10-Q 1 lvis-20220227.htm 10-Q lvis-20220227
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
Form 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended February 27, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-06631
_________________
LEVI STRAUSS & CO.
(Exact Name of Registrant as Specified in Its Charter)
Delaware  94-0905160
(State or Other Jurisdiction of
Incorporation or Organization)
  (I.R.S. Employer
Identification No.)
1155 Battery Street, San Francisco, California 94111
(Address of Principal Executive Offices) (Zip Code)
(415) 501-6000
(Registrant’s Telephone Number, Including Area Code)
None
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
_________________
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each classTrading symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.001 par value per shareLEVINew York Stock Exchange
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  þ  No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of "Large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ
Accelerated filer ¨
Emerging growth company
Non-accelerated filer ¨
Smaller reporting company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  þ
As of March 30, 2022, the registrant had 96,888,163 shares of Class A common stock, $0.001 par value per share and 299,610,904 shares of Class B common stock, $0.001 par value per share, outstanding.


LEVI STRAUSS & CO. AND SUBSIDIARIES
INDEX TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 27, 2022
 
  Page
Number
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
WHERE YOU CAN FIND MORE INFORMATION
Investors and others should note that we announce material financial information to our investors using our corporate website, press releases, SEC filings and public conference calls and webcasts. We also use the following social media channels as a means of disclosing information about our company, products, planned financial and other announcements, attendance at upcoming investor and industry conferences and other matters, as well as for complying with our disclosure obligations under Regulation FD promulgated under the Securities Exchange Act of 1934, as amended:
our Investor Relations page (https://levistrauss.com/investors/financial-news);
our Twitter account (https://twitter.com/LeviStraussCo);
our company blog (https://www.levistrauss.com/unzipped-blog/);
our Facebook page (https://www.facebook.com/levistraussco/);
our LinkedIn page (https://www.linkedin.com/company/levi-strauss-&-co-);
our Instagram page (https://www.instagram.com/levistraussco/); and
our YouTube channel (https://www.youtube.com/user/levistraussvideo).
The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels in addition to following our press releases, SEC filings and public conference calls and webcasts. This list may be updated from time to time. The information we post through these channels is not a part of this Quarterly Report.



PART I — FINANCIAL INFORMATION

Item 1.CONSOLIDATED FINANCIAL STATEMENTS
LEVI STRAUSS & CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
February 27,
2022
November 28,
2021
 (Dollars in thousands)
ASSETS
Current Assets:
Cash and cash equivalents$678,306 $810,266 
Short-term investments in marketable securities98,843 91,550 
Trade receivables, net648,233 707,625 
Inventories1,006,180 897,950 
Other current assets181,468 202,510 
Total current assets2,613,030 2,709,901 
Property, plant and equipment, net491,831 502,562 
Goodwill377,577 386,880 
Other intangible assets, net290,270 291,332 
Deferred tax assets, net553,160 573,114 
Operating lease right-of-use assets, net1,085,780 1,103,705 
Other non-current assets340,103 332,575 
Total assets$5,751,751 $5,900,069 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable562,972 524,838 
Accrued salaries, wages and employee benefits188,829 274,700 
Accrued sales returns and allowances192,464 209,364 
Short-term operating lease liabilities243,323 245,369 
Other accrued liabilities498,453 615,347 
Total current liabilities1,686,041 1,869,618 
Long-term debt1,020,499 1,020,700 
Postretirement medical benefits49,117 51,439 
Pension liabilities154,127 155,218 
Long-term employee related benefits110,759 108,544 
Long-term operating lease liabilities953,626 969,482 
Other long-term liabilities53,993 59,407 
Total liabilities4,028,162 4,234,408 
Commitments and contingencies
Stockholders’ Equity:
Common stock — $0.001 par value; 1,200,000,000 Class A shares authorized, 98,906,606 shares and 97,567,627 shares issued and outstanding as of February 27, 2022 and November 28, 2021, respectively; and 422,000,000 Class B shares authorized, 299,610,904 shares and 302,209,813 shares issued and outstanding, as of February 27, 2022 and November 28, 2021, respectively
399 400 
Additional paid-in capital575,310 584,774 
Accumulated other comprehensive loss(411,374)(394,387)
Retained earnings1,559,254 1,474,874 
Total stockholders’ equity1,723,589 1,665,661 
Total liabilities and stockholders’ equity$5,751,751 $5,900,069 

The accompanying notes are an integral part of these consolidated financial statements.

3

LEVI STRAUSS & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
 
 Three Months Ended
 February 27,
2022
February 28,
2021
(Dollars in thousands, except per share amounts)
(Unaudited)
Net revenues$1,591,562 $1,305,602 
Cost of goods sold647,954 545,573 
Gross profit943,608 760,029 
Selling, general and administrative expenses709,376 582,906 
Operating income234,232 177,123 
Interest expense(4,248)(23,310)
Other income, net15,897 858 
Income before income taxes245,881 154,671 
Income tax expense50,038 12,167 
Net income$195,843 $142,504 
Earnings per common share attributable to common stockholders:
Basic$0.49 $0.36 
Diluted$0.48 $0.35 
Weighted-average common shares outstanding:
Basic399,445,106 399,541,735 
Diluted407,017,092 411,872,771 

























The accompanying notes are an integral part of these consolidated financial statements.

4

LEVI STRAUSS & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
 Three Months Ended
 February 27,
2022
February 28,
2021
(Dollars in thousands)
(Unaudited)
Net income$195,843 $142,504 
Other comprehensive loss, before related income taxes:
Pension and postretirement benefits
2,185 2,938 
Derivative instruments
(4,168)(17,315)
Foreign currency translation (losses) gains(11,089)10,941 
Unrealized (losses) gains on marketable securities(5,994)401 
Total other comprehensive loss, before related income taxes(19,066)(3,035)
Income tax expense related to items of other comprehensive loss2,079 1,203 
Comprehensive income, net of income taxes$178,856 $140,672 

































The accompanying notes are an integral part of these consolidated financial statements.

5


LEVI STRAUSS & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three Months Ended February 27, 2022
Class A
& Class B
Common
Stock
Additional
Paid-In Capital
Retained
Earnings
Accumulated Other
Comprehensive Loss
Total
Stockholders' Equity
(Dollars in thousands)
(Unaudited)
Balance at November 28, 2021
$400 $584,774 $1,474,874 $(394,387)$1,665,661 
Net income— — 195,843 — 195,843 
Other comprehensive loss, net of tax— — — (16,987)(16,987)
Stock-based compensation and dividends, net2 14,088  — 14,090 
Employee stock purchase plan— 2,273 — — 2,273 
Repurchase of common stock(3)— (71,599)— (71,602)
Tax withholdings on equity awards— (25,825)— — (25,825)
Cash dividends declared ($0.10 per share)
— — (39,864)— (39,864)
Balance at February 27, 2022
$399 $575,310 $1,559,254 $(411,374)$1,723,589 

Three Months Ended February 28, 2021
Class A
& Class B
Common
Stock
Additional
Paid-In Capital
Retained
Earnings
Accumulated Other
Comprehensive Loss
Total
Stockholders' Equity
(Dollars in thousands)
(Unaudited)
Balance at November 29, 2020
$398 $626,243 $1,114,280 $(441,446)$1,299,475 
Net Income— — 142,504 — 142,504 
Other comprehensive loss, net of tax— — — (1,830)(1,830)
Stock-based compensation and dividends, net2 6,714  — 6,716 
Employee stock purchase plan— 1,929 — — 1,929 
Tax withholdings on equity awards— (25,818)— — (25,818)
Cash dividends declared ($0.04 per share)
— — (15,992)— (15,992)
Balance at February 28, 2021
$400 $609,068 $1,240,792 $(443,276)$1,406,984 










The accompanying notes are an integral part of these consolidated financial statements.

6

LEVI STRAUSS & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three Months Ended
 February 27,
2022
February 28,
2021
(Dollars in thousands)
(Unaudited)
Cash Flows from Operating Activities:
Net income$195,843 $142,504 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization38,933 35,469 
Stock-based compensation14,089 6,716 
Provision for (benefit from) deferred income taxes19,032 (18,786)
Other, net172 6,725 
Net change in operating assets and liabilities(181,934)(103,148)
Net cash provided by operating activities86,135 69,480 
Cash Flows from Investing Activities:
Purchases of property, plant and equipment(73,591)(36,986)
Proceeds on settlement of forward foreign exchange contracts not designated for hedge accounting3,093 78 
Payments to acquire short-term investments(27,983)(30,915)
Proceeds from sale, maturity and collection of short-term investments20,277 32,930 
Net cash used for investing activities(78,204)(34,893)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt, net of issuance costs 489,886 
Other short-term borrowings, net(1,363)(9,622)
Repurchase of common stock(74,191) 
Tax withholdings on equity awards(25,825)(25,818)
Dividend to stockholders(39,864)(15,992)
Other financing activities, net1,814 1,214 
Net cash (used for) provided by financing activities(139,429)439,668 
Effect of exchange rate changes on cash and cash equivalents and restricted cash(443)2,191 
Net (decrease) increase in cash and cash equivalents and restricted cash(131,941)476,446 
Beginning cash and cash equivalents, and restricted cash810,580 1,497,648 
Ending cash and cash equivalents, and restricted cash678,639 1,974,094 
Less: Ending restricted cash(333)(492)
Ending cash and cash equivalents$678,306 $1,973,602 
Noncash Investing and Financing Activity:
Property, plant and equipment acquired and not yet paid at end of period$25,717 $19,201 
Supplemental disclosure of cash flow information:
Cash paid for interest during the period$712 $846 
Cash paid for income taxes during the period, net of refunds6,499 9,991 






The accompanying notes are an integral part of these consolidated financial statements.

7


LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 27, 2022
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Levi Strauss & Co. (the "Company") is one of the world’s largest brand-name apparel companies. The Company designs, markets and sells – directly or through third parties and licensees – products that include jeans, casual and dress pants, tops, shorts, skirts, dresses, jackets, footwear and related accessories for men, women and children around the world under the Levi’s®, Signature by Levi Strauss & Co.™, Denizen®, Dockers® and Beyond Yoga® brands.
In the fourth quarter of fiscal 2021, the Company acquired Beyond Yoga®, which has been consolidated since the date of acquisition.
Basis of Presentation and Principles of Consolidation
The interim consolidated financial statements of the Company and its wholly-owned and majority-owned foreign and domestic subsidiaries, including the notes, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the "SEC") applicable to interim period financial statements and do not include all of the information and disclosures required by generally accepted accounting principles in the United States ("U.S. GAAP") for complete financial statements. In the opinion of management, all adjustments necessary for a fair statement of the financial position and the results of operations for the periods presented have been included. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended November 28, 2021, included in the Company's 2021 Annual Report on Form 10-K.
The unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions have been eliminated. The results of operations for the three months ended February 27, 2022 may not be indicative of the results to be expected for any other interim period or the year ending November 27, 2022.
The Company’s fiscal year ends on the last Sunday of November in each year, although the fiscal years of certain foreign subsidiaries end on November 30. Each quarter of both fiscal years 2022 and 2021 consists of 13 weeks. All references to years and quarters relate to fiscal years and quarters rather than calendar years and quarters.
Accounts Receivable
Accounts receivable are recorded net of an allowance for credit losses. The Company estimates the allowance for credit losses based on an analysis of the aging of accounts receivable, assessment of collectability, including any known or anticipated bankruptcies, customer-specific circumstances and an evaluation of current economic conditions. The allowance for credit losses was $11.0 million and $11.6 million as of February 27, 2022 and November 28, 2021, respectively.
Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may be impaired. Impairment losses are measured and recorded for the excess of carrying value over its fair value, estimated based on expected future cash flows and other quantitative and qualitative factors.
Property, plant and equipment, net includes accumulated depreciation of $1.2 billion and $1.1 billion as of February 27, 2022 and November 28, 2021, respectively.
Right-of-Use Assets and Lease Liabilities
As of February 27, 2022 the Company had entered into an agreement for the construction and lease of a distribution facility in Germany. The facility is currently under construction and has an expected lease commencement date in the fourth quarter of fiscal year 2023. Once the 20-year lease term commences, the Company expects to recognize a right-of-use ("ROU") asset and corresponding lease liability of between $100 million and $110 million. The Company expects to capitalize approximately $60 million for equipment to be installed in the leased facility.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the related notes to the consolidated

8


LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 27, 2022

financial statements. Estimates are based upon historical factors, current circumstances and the experience and judgment of the Company’s management. Management evaluates its estimates and assumptions on an ongoing basis and may employ outside experts to assist in its evaluations. Changes in such estimates, based on more accurate future information, or different assumptions or conditions, may affect amounts reported in future periods. As a result of uncertainty and frequently changing information regarding the COVID-19 pandemic and its impact on global economic conditions, estimates may change frequently and in the near term.     
Share Repurchases
During the three months ended February 27, 2022, 3.0 million shares were repurchased for $71.5 million, plus broker's commissions, in the open market. This equates to an average repurchase price of approximately $23.56 per share.
The Company accounts for share repurchases by charging the excess of repurchase price over the repurchased Class A common stock's par value entirely to retained earnings. All repurchased shares are retired and become authorized but unissued shares. The Company accrues for the shares purchased under the share repurchase plan based on the trade date. The Company may terminate or limit the share repurchase program at any time.
Subsequent to quarter end, the Company completed its $200 million share repurchase program by repurchasing an additional 2.0 million shares for $40.0 million, plus broker's commissions, in the open market. This equates to an average repurchase price of approximately $19.68 per share.
Reclassification
Certain insignificant amounts on the consolidated balance sheets and consolidated statements of cash flow have been conformed to the February 27, 2022 presentation.
Recently Adopted Accounting Principles
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. ASU 2019-12 enhances and simplifies aspects of the income tax accounting guidance in ASC 740. The Company adopted this standard in the first quarter of fiscal 2022 on a prospective basis. The adoption of this standard did not have a material impact on the Company's consolidated financial statements and related disclosures.
Recently Issued Accounting Standards
There have been no developments to recently issued accounting standards, including the expected dates of adoption and estimated effects on the Company’s consolidated financial statements and footnote disclosures, from those disclosed in the 2021 Annual Report on Form 10-K.

9


LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 27, 2022

NOTE 2: INVENTORIES
The following table presents the Company's inventory balances: 
February 27,
2022
November 28,
2021
 (Dollars in thousands)
Raw materials$10,471 $9,141 
Work-in-progress3,948 3,603 
Finished goods991,761 885,206 
Total inventories$1,006,180 $897,950 
NOTE 3: FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the Company’s financial instruments that are carried at fair value:
 February 27, 2022November 28, 2021
  Fair Value Estimated
Using
 Fair Value Estimated
Using
 Fair Value
Level 1 Inputs(1)
Level 2 Inputs(2)
Fair Value
Level 1 Inputs(1)
Level 2 Inputs(2)
 (Dollars in thousands)
Financial assets carried at fair value
Rabbi trust assets$76,950 $76,950 $ $80,188 $80,188 $ 
Short-term investments in marketable securities98,843 98,843 91,550 91,550 
Derivative instruments(3)
19,770  19,770 27,512  27,512 
Total$195,563 $76,950 $118,613 $199,250 $80,188 $119,062 
Financial liabilities carried at fair value
Derivative instruments(3)
10,542  10,542 13,255  13,255 
Total$10,542 $ $10,542 $13,255 $ $13,255 
_____________
(1)Fair values estimated using Level 1 inputs are inputs that consist of quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Rabbi trust assets consist of a diversified portfolio of equity, fixed income and other securities.
(2)Fair values estimated using Level 2 inputs are inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly, and include among other things, quoted prices for similar assets or liabilities in markets that are active or inactive as well as inputs other than quoted prices that are observable. Short-term investments in marketable securities consist of fixed income securities. For forward foreign exchange contracts, inputs include foreign currency exchange and interest rates and, where applicable, credit default swap prices.
(3)The Company’s cash flow hedges are subject to International Swaps and Derivatives Association, Inc. master agreements. These agreements permit the net settlement of these contracts on a per-institution basis. Refer to Note 4 for more information.

10


LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 27, 2022

The following table presents the amortized cost, gross unrealized gains (losses) and fair values of the Company’s available for sale investments:
 February 27, 2022November 28, 2021
 Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair ValueAmortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
 (Dollars in thousands)
Short-term investments
Rabbi trust assets$3,897 $1,303 $ $5,200 $2,823 $1,277 $ $4,100 
Short-term investments in marketable securities99,082 152 (391)98,843 91,475 155 (80)91,550 
102,979 1,455 (391)104,043 94,298 1,432 (80)95,650 
Long-term investments
Rabbi trust assets53,767 17,983  71,750 52,398 23,690  76,088 
$156,746 $19,438 $(391)$175,793 $146,696 $25,122 $(80)$171,738 

The following table presents the carrying value, including related accrued interest, and estimated fair value of the Company’s financial instruments that are carried at adjusted historical cost:
 February 27, 2022November 28, 2021
 Carrying
Value
Estimated Fair
 Value
Carrying
Value
Estimated Fair
 Value
 (Dollars in thousands)
Financial liabilities carried at adjusted historical cost
3.375% senior notes due 2027(1)
$535,308 $537,285 $531,382 $541,935 
3.50% senior notes due 2031(1)
502,020 465,013 497,335 502,881 
Short-term borrowings4,227 4,227 5,862 5,862 
Total$1,041,555 $1,006,525 $1,034,579 $1,050,678 
_____________
(1)Fair values are estimated using Level 1 inputs and incorporate mid-market price quotes. Level 1 inputs are inputs that consist of quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

11


LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 27, 2022

NOTE 4: DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Designated Cash Flow Hedges
The Company actively manages the risk of changes in functional currency equivalent cash flows resulting from anticipated non-functional currency denominated purchases and sales. The Company’s global sourcing organization uses the U.S. dollar as its functional currency and is primarily exposed to changes in functional currency equivalent cash flows from anticipated inventory purchases, as it procures inventory on behalf of subsidiaries with the Euro, Australian Dollar and Japanese Yen functional currencies. The Mexico subsidiary uses the Mexican Peso as its functional currency and is exposed as it procures inventory in the U.S. Dollar. Additionally, a European subsidiary uses Euros as its functional currency and is exposed to anticipated non-functional currency denominated sales. The Company manages these risks by using currency forward contracts formally designated and effective as cash flow hedges. Hedge effectiveness is generally determined by evaluating the ability of a hedging instrument's cumulative change in fair value to offset the cumulative change in the present value of expected cash flows on the underlying exposures. For forward contracts, forward points are excluded from the determination of hedge effectiveness and are included in cost of goods sold for hedges of anticipated inventory purchases and in net revenues for hedges of anticipated sales on a straight-line basis over the life of the contract. In each accounting period, differences between the change in fair value of the forward points and the amount recognized on a straight-line basis is recognized in other comprehensive loss.
Net Investment Hedges
The Company designates certain non-derivative instruments as net investment hedges to hedge the Company's net investment position in certain of its foreign subsidiaries. For these instruments, the Company documents the hedge designation by identifying the hedging instrument, the nature of the risk being hedged and the approach for measuring hedge effectiveness. The ineffective portions of these hedges are recorded in "Other income, net" in the Company's consolidated statements of income. The effective portions of these hedges are recorded in "Accumulated other comprehensive loss" on the Company's consolidated balance sheets and are not reclassified to earnings until the related net investment position has been liquidated.
Non-designated Cash Flow Hedges
The Company enters into derivative instruments not designated as hedges. These derivative instruments are not speculative and are used to manage the Company’s exposure to certain product sourcing activities, some intercompany sales, foreign subsidiaries' royalty payments, interest payments, earnings repatriations, net investment in foreign operations and funding activities but the Company has not elected to apply hedge accounting. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in "Other income, net" in the Company’s consolidated statements of income.
As of February 27, 2022, the Company had forward foreign exchange contracts derivatives that were not designated as hedges in qualifying hedging relationships, of which $866.9 million were contracts to buy and $487.4 million were contracts to sell various foreign currencies. These contracts are at various exchange rates and expire at various dates through May 2023.

12


LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 27, 2022

The table below provides data about the carrying values of derivative and non-derivative instruments: 
 February 27, 2022November 28, 2021
 Assets(Liabilities)Derivative
Net Carrying
Value
Assets(Liabilities)Derivative
Net Carrying
Value
 Carrying
Value
Carrying
Value
Carrying
Value
Carrying
Value
 (Dollars in thousands)
Derivatives designated as hedging instruments
Foreign exchange risk cash flow hedges(1)
$15,823 $ $15,823 $24,858 $ $24,858 
Foreign exchange risk cash flow hedges(2)
 (3,048)(3,048) (2,030)(2,030)
Total
$15,823 $(3,048)$24,858 $(2,030)
Derivatives not designated as hedging instruments
Forward foreign exchange contracts(1)
$19,770 $(15,823)$3,947 $27,512 $(24,858)$2,654 
Forward foreign exchange contracts(2)
3,048 (10,542)(7,494)2,030 (13,255)(11,225)
Total
$22,818 $(26,365)$29,542 $(38,113)
Non-derivatives designated as hedging instruments
Euro senior notes
$ $(531,525)$ $(532,285)
_____________
(1)Included in "Other current assets" or "Other non-current assets" on the Company’s consolidated balance sheets.
(2)Included in "Other accrued liabilities" or "Other long-term liabilities" on the Company’s consolidated balance sheets.
The Company's over-the-counter forward foreign exchange contracts are subject to International Swaps and Derivatives Association, Inc. master agreements. These agreements permit the net settlement of these contracts on a per-institution basis; however, the Company records the fair value on a gross basis on its consolidated balance sheets based on maturity dates, including those subject to master netting arrangements. The table below presents the gross and net amounts of these contracts recognized on the Company's consolidated balance sheets by type of financial instrument:
February 27, 2022November 28, 2021
Gross Amounts of Assets / (Liabilities)
Presented in the Balance Sheet
Gross Amounts
Not Offset in the Balance Sheet
Net Amounts
of Assets / (Liabilities)
Gross Amounts of Assets / (Liabilities)
Presented in the Balance Sheet
Gross Amounts
Not Offset in the Balance Sheet
Net Amounts
of Assets / (Liabilities)
(Dollars in thousands)
Foreign exchange risk contracts and forward foreign exchange contracts
Financial assets$38,641 $(7,389)$31,252 $54,400 $(10,152)$44,248 
Financial liabilities(29,413)7,389 (22,024)(40,143)10,152 (29,991)
Total$9,228 $14,257 

13


LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 27, 2022

The table below provides data about the amount of gains and losses related to derivative instruments designated as cash flow hedges and non-derivative instruments designated as net investment hedges included in "Accumulated other comprehensive loss" ("AOCL") on the Company’s consolidated balance sheets:
 Amount of Gain (Loss)
Recognized in AOCL
(Effective Portion)
Amount of Gain (Loss) Reclassified from
 AOCL into Net Income(1)
 As of
February 27,
2022
As of
November 28,
 2021
Three Months Ended
February 27,
2022
February 28,
2021
 (Dollars in thousands)
Foreign exchange risk contracts$19,376 $24,304 $555 $(1,878)
Realized forward foreign exchange swaps (2)
4,637 4,637   
Yen-denominated Eurobonds(19,811)(19,811)  
Euro-denominated senior notes(44,441)(45,201)  
Cumulative income taxes16,245 15,157   
Total$(23,994)$(20,914)
_____________
(1)Amounts reclassified from AOCL were classified as net revenues and cost of goods sold on the consolidated statements of income.
(2)Prior to and during 2005, the Company used foreign exchange currency swaps to hedge the net investment in its foreign operations. For hedges that qualified for hedge accounting, the net gains were included in AOCL and are not reclassified to earnings until the related net investment position has been liquidated.
There was no hedge ineffectiveness for the three months ended February 27, 2022. Within the next 12 months, a $12.8 million gain from cash flow hedges is expected to be reclassified from AOCL into net income.
The table below presents the effects of the Company's cash flow hedges of foreign exchange risk contracts on the consolidated statements of income:
Three Months Ended
February 27,
2022
February 28,
2021
(Dollars in thousands)
Amount of Gain (Loss) on Cash Flow Hedge Activity
Net revenues$(914)$943 
Cost of goods sold$1,469 $(2,821)
The table below provides data about the amount of gains and losses related to derivatives instruments included in "Other income, net" in the Company's consolidated statements of income:
 Three Months Ended
 February 27,
2022
February 28,
2021
 (Dollars in thousands)
Realized (loss) gain$(1,354)$1,749 
Unrealized gain (loss)3,675 (1,382)
Total$2,321 $367 


14


LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 27, 2022

NOTE 5: OTHER ACCRUED LIABILITIES
The following table presents the Company's other accrued liabilities:
February 27,
2022
November 28,
2021
 (Dollars in thousands)
Other accrued liabilities
Accrued advertising and promotion$79,694 $111,086 
Accrued income taxes17,249 14,477 
Accrued interest payable17,052 8,281 
Accrued rent13,550 16,612 
Fair value derivatives10,542 13,246 
Restructuring Liabilities9,324 19,106 
Short-term debt4,227 5,862 
Taxes other than income taxes payable44,178 48,278 
Other302,637 378,399 
Total other accrued liabilities$498,453 $615,347 
NOTE 6: DEBT 
The following table presents the Company's debt: 
February 27,
2022
November 28,
2021
 (Dollars in thousands)
Long-term debt
3.375% senior notes due 2027
$527,084 $527,644 
3.50% senior notes due 2031
493,415 493,056 
Total long-term debt$1,020,499 $1,020,700 
Short-term debt
Short-term borrowings4,227 5,862 
Total debt$1,024,726 $1,026,562 

Senior Revolving Credit Facility
The Company's unused availability under the Credit Facility was $837.2 million at February 27, 2022, as the Company's total availability of $850.0 million was reduced by $12.8 million of letters of credit and other credit usage allocated under the Credit Facility.
Interest Rates on Borrowings
The Company’s weighted-average interest rate on average borrowings outstanding during the three months ended February 27, 2022 was 3.83%, as compared to 4.55% during the same period of 2021.

15


LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 27, 2022

NOTE 7: COMMITMENTS AND CONTINGENCIES
Forward Foreign Exchange Contracts
The Company uses cash flow hedge derivative instruments to manage its exposure to foreign currencies. The Company is exposed to credit loss in the event of nonperformance by the counterparties to the forward foreign exchange contracts. However, the Company believes that its exposures are appropriately diversified across counterparties and that these counterparties are creditworthy financial institutions. See Note 4 for additional information.
Other Contingencies
Litigation. In the ordinary course of business, the Company has various claims, complaints and pending cases, including contractual matters, facility and employee-related matters, distribution matters, product liability matters, intellectual property matters, bankruptcy preference matters, and tax and administrative matters. The Company establishes loss provisions for these ordinary course claims as well as other matters in which losses are probable and can be reasonably estimated. The Company does not believe any of these pending claims, complaints and legal proceedings will have a material impact on its financial condition, results of operations or cash flows.
Customs Duty Audits. The Company imports both raw materials and finished garments into all of its geographic regions and, as such, is subject to numerous countries' complex customs laws and regulations with respect to its import and export activity. The Company has various pending audit assessments in connection with these activities. As of February 27, 2022, the Company has recorded certain reserves for these matters which are not material. The Company does not believe any of the claims for customs duty and related charges will have a material impact on its financial condition, results of operations or cash flows.
Inventory Purchase Commitments. The Company also has minimum inventory purchase commitments, including fabric commitments, with suppliers that secure a portion of material needs for future seasons.
NOTE 8: DIVIDENDS
Dividends are declared at the discretion of the Board. In January 2022 and 2021, the Company declared cash dividends of $0.10 and $0.04, respectively, per share to holders of record of its Class A and Class B common stock. Dividends in the amount of $39.9 million and $16.0 million, respectively, were paid during the three months ended February 27, 2022 and February 28, 2021.
The Company does not have an established dividend policy. The Board reviews the Company's ability to pay dividends on an ongoing basis and establishes the dividend amount based on the Company's financial condition, results of operations, capital requirements, current and projected cash flows and other factors, and any restrictions related to the terms of the Company’s debt agreements.
Subsequent to the Company's quarter end, a cash dividend of $0.10 per share was declared to holders of record of its Class A and Class B common stock at the close of business on May 6, 2022, for a total quarterly dividend of approximately $40 million.

16


LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 27, 2022

NOTE 9: ACCUMULATED OTHER COMPREHENSIVE LOSS
The following is a summary of the components of "Accumulated other comprehensive loss," net of related income taxes: 
February 27,
2022
November 28,
2021
February 28,
2021
 (Dollars in thousands)
Pension and postretirement benefits$(193,827)$(195,481)$(219,864)
Derivative instruments(23,994)(20,914)(88,877)
Foreign currency translation losses(207,676)(196,763)(149,333)
Unrealized gains on marketable securities14,123 18,771 14,798 
Accumulated other comprehensive loss$(411,374)$(394,387)$(443,276)

No material amounts were reclassified out of "Accumulated other comprehensive loss" into net income other than those that pertain to the Company's derivative instruments. Refer to Note 4 for additional information.

17


LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 27, 2022

NOTE 10: NET REVENUES
Disaggregated Revenue
The table below provides the Company's revenues disaggregated by segment and channel.
Three Months Ended February 27, 2022
Levi's Brands
AmericasEuropeAsiaOther BrandsTotal
(Dollars in thousands)
Net revenues by channel:
Wholesale$510,735 $265,718 $122,763 $63,854 $963,070 
Direct-to-consumer255,117 203,639 135,642 34,094 628,492 
Total net revenues$765,852 $469,357 $258,405 $97,948 $1,591,562 

Three Months Ended February 28, 2021
Levi's Brands
AmericasEuropeAsiaOther BrandsTotal
(Dollars in thousands)
Net revenues by channel:
Wholesale$411,205 $276,785 $116,813 $33,956 $838,759 
Direct-to-consumer194,916 139,932 116,103 15,892 466,843 
Total net revenues$606,121 $416,717 $232,916 $49,848 $1,305,602 
The Company did not have any material contract assets or contract liabilities recorded in the consolidated balance sheets as of February 27, 2022 and November 28, 2021.
NOTE 11: OTHER INCOME, NET
The following table summarizes significant components of "Other income, net": 
 Three Months Ended
 February 27,
2022
February 28,
2021
 (Dollars in thousands)
Foreign exchange management gains(1)
$2,321 $367 
Foreign currency transaction losses(2)
(2,211)(3,235)
Investment income 2,440 1,964 
COVID-19 government subsidy gain(3)
12,524  
Other, net823 1,762 
Total other income, net$15,897 $858 
_____________
(1)Gains on forward foreign exchange contracts primarily resulted from currency fluctuations relative to negotiated contract rates.
(2)Foreign currency transaction losses reflect the impact of foreign currency fluctuation on the Company's foreign currency denominated balances.
(3)COVID-19 government subsidy gain reflects a payment received from the German government as reimbursement for COVID-19 losses incurred in prior years.

18


LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 27, 2022

NOTE 12: INCOME TAXES
The Company's effective income tax rate was 20.4% for the three months ended February 27, 2022, compared to 7.9% for the same prior-year period. The increase in the effective tax rate was primarily driven by lower tax benefits from the foreign-derived intangible income deduction on actual and deemed royalty income and stock-based compensation equity awards in the quarter as compared to the first quarter of fiscal 2021.
NOTE 13: EARNINGS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
The following table sets forth the computation of the Company's basic and diluted earnings per share:
 Three Months Ended
 February 27,
2022
February 28,
2021
 (Dollars in thousands, except per share amounts)
Numerator:
Net income$195,843 $142,504 
Denominator:
Weighted-average common shares outstanding - basic399,445,106 399,541,735 
Dilutive effect of stock awards7,571,986 12,331,036 
Weighted-average common shares outstanding - diluted407,017,092 411,872,771 
Earnings per common share attributable to common stockholders:
Basic$0.49 $0.36 
Diluted$0.48 $0.35 
Anti-dilutive securities excluded from calculation of diluted earnings per share attributable to common stockholders1,192,463 989,627 
NOTE 14: RELATED PARTIES
Charles V. Bergh, President and Chief Executive Officer is a board member of the Levi Strauss Foundation, which is not a consolidated entity of the Company. Seth R. Jaffe, Executive Vice President and General Counsel, is Vice President of the Levi Strauss Foundation. During the three months ended February 27, 2022, the Company donated $11.4 million to the Levi Strauss Foundation as compared to $2.4 million for the same prior-year period.

19


LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 27, 2022

NOTE 15: BUSINESS SEGMENT INFORMATION
In the fourth quarter of 2021, the Company changed its segment reporting as a result of operational changes in support of the ongoing efforts to globally integrate the Levi's Brands business, which includes Levi's®, Signature by Levi Strauss & Co.™ and Denizen® brands, and separate the Dockers® business. The Levi's business is defined geographically in three operating segments: Americas, Europe and Asia. The Dockers® business, which is managed separately, will no longer be reported in the three geographical regions of Americas, Europe and Asia.
Therefore, there are three reportable segments: Americas, Europe, and Asia, collectively comprising the Company's Levi's Brands business, and Other Brands, which includes Dockers® and the newly acquired Beyond Yoga® business, which do not meet the quantitative thresholds for reportable segments and therefore are presented under the caption of Other Brands. While this reporting change did not impact consolidated results, the segment data has been recast to be consistent for all periods presented throughout the financial statements and related notes.
The Company considers its chief executive officer to be the Company’s chief operating decision maker. The Company’s chief operating decision maker manages business operations, evaluates performance and allocates resources based on the segments’ net revenues and operating income.
Business segment information for the Company is as follows: 
 Three Months Ended
 February 27,
2022
February 28,
2021
 (Dollars in thousands)
Net revenues:
Americas$765,852 $606,121 
Europe469,357