting the phrase "Lender Derivative/FX Usage" therefor. B. Section 7.1 of the Credit Agreement is hereby amended by (i) deleting the word "and" at the end of Section 7.1(s) thereof, (ii) renumbering Section 7.1(t) thereof as Section 7.1(u) and (iii) adding a new Section 7.1(t) thereto as follows: "Indebtedness between Company and any of its Subsidi- aries or between any of Company's Subsidiaries arising from purchases of inven- tory or raw materials in the ordinary course of business; and" C. Section 7.3(m) of the Credit Agreement is hereby amended to read in its entirety as follows: 2 "Dispositions of accounts receivable to collection agencies or, in the case of accounts receivable of Foreign Subsidiaries, to collection agencies or other third parties, provided the aggregate face amount of all such accounts receivable does not exceed $2,000,000." 1.5 AMENDMENT TO EXHIBITS Exhibit II to the Credit Agreement is hereby deleted. Section 2. WAIVERS 2.1 WAIVER OF SECTION 2.6(b) The undersigned Banks, constituting Majority Banks under the Credit Agreement, hereby waive compliance with the provisions of Section 2.6(b) of the Credit Agreement to the extent, and only to the extent, that such provisions require Company to deliver Notices of Lender Derivative/FX Contracts from the period commencing on the Closing Date to and including the date of this Amendment. 2.2 WAIVER OF SECTION 6.1(a)(vii) The undersigned Banks, constituting Majority Banks under the Credit Agreement, hereby waive compliance with the provisions of Section 6.1(a)(vii) of the Credit Agreement to the extent, and only to the extent, that such provisions require Company to deliver the information described in Section 6.1(a)(vii) from the period commencing on the Closing Date to and including the date of this Amendment. 2.3 WAIVER OF SECTION 6.11(a)(ii) The undersigned Banks, constituting Majority Banks under the Credit Agreement, hereby waive compliance with the provisions of Section 6.11(a)(ii) of the Credit Agreement to the extent, and only to the extent, necessary to permit the sale of the Property located at 501 Conestoga Way, Henderson, NV to be consummated on or prior to August 31, 2000 without causing Company to be required to deliver the documents described in Section 6.11(a)(ii) promptly following the date that is 90 days after the Closing Date; PROVIDED that, if the sale of such Property is not consummated on or prior to August 31, 2000, Company shall deliver the documents described in Section 6.11(a)(ii) on or prior to September 30, 2000. 2.4 WAIVER OF SECTION 6.11(a)(iii) The undersigned Banks, constituting Majority Banks under the Credit Agreement, hereby waive compliance with the provisions of Section 6.11(a)(iii) of the Credit Agreement to the extent, and only to the extent, necessary to permit the sale of each of the Properties located at (i) 2101 Cypress Avenue, El Paso, TX, (ii) 1800 Stirman Avenue, Fayetteville, AR, (iii) 7950 U.S. Highway 25, Florence, KY and (iv) 1001 East Broadway, Morrilton, AR to be consummated on or prior to August 31, 2000 without causing Company to be required to deliver the documents described in Section 6.11(a)(iii) (a) promptly following the date that is 120 days after the Closing Date for any such Property with respect to which no contract of sale has been 3 entered into prior to that date or (b) promptly following the date that is 60 days after the execution of any contract of sale for any such Property if the sale has not been consummated on or prior to that date; provided that, if the sale of any such Property is not consummated on or prior to August 31, 2000, Company shall deliver the documents described in Section 6.11(a)(iii) on or prior to September 30, 2000 with respect to such Property. 2.5 LIMITATION OF WAIVER Without limiting the generality of the provisions of Section 10.1 of the Credit Agreement, the waiver set forth herein shall be limited precisely as written and relates solely to a waiver of compliance by Company with the provisions of Sections 2.6(b), 6.1(a)(vii), 6.11(a)(ii) and 6.11(a)(iii) of the Credit Agreement in the manner and to the extent described above, and nothing in this Amendment shall be deemed to (a) constitute a waiver of compliance by Company with respect to (i) Section 2.6(b), 6.1(a)(vii), 6.11(a)(ii) or 6.11(a)(iii) of the Credit Agreement in any other instance or (ii) any other term, provision or condition of the Credit Agreement or any other instrument or agreement referred to therein or (b) prejudice any right or remedy that Administrative Agent, Collateral Agent or any Bank may now have or may have in the future under or in connection with the Credit Agreement or any other instrument or agreement referred to therein. Section 3. COMPANY'S REPRESENTATIONS AND WARRANTIES In order to induce Banks to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, Company represents and warrants to each Bank that the following statements are true, correct and complete: A. CORPORATE POWER AND AUTHORITY. Company has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT"). B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this Amendment and the performance of the Amended Agreement have been duly authorized by all necessary corporate action on the part of Company. C. NO CONFLICT. The execution and delivery by Company of this Amend- ment and the performance by Company of the Amended Agreement do not and will not (i) violate any of its Organization Documents or any order, judgment or decree of any court or other Governmental Authority binding on Company, (ii) conflict with, result in a breach of, constitute a default under, or require the termination of, any Contractual Obligation of Company, except where such conflicts, breaches, defaults and terminations, in the aggregate, would not have a Material Adverse Effect, (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any of the properties or assets of Company (other than pursuant to the Collateral Documents) or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Company except where the failure to obtain such approvals and consents would not, in the aggregate, have a Material Adverse Effect. 4 D. GOVERNMENTAL CONSENTS. The execution and delivery by Company of this Amendment and the performance by Company of the Amended Agreement do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Authority. E. BINDING OBLIGATION. This Amendment and the Amended Agreement have been duly executed and delivered by Company and are the legally valid and binding obligations of Company, enforceable against Company in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability, whether enforcement is sought in a proceeding at law or in equity. Section 4. MISCELLANEOUS A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS. (i) On and after the date hereof, each reference in the Credit Agree- ment to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Agreement. (ii) Except as specifically amended by this Amendment, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (iii) The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Administrative Agent, Collateral Agent or any Bank under, the Credit Agreement or any of the other Loan Documents. B. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. C. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment shall become effective upon the execution of a counterpart hereof by Company and Majority Banks and receipt by Company and Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof, except for Sections 2.1 and 2.2 hereof which shall become effective as of January 31, 2000, Section 2.3 hereof which shall become effective as of April 30, 2000 and 5 Section 2.4 hereof which shall become effective as of May 30, 2000, each upon the happening of the same events. [Remainder of page intentionally left blank] 6 IN WITNESS WHEREOF, the parties hereto have caused this Amend- ment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. LEVI STRAUSS & CO. By: _________________________________ Title: ______________________________ BANK OF AMERICA, N.A., as a Bank By: _________________________________ Title: ______________________________ THE BANK OF NOVA SCOTIA, as a Co-Syndication Agent and a Bank By: _________________________________ Title: ______________________________ CITICORP U.S.A. INCORPORATED, as a Co-Syndication Agent and as a Bank By: _________________________________ Title: ______________________________ MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent and as a Bank By: _________________________________ Title: ______________________________ S-1 BANK ONE, N.A., as a Bank By:___________________________________ Title: ______________________________ BANK OF AMERICA, N.A., as Administrative Agent By:___________________________________ Title: ______________________________ BANK OF AMERICA, N.A., as Collateral Agent By:___________________________________ Title: ______________________________ ACKNOWLEDGED: BATTERY STREET ENTERPRISES, INC. By: ___________________________________ Title: ________________________________ LEVI STRAUSS FINANCIAL CENTER CORPORATION By: ___________________________________ Title: ________________________________ LEVI STRAUSS FUNDING, LLC By:_____________________________________ Title: ________________________________ LEVI STRAUSS GLOBAL FULFILLMENT SERVICES, INC. By: ___________________________________ Title: ________________________________ S-2 LEVI STRAUSS GLOBAL OPERATIONS, INC. By:_____________________________________ Title: ________________________________ LEVI STRAUSS INTERNATIONAL By: ___________________________________ Title: ________________________________ LEVI STRAUSS LATIN AMERICA, INC. By: ___________________________________ Title: ________________________________ LEVI'S ONLY STORES, INC. By: ___________________________________ Title: ________________________________ NF INDUSTRIES, INC. By: ___________________________________ Title: ________________________________ S-3 EX-10.2 3 0003.txt 1ST AMENDMENT TO AMENDED AND RESTATED 1997 364 DAY EXHIBIT 10.2 LEVI STRAUSS & CO. FIRST AMENDMENT TO AMENDED AND RESTATED 1997 364 DAY CREDIT AGREEMENT AND LIMITED WAIVER This FIRST AMENDMENT TO AMENDED AND RESTATED 1997 364 DAY CREDIT AGREEMENT AND LIMITED WAIVER (this "AMENDMENT") is dated as of July 31, 2000 and entered into by and among Levi Strauss & Co., a Delaware corporation ("COMPANY"); the financial institutions party hereto ("BANKS"); Bank of America, N.A. as Agent for Banks ("AGENT"); and Bank of America, N.A. as Collateral Agent for Banks ("COLLATERAL AGENT"), and is made with reference to that certain Amended and Restated 1997 364 Day Credit Agreement dated as of January 31, 2000 (the "CREDIT AGREEMENT"), by and among Company; Banks; the several financial institutions party thereto as Senior Managing Agents; the several financial institutions party thereto as Managing Agents; the several financial institutions party thereto as Co-Agents; Agent; and Collateral Agent. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement. RECITALS WHEREAS, Company and Banks desire to amend the Credit Agreement as set forth below; and WHEREAS, Company has requested Banks to waive certain provisions of the Credit Agreement as set forth below. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT 1.1 AMENDMENT TO ARTICLE II: THE CREDITS Section 2.9(b) of the Credit Agreement is hereby amended to read in its entirety as follows: "UTILIZATION FEE. Company shall pay to Agent for the account of each Bank PRO RATA according to its Commitment Percentage, a utilization fee equal to 0.25% TIMES the actual daily aggregate principal amount of such Bank's Loans then outstanding hereunder. The utilization fee shall accrue at all times from the Closing Date until the Maturity Date, shall be computed on a daily basis, and shall be payable in arrears (i) (A) for the period from the Closing Date to July 31, 2000, on the last Business Day of each calendar quarter, commencing on the first such day after the Closing Date, and (B) for the 1 period from and after July 31, 2000, on the fifth Business Day after the last day of each fiscal quarter and (ii) on the Maturity Date." 1.2 AMENDMENTS TO ARTICLE VI: AFFIRMATIVE COVENANTS A. Section 6.1(a)(vii) of the Credit Agreement is hereby amended to read in its entirety as follows: "(A) As soon as practicable and in any event no later than 10 Business Days after the end of each fiscal month, or more frequently if requested by Agent, a report setting forth (w) the aggregate Termination Value of all Derivative/FX Contracts to which Company or FinServ is a party, (x) the aggregate Termination Value for each Derivative/FX Lender of all Lender Derivative/FX Contracts to which such Derivative/FX Lender and Company or FinServ is a party, (y) all Derivative/FX Contracts to which Company or FinServ is a party, and (z) all other outstanding unsecured Indebtedness of Company or any of its Subsidiaries (including any letters of credit (other than Lender Letters of Credit) issued for the benefit of Company and its Subsidiaries) incurred in accordance with Section 7.1(r), and (B) promptly upon request, any other information concerning such Derivative/FX Contracts reasonably requested by Agent." B. Section 6.11(c) of the Credit Agreement is hereby amended by deleting the phrase "the date that is 60 days after the Closing Date" contained therein and substituting the phrase "August 31, 2000" therefor. 1.3 AMENDMENTS TO ARTICLE VII: NEGATIVE COVENANTS A. Section 7.1 of the Credit Agreement is hereby amended by (i) deleting the word "and" at the end of Section 7.1(s) thereof, (ii) renumbering Section 7.1(t) thereof as Section 7.1(u) and (iii) adding a new Section 7.1(t) thereto as follows: "Indebtedness between Company and any of its Subsidiaries or between any of Company's Subsidiaries arising from purchases of inventory or raw materials in the ordinary course of business; and" B. Section 7.3(m) of the Credit Agreement is hereby amended to read in its entirety as follows: "Dispositions of accounts receivable to collection agencies or, in the case of accounts receivable of Foreign Subsidiaries, to collection agencies or other third parties, provided the aggregate face amount of all such accounts receivable does not exceed $2,000,000." 2 SECTION 2. WAIVERS 2.1 WAIVER OF SECTION 6.1(A)(VII) The undersigned Banks, constituting Majority Banks under the Credit Agreement, hereby waive compliance with the provisions of Section 6.1(a)(vii) of the Credit Agreement to the extent, and only to the extent, that such provisions require Company to deliver the information described in Section 6.1(a)(vii) from the period commencing on the Closing Date to and including the date of this Amendment. 2.2 WAIVER OF SECTION 6.11(A)(II) The undersigned Banks, constituting Majority Banks under the Credit Agreement, hereby waive compliance with the provisions of Section 6.11(a)(ii) of the Credit Agreement to the extent, and only to the extent, necessary to permit the sale of the Property located at 501 Conestoga Way, Henderson, NV to be consummated on or prior to August 31, 2000 without causing Company to be required to deliver the documents described in Section 6.11(a)(ii) promptly following the date that is 90 days after the Closing Date; PROVIDED that, if the sale of such Property is not consummated on or prior to August 31, 2000, Company shall deliver the documents described in Section 6.11(a)(ii) on or prior to September 30, 2000. 2.3 WAIVER OF SECTION 6.11(A)(III) The undersigned Banks, constituting Majority Banks under the Credit Agreement, hereby waive compliance with the provisions of Section 6.11(a)(iii) of the Credit Agreement to the extent, and only to the extent, necessary to permit the sale of each of the Properties located at (i) 2101 Cypress Avenue, El Paso, TX, (ii) 1800 Stirman Avenue, Fayetteville, AR, (iii) 7950 U.S. Highway 25, Florence, KY and (iv) 1001 East Broadway, Morrilton, AR to be consummated on or prior to August 31, 2000 without causing Company to be required to deliver the documents described in Section 6.11(a)(iii) (a) promptly following the date that is 120 days after the Closing Date for any such Property with respect to which no contract of sale has been entered into prior to that date or (b) promptly following the date that is 60 days after the execution of any contract of sale for any such Property if the sale has not been consummated on or prior to that date; PROVIDED that, if the sale of any such Property is not consummated on or prior to August 31, 2000, Company shall deliver the documents described in Section 6.11(a)(iii) on or prior to September 30, 2000 with respect to such Property. 2.4 LIMITATION OF WAIVER Without limiting the generality of the provisions of Section 10.1 of the Credit Agreement, the waiver set forth herein shall be limited precisely as written and relates solely to a waiver of compliance by Company with the provisions of Sections 6.1(a)(vii), 6.11(a)(ii) and 6.11(a)(iii) of the Credit Agreement in the manner and to the extent described above, and nothing in this Amendment shall be deemed to (a) constitute a waiver of compliance by Company with respect to (i) Section 6.1(a)(vii), 6.11(a)(ii) or 6.11(a)(iii) of the Credit Agreement in any other instance or (ii) any other term, provision or condition of the Credit Agreement or any other instrument or agreement referred to therein or (b) prejudice any right or remedy that Agent, 3 Collateral Agent or any Bank may now have or may have in the future under or in connection with the Credit Agreement or any other instrument or agreement referred to therein. SECTION 3. COMPANY'S REPRESENTATIONS AND WARRANTIES In order to induce Banks to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, Company represents and warrants to each Bank that the following statements are true, correct and complete: A. CORPORATE POWER AND AUTHORITY. Company has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT"). B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this Amendment and the performance of the Amended Agreement have been duly authorized by all necessary corporate action on the part of Company. C. NO CONFLICT. The execution and delivery by Company of this Amend- ment and the performance by Company of the Amended Agreement do not and will not (i) violate any of its Organization Documents or any order, judgment or decree of any court or other Governmental Authority binding on Company, (ii) conflict with, result in a breach of, constitute a default under, or require the termination of, any Contractual Obligation of Company, except where such conflicts, breaches, defaults and terminations, in the aggregate, would not have a Material Adverse Effect, (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any of the properties or assets of Company (other than pursuant to the Collateral Documents) or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Company except where the failure to obtain such approvals and consents would not, in the aggregate, have a Material Adverse Effect. D. GOVERNMENTAL CONSENTS. The execution and delivery by Company of this Amendment and the performance by Company of the Amended Agreement do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Authority. E. BINDING OBLIGATION. This Amendment and the Amended Agreement have been duly executed and delivered by Company and are the legally valid and binding obligations of Company, enforceable against Company in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability, whether enforcement is sought in a proceeding at law or in equity. 4 SECTION 4. MISCELLANEOUS A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS. (i) On and after the date hereof, each reference in the Credit Agree- ment to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Agreement. (ii) Except as specifically amended by this Amendment, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (iii) The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Agent, Collateral Agent or any Bank under, the Credit Agreement or any of the other Loan Documents. B. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. C. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment shall become effective upon the execution of a counterpart hereof by Company and Majority Banks and receipt by Company and Agent of written or telephonic notification of such execution and authorization of delivery thereof, except for Section 2.1 hereof which shall become effective as of January 31, 2000, Section 2.2 hereof which shall become effective as of April 30, 2000 and Section 2.3 hereof which shall become effective as of May 30, 2000, each upon the happening of the same events. [Remainder of page intentionally left blank] 5 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. LEVI STRAUSS & CO. By: ----------------------------------------- Name: Title: ABN AMRO BANK N.V. By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: AIMCO CDO SERIES 2000-A By: ----------------------------------------- Name: Title: ALLSTATE LIFE INSURANCE COMPANY By:____________________________ Name: Title: BANCA COMMERCIALE ITALIANA LOS ANGELES FOREIGN BRANCH By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: BANK OF AMERICA, N.A., as a Bank By: ----------------------------------------- Name: Title: THE BANK OF NOVA SCOTIA By: ----------------------------------------- Name: Title: BANK ONE, N.A. By: ----------------------------------------- Name: Title: BANKERS TRUST COMPANY By: ----------------------------------------- Name: Title: BANQUE NATIONALE DE PARIS By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: CARIPLO - CASSA DI RISPARMIO DELLE PROVINCIE LOMBARDE SPA By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: CITICORP U.S.A. INCORPORATED By: ----------------------------------------- Name: Title: COMMERZBANK AG NEW YORK AND GRAND CAYMAN BRANCHES By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: DEUTSCHE BANK AKTIENGESELLSCHAFT, NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: FIRST HAWAIIAN BANK By: ----------------------------------------- Name: Title: FRANKLIN CLO I LIMITED By: ----------------------------------------- Name: Title: GOLDMAN SACHS & COMPANY By:___________________________ Name: Title: INDOSUEZ CAPITAL FUNDING IIA LIMITED By: ----------------------------------------- Name: Title: KBC BANK N.V. By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: MELLON BANK, N.A. By: ----------------------------------------- Name: Title: ML CLO XV PILGRIM AMERICA By: ----------------------------------------- Name: Title: ML CLO XX PILGRIM AMERICA (CAYMAN) LTD. By:_____________________________ Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: ----------------------------------------- Name: Title: PIMCO HIGH YIELD FUND By: ----------------------------------------- Name: Title: SEQUILS-PILGRIM I LTD. By:____________________________ Name: Title: SOCIETE GENERALE NEW YORK BRANCH By: ----------------------------------------- Name: Title: THE SUMITOMO BANK, LIMITED By: ----------------------------------------- Name: Title: UNICREDITO ITALIANO S.P.A. By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: WACHOVIA BANK N.A. By: ----------------------------------------- Name: Title: BANK OF AMERICA, N.A., as Agent By: ----------------------------------------- Name: Title: BANK OF AMERICA, N.A., as Collateral Agent By: ----------------------------------------- Name: Title: ACKNOWLEDGED: BATTERY STREET ENTERPRISES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS FINANCIAL CENTER CORPORATION By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS FUNDING, LLC By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS GLOBAL FULFILLMENT SERVICES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS GLOBAL OPERATIONS, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS INTERNATIONAL By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS LATIN AMERICA, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI'S ONLY STORES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ NF INDUSTRIES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ EX-10.3 4 0004.txt 1ST AMENDMENT TO AMENDED AND RESTATED 1999 180 DAY LEVI STRAUSS & CO. FIRST AMENDMENT TO AMENDED AND RESTATED 1999 180 DAY CREDIT AGREEMENT AND LIMITED WAIVER This FIRST AMENDMENT TO AMENDED AND RESTATED 1999 180 DAY CREDIT AGREEMENT AND LIMITED WAIVER (this "AMENDMENT") is dated as of July 31, 2000 and entered into by and among Levi Strauss & Co., a Delaware corporation ("COMPANY"); the financial institutions party hereto ("BANKS"); Bank of America, N.A. as Administrative Agent for Banks ("ADMINISTRATIVE AGENT"); and Bank of America, N.A. as Collateral Agent for Banks ("COLLATERAL AGENT"), and is made with reference to that certain Amended and Restated 1999 180 Day Credit Agreement dated as of January 31, 2000 (the "CREDIT AGREEMENT"), by and among Company; Banks; the several financial institutions party thereto as Co-Documentation Agents; Administrative Agent; and Collateral Agent. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement. RECITALS WHEREAS, Company and Banks desire to amend the Credit Agreement as set forth below; and WHEREAS, Company has requested Banks to waive certain provisions of the Credit Agreement as set forth below. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT 1.1 AMENDMENT TO ARTICLE I: DEFINITIONS Section 1.1 of the Credit Agreement is hereby amended by deleting the definition of "TOTAL AMOUNT OF UNSECURED DEBT" contained therein and substituting the following therefor: "TOTAL AMOUNT OF UNSECURED DEBT' means, as of any date of determination, the sum, without duplication, of (a) the Unsecured Derivative/FX Usage, (b) the Unsecured Letter of Credit Usage, and (c) the aggregate amount of all unsecured Indebtedness of Company and its Subsidiaries (other than Indebtedness permitted under Sections 7.1(a), 7.1(b), 7.1(c), 7.1(d), 7.1(e), 7.1(f), 7.1(g), 7.1(h), 7.1(i), 7.1(j), 7.1(k), 7.1(l), 7.1(m), 7.1(n), 7.1(o), 7.1(p), 7.1(q), 7.1(s), 7.1(t), and 7.1(u))." 1 1.2 AMENDMENTS TO ARTICLE VI: AFFIRMATIVE COVENANTS A. Section 6.1(a)(vii) of the Credit Agreement is hereby amended to read in its entirety as follows: "(A) As soon as practicable and in any event no later than 10 Business Days after the end of each fiscal month, or more frequently if requested by Administrative Agent, a report setting forth (w) the aggregate Termination Value of all Derivative/FX Contracts to which Company or FinServ is a party, (x) the aggregate Termination Value for each Derivative/FX Lender of all Lender Derivative/FX Contracts to which such Derivative/FX Lender and Company or FinServ is a party, (y) all Derivative/FX Contracts to which Company or FinServ is a party, and (z) all other outstanding unsecured Indebtedness of Company or any of its Subsidiaries (including any letters of credit (other than Lender Bridge Letters of Credit and Lender 180 Day Letters of Credit) issued for the benefit of Company and its Subsidiaries) incurred in accordance with Section 7.1(r), and (B) promptly upon request, any other information concerning such Derivative/FX Contracts reasonably requested by Administrative Agent." B. Section 6.11(c) of the Credit Agreement is hereby amended by deleting the phrase "the date that is 60 days after the Closing Date" contained therein and substituting the phrase "August 31, 2000" therefor. 1.3 AMENDMENTS TO ARTICLE VII: NEGATIVE COVENANTS A. Section 7.1(r) of the Credit Agreement is hereby amended by deleting the phrase "Derivative/FX Usage" contained in clause (iii)(B) thereof and substituting the phrase "Lender Derivative/FX Usage" therefor. B. Section 7.1 of the Credit Agreement is hereby amended by (i) deleting the word "and" at the end of Section 7.1(s) thereof, (ii) renumbering Section 7.1(t) thereof as Section 7.1(u) and (iii) adding a new Section 7.1(t) thereto as follows: "Indebtedness between Company and any of its Subsidiaries or between any of Company's Subsidiaries arising from purchases of inventory or raw materials in the ordinary course of business; and" C. Section 7.3(m) of the Credit Agreement is hereby amended to read in its entirety as follows: "Dispositions of accounts receivable to collection agencies or, in the case of accounts receivable of Foreign Subsidiaries, to collection agencies or other third parties, provided the aggregate face amount of all such accounts receivable does not exceed $2,000,000." 2 SECTION 2. WAIVERS 2.1 WAIVER OF SECTION 6.1(A)(VII) The undersigned Banks, constituting Majority Banks under the Credit Agreement, hereby waive compliance with the provisions of Section 6.1(a)(vii) of the Credit Agreement to the extent, and only to the extent, that such provisions require Company to deliver the information described in Section 6.1(a)(vii) from the period commencing on the Closing Date to and including the date of this Amendment. 2.2 WAIVER OF SECTION 6.11(A)(II) The undersigned Banks, constituting Majority Banks under the Credit Agreement, hereby waive compliance with the provisions of Section 6.11(a)(ii) of the Credit Agreement to the extent, and only to the extent, necessary to permit the sale of the Property located at 501 Conestoga Way, Henderson, NV to be consummated on or prior to August 31, 2000 without causing Company to be required to deliver the documents described in Section 6.11(a)(ii) promptly following the date that is 90 days after the Closing Date; PROVIDED that, if the sale of such Property is not consummated on or prior to August 31, 2000, Company shall deliver the documents described in Section 6.11(a)(ii) on or prior to September 30, 2000. 2.3 WAIVER OF SECTION 6.11(A)(III) The undersigned Banks, constituting Majority Banks under the Credit Agreement, hereby waive compliance with the provisions of Section 6.11(a)(iii) of the Credit Agreement to the extent, and only to the extent, necessary to permit the sale of each of the Properties located at (i) 2101 Cypress Avenue, El Paso, TX, (ii) 1800 Stirman Avenue, Fayetteville, AR, (iii) 7950 U.S. Highway 25, Florence, KY and (iv) 1001 East Broadway, Morrilton, AR to be consummated on or prior to August 31, 2000 without causing Company to be required to deliver the documents described in Section 6.11(a)(iii) (a) promptly following the date that is 120 days after the Closing Date for any such Property with respect to which no contract of sale has been entered into prior to that date or (b) promptly following the date that is 60 days after the execution of any contract of sale for any such Property if the sale has not been consummated on or prior to that date; PROVIDED that, if the sale of any such Property is not consummated on or prior to August 31, 2000, Company shall deliver the documents described in Section 6.11(a)(iii) on or prior to September 30, 2000 with respect to such Property. 2.4 LIMITATION OF WAIVER Without limiting the generality of the provisions of Section 10.1 of the Credit Agreement, the waiver set forth herein shall be limited precisely as written and relates solely to a waiver of compliance by Company with the provisions of Sections 6.1(a)(vii), 6.11(a)(ii) and 6.11(a)(iii) of the Credit Agreement in the manner and to the extent described above, and nothing in this Amendment shall be deemed to (a) constitute a waiver of compliance by Company with respect to (i) Section 6.1(a)(vii), 6.11(a)(ii) or 6.11(a)(iii) of the Credit Agreement in any other instance or (ii) any other term, provision or condition of the Credit Agreement or any other instrument or agreement referred to therein or (b) prejudice any right or remedy that Administrative Agent, Collateral Agent or any Bank may now have or may have in the future 3 under or in connection with the Credit Agreement or any other instrument or agreement referred to therein. SECTION 3. COMPANY'S REPRESENTATIONS AND WARRANTIES In order to induce Banks to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, Company represents and warrants to each Bank that the following statements are true, correct and complete: A. CORPORATE POWER AND AUTHORITY. Company has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT"). B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this Amendment and the performance of the Amended Agreement have been duly authorized by all necessary corporate action on the part of Company. C. NO CONFLICT. The execution and delivery by Company of this Amend- ment and the performance by Company of the Amended Agreement do not and will not (i) violate any of its Organization Documents or any order, judgment or decree of any court or other Governmental Authority binding on Company, (ii) conflict with, result in a breach of, constitute a default under, or require the termination of, any Contractual Obligation of Company, except where such conflicts, breaches, defaults and terminations, in the aggregate, would not have a Material Adverse Effect, (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any of the properties or assets of Company (other than pursuant to the Collateral Documents) or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Company except where the failure to obtain such approvals and consents would not, in the aggregate, have a Material Adverse Effect. D. GOVERNMENTAL CONSENTS. The execution and delivery by Company of this Amendment and the performance by Company of the Amended Agreement do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Authority. E. BINDING OBLIGATION. This Amendment and the Amended Agreement have been duly executed and delivered by Company and are the legally valid and binding obligations of Company, enforceable against Company in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability, whether enforcement is sought in a proceeding at law or in equity. 4 SECTION 4. MISCELLANEOUS A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS. (i) On and after the date hereof, each reference in the Credit Agree- ment to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Agreement. (ii) Except as specifically amended by this Amendment, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (iii) The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Administrative Agent, Collateral Agent or any Bank under, the Credit Agreement or any of the other Loan Documents. B. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. C. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment shall become effective upon the execution of a counterpart hereof by Company and Majority Banks and receipt by Company and Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof, except for Section 2.1 hereof which shall become effective as of January 31, 2000, Section 2.2 hereof which shall become effective as of April 30, 2000 and Section 2.3 hereof which shall become effective as of May 30, 2000, each upon the happening of the same events. [Remainder of page intentionally left blank] 5 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. LEVI STRAUSS & CO. By: --------------------------------------------- Title: ------------------------------------------ BANK OF AMERICA, N.A., as a Bank By: --------------------------------------------- Title: ------------------------------------------ THE BANK OF NOVA SCOTIA, as a Co-Documentation Agent and as a Bank By: --------------------------------------------- Title: ------------------------------------------ CITICORP U.S.A. INCORPORATED, as a Co-Documentation Agent and as a Bank By: --------------------------------------------- Title: ------------------------------------------ MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Co-Documentation Agent and as a Bank By: --------------------------------------------- Title: ------------------------------------------ S-1 BANK OF AMERICA, N.A., as Administrative Agent By: --------------------------------------------- Title: ------------------------------------------ BANK OF AMERICA, N.A., as Collateral Agent By: --------------------------------------------- Title: ------------------------------------------ ACKNOWLEDGED: BATTERY STREET ENTERPRISES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS FINANCIAL CENTER CORPORATION By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS FUNDING, LLC By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS GLOBAL FULFILLMENT SERVICES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS GLOBAL OPERATIONS, INC. By: --------------------------------------------------- Title: ------------------------------------------------ S-2 LEVI STRAUSS INTERNATIONAL By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS LATIN AMERICA, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI'S ONLY STORES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ NF INDUSTRIES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ S-3 EX-10.4 5 0005.txt 1ST AMENDMENT TO 1997 2ND AMENDED AND RESTATED CRE LEVI STRAUSS & CO. FIRST AMENDMENT TO 1997 SECOND AMENDED AND RESTATED CREDIT AGREEMENT AND LIMITED WAIVER This FIRST AMENDMENT TO 1997 SECOND AMENDED AND RESTATED CREDIT AGREEMENT AND LIMITED WAIVER (this "AMENDMENT") is dated as of July 31, 2000 and entered into by and among Levi Strauss & Co., a Delaware corporation ("COMPANY"); the financial institutions party hereto ("BANKS"); Bank of America, N.A. as Agent for Banks ("AGENT"); and Bank of America, N.A. as Collateral Agent for Banks ("COLLATERAL AGENT"), and is made with reference to that certain 1997 Second Amended and Restated Credit Agreement dated as of January 31, 2000 (the "CREDIT AGREEMENT"), by and among Company; Banks; the several financial institutions party thereto as Senior Managing Agents; the several financial institutions party thereto as Managing Agents; the several financial institutions party thereto as Co-Agents; Agent; and Collateral Agent. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement. RECITALS WHEREAS, Company and Banks desire to amend the Credit Agreement as set forth below; and WHEREAS, Company has requested Banks to waive certain provisions of the Credit Agreement as set forth below. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT 1.1 AMENDMENTS TO ARTICLE VI: AFFIRMATIVE COVENANTS A. Section 6.1(a)(vii) of the Credit Agreement is hereby amended to read in its entirety as follows: "(A) As soon as practicable and in any event no later than 10 Business Days after the end of each fiscal month, or more frequently if requested by Agent, a report setting forth (w) the aggregate Termination Value of all Derivative/FX Contracts to which Company or FinServ is a party, (x) the aggregate Termination Value for each Derivative/FX Lender of all Lender Derivative/FX Contracts to which such Derivative/FX Lender and Company or FinServ is a party, (y) all Derivative/FX Contracts to which Company or FinServ is a party, and (z) all other outstanding unsecured Indebtedness of Company or any of its Subsidiaries (including any letters of 1 credit (other than Lender Letters of Credit) issued for the benefit of Company and its Subsidiaries) incurred in accordance with Section 7.1(r), and (B) promptly upon request, any other information concerning such Derivative/FX Contracts reasonably requested by Agent." B. Section 6.11(c) of the Credit Agreement is hereby amended by deleting the phrase "the date that is 60 days after the Closing Date" contained therein and substituting the phrase "August 31, 2000" therefor. 1.2 AMENDMENTS TO ARTICLE VII: NEGATIVE COVENANTS A. Section 7.1 of the Credit Agreement is hereby amended by (i) deleting the word "and" at the end of Section 7.1(s) thereof, (ii) renumbering Section 7.1(t) thereof as Section 7.1(u) and (iii) adding a new Section 7.1(t) thereto as follows: "Indebtedness between Company and any of its Subsidiaries or between any of Company's Subsidiaries arising from purchases of inventory or raw materials in the ordinary course of business; and" B. Section 7.3(m) of the Credit Agreement is hereby amended to read in its entirety as follows: "Dispositions of accounts receivable to collection agencies or, in the case of accounts receivable of Foreign Subsidiaries, to collection agencies or other third parties, provided the aggregate face amount of all such accounts receivable does not exceed $2,000,000." SECTION 2. WAIVERS 2.1 WAIVER OF SECTION 6.1(A)(VII) The undersigned Banks, constituting Majority Banks under the Credit Agreement, hereby waive compliance with the provisions of Section 6.1(a)(vii) of the Credit Agreement to the extent, and only to the extent, that such provisions require Company to deliver the information described in Section 6.1(a)(vii) from the period commencing on the Closing Date to and including the date of this Amendment. 2.2 WAIVER OF SECTION 6.11(A)(II) The undersigned Banks, constituting Majority Banks under the Credit Agreement, hereby waive compliance with the provisions of Section 6.11(a)(ii) of the Credit Agreement to the extent, and only to the extent, necessary to permit the sale of the Property located at 501 Conestoga Way, Henderson, NV to be consummated on or prior to August 31, 2000 without causing Company to be required to deliver the documents described in Section 6.11(a)(ii) promptly following the date that is 90 days after the Closing Date; PROVIDED that, if the sale of such Property is not consummated on or prior to August 31, 2000, Company shall deliver the documents described in Section 6.11(a)(ii) on or prior to September 30, 2000. 2 2.3 WAIVER OF SECTION 6.11(A)(III) The undersigned Banks, constituting Majority Banks under the Credit Agreement, hereby waive compliance with the provisions of Section 6.11(a)(iii) of the Credit Agreement to the extent, and only to the extent, necessary to permit the sale of each of the Properties located at (i) 2101 Cypress Avenue, El Paso, TX, (ii) 1800 Stirman Avenue, Fayetteville, AR, (iii) 7950 U.S. Highway 25, Florence, KY and (iv) 1001 East Broadway, Morrilton, AR to be consummated on or prior to August 31, 2000 without causing Company to be required to deliver the documents described in Section 6.11(a)(iii) (a) promptly following the date that is 120 days after the Closing Date for any such Property with respect to which no contract of sale has been entered into prior to that date or (b) promptly following the date that is 60 days after the execution of any contract of sale for any such Property if the sale has not been consummated on or prior to that date; PROVIDED that, if the sale of any such Property is not consummated on or prior to August 31, 2000, Company shall deliver the documents described in Section 6.11(a)(iii) on or prior to September 30, 2000 with respect to such Property. 2.4 LIMITATION OF WAIVER Without limiting the generality of the provisions of Section 10.1 of the Credit Agreement, the waiver set forth herein shall be limited precisely as written and relates solely to a waiver of compliance by Company with the provisions of Sections 6.1(a)(vii), 6.11(a)(ii) and 6.11(a)(iii) of the Credit Agreement in the manner and to the extent described above, and nothing in this Amendment shall be deemed to (a) constitute a waiver of compliance by Company with respect to (i) Section 6.1(a)(vii), 6.11(a)(ii) or 6.11(a)(iii) of the Credit Agreement in any other instance or (ii) any other term, provision or condition of the Credit Agreement or any other instrument or agreement referred to therein or (b) prejudice any right or remedy that Agent, Collateral Agent or any Bank may now have or may have in the future under or in connection with the Credit Agreement or any other instrument or agreement referred to therein. SECTION 3. COMPANY'S REPRESENTATIONS AND WARRANTIES In order to induce Banks to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, Company represents and warrants to each Bank that the following statements are true, correct and complete: A. CORPORATE POWER AND AUTHORITY. Company has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT"). B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this Amendment and the performance of the Amended Agreement have been duly authorized by all necessary corporate action on the part of Company. C. NO CONFLICT. The execution and delivery by Company of this Amend- ment and the performance by Company of the Amended Agreement do not and will not (i) violate any of its Organization Documents or any order, judgment or decree of any court or other Governmental Authority binding on Company, (ii) conflict with, result in a breach of, constitute 3 a default under, or require the termination of, any Contractual Obligation of Company, except where such conflicts, breaches, defaults and terminations, in the aggregate, would not have a Material Adverse Effect, (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any of the properties or assets of Company (other than pursuant to the Collateral Documents) or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Company except where the failure to obtain such approvals and consents would not, in the aggregate, have a Material Adverse Effect. D. GOVERNMENTAL CONSENTS. The execution and delivery by Company of this Amendment and the performance by Company of the Amended Agreement do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Authority. E. BINDING OBLIGATION. This Amendment and the Amended Agreement have been duly executed and delivered by Company and are the legally valid and binding obligations of Company, enforceable against Company in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability, whether enforcement is sought in a proceeding at law or in equity. SECTION 4. MISCELLANEOUS A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS. (i) On and after the date hereof, each reference in the Credit Agree- ment to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Agreement. (ii) Except as specifically amended by this Amendment, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (iii) The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Agent, Collateral Agent or any Bank under, the Credit Agreement or any of the other Loan Documents. B. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. C. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which 4 when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment shall become effective upon the execution of a counterpart hereof by Company and Majority Banks and receipt by Company and Agent of written or telephonic notification of such execution and authorization of delivery thereof, except for Section 2.1 hereof which shall become effective as of January 31, 2000, Section 2.2 hereof which shall become effective as of April 30, 2000 and Section 2.3 hereof which shall become effective as of May 30, 2000, each upon the happening of the same events. [Remainder of page intentionally left blank] 5 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. LEVI STRAUSS & CO. By: ----------------------------------------- Name: Title: ABN AMRO BANK N.V. By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: AIMCO CDO SERIES 2000-A By: ----------------------------------------- Name: Title: ARCHIMEDES FUNDING III LTD. By:___________________________ Name: Title: ARCHIMEDES FUNDING LLC By:___________________________ Name: Title: BANCA COMMERCIALE ITALIANA LOS ANGELES FOREIGN BRANCH By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: BANCA MONTE DEI PASCHI DI SIENA SPA By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: BANK OF AMERICA, N.A., as a Bank By: ----------------------------------------- Name: Title: THE BANK OF NOVA SCOTIA By: ----------------------------------------- Name: Title: BANK ONE, N.A. By: ----------------------------------------- Name: Title: BANKERS TRUST COMPANY By: ----------------------------------------- Name: Title: BANQUE NATIONALE DE PARIS By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: CAPTIVA III FINANCE LTD. By:____________________________ Name: Title: CAPTIVA IV FINANCE LTD. By:_____________________________ Name: Title: CARIPLO - CASSA DI RISPARMIO DELLE PROVINCIE LOMBARDE SPA By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: CIBC INC. By: ----------------------------------------- Name: Title: CITICORP U.S.A. INCORPORATED By: ----------------------------------------- Name: Title: COMMERZBANK AG NEW YORK AND GRAND CAYMAN BRANCHES By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: CYPRESS MANAGEMENT PARTNERSHIP By:_____________________________ Name: Title: DEUTSCHE BANK AKTIENGESELLSCHAFT, NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: FERNWOOD ASSOCIATES L.P. By:____________________________ Name: Title: FIRST HAWAIIAN BANK By: ----------------------------------------- Name: Title: BANKBOSTON N.A. By: ----------------------------------------- Name: Title: FRANKLIN FLOATING RATE TRUST By:____________________________ Name: Title: GALAXY CLO 1999-1, LTD. By:____________________________ Name: Title: GOLDMAN SACHS & COMPANY By:___________________________ Name: Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED By: ----------------------------------------- Name: Title: INDOSUEZ CAPITAL FUNDING III LIMITED, BY INDOSUEZ CAPITAL AS PORTFOLIO ADVISOR By:_____________________________ Name: Title: INDOSUEZ CAPITAL FUNDING IV L.P., BY INDOSUEZ CAPITAL AS PORTFOLIO ADVISOR By:_____________________________ Name: Title: INDOSUEZ CAPITAL FUNDING VI LIMITED By: ----------------------------------------- Name: Title: MELLON BANK, N.A. By: ----------------------------------------- Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: ----------------------------------------- Name: Title: COOPERATIEVE CENTRALE RAIFFEISEN- BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: SALOMON BROTHERS HOLDING COMPANY INC. By:______________________________ Name: Title: THE SANWA BANK, LIMITED By: ----------------------------------------- Name: Title: SOCIETE GENERALE NEW YORK BRANCH By: ----------------------------------------- Name: Title: THE SUMITOMO BANK, LIMITED By: ----------------------------------------- Name: Title: THE TOKAI BANK LIMITED By: ----------------------------------------- Name: Title: UBS AG, STAMFORD BRANCH By: ----------------------------------------- Name: Title: UNICREDITO ITALIANO S.P.A. By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: WACHOVIA BANK N.A. By: ----------------------------------------- Name: Title: BANK OF AMERICA, N.A., as Agent By: ----------------------------------------- Name: Title: BANK OF AMERICA, N.A., as Collateral Agent By: ----------------------------------------- Name: Title: ACKNOWLEDGED: BATTERY STREET ENTERPRISES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS FINANCIAL CENTER CORPORATION By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS FUNDING, LLC By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS GLOBAL FULFILLMENT SERVICES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS GLOBAL OPERATIONS, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS INTERNATIONAL By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS LATIN AMERICA, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI'S ONLY STORES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ NF INDUSTRIES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ EX-27 6 0006.txt FINANCIAL DATA SCHEDULE
5 0000094845 Levi Strauss & Co. 1,000 9-MOS NOV-26-2000 AUG-27-2000 75,446 0 679,093 26,841 646,167 1,801,012 1,065,792 509,566 3,171,630 1,202,689 1,967,191 0 0 373 (1,137,934) 3,171,630 3,359,221 3,359,221 1,957,328 1,957,328 1,048,052 4,510 177,177 227,667 79,683 147,984 0 0 0 147,984 3.97 3.97
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