10-Q 1 lvis-20220529.htm 10-Q lvis-20220529
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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 May 29, 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 June 30, 2022, the registrant had 98,953,422 shares of Class A common stock, $0.001 par value per share and 297,760,924 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 MAY 29, 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)
May 29,
2022
November 28,
2021
 (Dollars in thousands)
ASSETS
Current Assets:
Cash and cash equivalents$601,870 $810,266 
Short-term investments in marketable securities96,396 91,550 
Trade receivables, net609,180 707,625 
Inventories1,112,835 897,950 
Other current assets222,081 202,510 
Total current assets2,642,362 2,709,901 
Property, plant and equipment, net513,776 502,562 
Goodwill368,162 386,880 
Other intangible assets, net289,176 291,332 
Deferred tax assets, net556,120 573,114 
Operating lease right-of-use assets, net1,019,524 1,103,705 
Other non-current assets348,637 332,575 
Total assets$5,737,757 $5,900,069 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable558,665 524,838 
Accrued salaries, wages and employee benefits221,815 274,700 
Accrued sales returns and allowances188,467 209,364 
Short-term operating lease liabilities243,841 245,369 
Other accrued liabilities517,826 615,347 
Total current liabilities1,730,614 1,869,618 
Long-term debt998,484 1,020,700 
Postretirement medical benefits47,033 51,439 
Pension liabilities151,105 155,218 
Long-term employee related benefits104,802 108,544 
Long-term operating lease liabilities925,049 969,482 
Other long-term liabilities52,338 59,407 
Total liabilities4,009,425 4,234,408 
Commitments and contingencies
Stockholders’ Equity:
Common stock — $0.001 par value; 1,200,000,000 Class A shares authorized, 98,326,863 shares and 97,567,627 shares issued and outstanding as of May 29, 2022 and November 28, 2021, respectively; and 422,000,000 Class B shares authorized, 298,351,504 shares and 302,209,813 shares issued and outstanding, as of May 29, 2022 and November 28, 2021, respectively
397 400 
Additional paid-in capital592,827 584,774 
Accumulated other comprehensive loss(394,182)(394,387)
Retained earnings1,529,290 1,474,874 
Total stockholders’ equity1,728,332 1,665,661 
Total liabilities and stockholders’ equity$5,737,757 $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 EndedSix Months Ended
 May 29,
2022
May 30,
2021
May 29,
2022
May 30,
2021
(Dollars in thousands, except per share amounts)
(Unaudited)
Net revenues$1,471,149 $1,275,971 $3,062,711 $2,581,573 
Cost of goods sold616,126 525,770 1,264,080 1,071,343 
Gross profit855,023 750,201 1,798,631 1,510,230 
Selling, general and administrative expenses778,857 643,746 1,488,233 1,226,652 
Operating income76,166 106,455 310,398 283,578 
Interest expense(4,360)(19,933)(8,608)(43,243)
Loss on early extinguishment of debt (30,108) (30,338)
Other income (expense), net6,004 (715)21,901 373 
Income before income taxes77,810 55,699 323,691 210,370 
Income tax expense (benefit)28,068 (9,020)78,106 3,147 
Net income$49,742 $64,719 $245,585 $207,223 
Earnings per common share attributable to common stockholders:
Basic$0.13 $0.16 $0.62 $0.52 
Diluted$0.12 $0.16 $0.61 $0.50 
Weighted-average common shares outstanding:
Basic397,882,576 401,964,569 398,650,665 400,771,248 
Diluted403,782,416 412,102,841 405,852,351 410,644,463 

























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 EndedSix Months Ended
 May 29,
2022
May 30,
2021
May 29,
2022
May 30,
2021
(Dollars in thousands)
(Unaudited)
Net income$49,742 $64,719 $245,585 $207,223 
Other comprehensive income (loss), before related income taxes:
Pension and postretirement benefits
2,041 2,743 4,226 5,681 
Derivative instruments
34,030 4,579 29,862 (12,736)
Foreign currency translation (losses) gains(14,049)4,418 (25,138)15,359 
Unrealized (losses) gains on marketable securities(4,415)4,034 (10,409)4,435 
Total other comprehensive income (loss), before related income taxes17,607 15,774 (1,459)12,739 
Income tax (benefit) expense related to items of other comprehensive income (loss)(415)(3,987)1,664 (2,784)
Comprehensive income, net of income taxes$66,934 $76,506 $245,790 $217,178 

































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 May 29, 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 February 27, 2022
$399 $575,310 $1,559,254 $(411,374)$1,723,589 
Net income— — 49,742 — 49,742 
Other comprehensive loss, net of tax— — — 17,192 17,192 
Stock-based compensation and dividends, net— 16,653 — — 16,653 
Employee stock purchase plan— 2,200 — — 2,200 
Repurchase of common stock(2)— (40,038)— (40,040)
Tax withholdings on equity awards— (1,336)— — (1,336)
Cash dividends declared ($0.10 per share)
— — (39,668)— (39,668)
Balance at May 29, 2022
$397 $592,827 $1,529,290 $(394,182)$1,728,332 

Six Months Ended May 29, 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— — 245,585 — 245,585 
Other comprehensive loss, net of tax— — — 205 205 
Stock-based compensation and dividends, net2 30,741 — — 30,743 
Employee stock purchase plan— 4,473 — — 4,473 
Repurchase of common stock(5)— (111,637)— (111,642)
Tax withholdings on equity awards— (27,161)— — (27,161)
Cash dividends declared ($0.20 per share)
— — (79,532)— (79,532)
Balance at May 29, 2022
$397 $592,827 $1,529,290 $(394,182)$1,728,332 

6


Three Months Ended May 30, 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 February 28, 2021
$400 $609,068 $1,240,792 $(443,276)$1,406,984 
Net Income— — 64,719 — 64,719 
Other comprehensive loss, net of tax— — — 11,787 11,787 
Stock-based compensation and dividends, net2 23,384  — 23,386 
Employee stock purchase plan— 1,792 — — 1,792 
Tax withholdings on equity awards— (50,542)— — (50,542)
Cash dividends declared ($0.06 per share)
— — (24,104)— (24,104)
Balance at May 30, 2021
$402 $583,702 $1,281,407 $(431,489)$1,434,022 

Six Months Ended May 30, 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— — 207,223 — 207,223 
Other comprehensive loss, net of tax— — — 9,957 9,957 
Stock-based compensation and dividends, net4 30,098  — 30,102 
Employee stock purchase plan— 3,721 — — 3,721 
Tax withholdings on equity awards— (76,360)— — (76,360)
Cash dividends declared ($0.10 per share)
— — (40,096)— (40,096)
Balance at May 30, 2021
$402 $583,702 $1,281,407 $(431,489)$1,434,022 










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

7

LEVI STRAUSS & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months Ended
 May 29,
2022
May 30,
2021
(Dollars in thousands)
(Unaudited)
Cash Flows from Operating Activities:
Net income$245,585 $207,223 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization77,740 69,926 
Property, plant, equipment, right-of-use asset, and goodwill impairments54,733 5,147 
Loss on early extinguishment of debt 30,338 
Stock-based compensation30,743 30,102 
Provision for (benefit from) deferred income taxes17,435 (46,857)
Other, net9,847 9,392 
Net change in operating assets and liabilities(290,201)(57,253)
Net cash provided by operating activities145,882 248,018 
Cash Flows from Investing Activities:
Purchases of property, plant and equipment(120,507)(67,501)
Payments on settlement of forward foreign exchange contracts not designated for hedge accounting(9,089)(4,349)
Payments to acquire short-term investments(44,589)(55,124)
Proceeds from sale, maturity and collection of short-term investments39,027 56,530 
Net cash used for investing activities(135,158)(70,444)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt, net of issuance costs 489,554 
Repayments of long-term debt including debt extinguishment costs (820,000)
Other short-term borrowings, net213 (8,502)
Repurchase of common stock(114,232) 
Tax withholdings on equity awards(27,161)(76,360)
Dividend to stockholders(79,532)(40,097)
Other financing activities, net3,563 2,267 
Net cash used for financing activities(217,149)(453,138)
Effect of exchange rate changes on cash and cash equivalents and restricted cash(1,939)2,500 
Net decrease in cash and cash equivalents and restricted cash(208,364)(273,064)
Beginning cash and cash equivalents, and restricted cash810,580 1,497,648 
Ending cash and cash equivalents, and restricted cash602,216 1,224,584 
Less: Ending restricted cash(346)(504)
Ending cash and cash equivalents$601,870 $1,224,080 
Noncash Investing and Financing Activity:
Property, plant and equipment acquired and not yet paid at end of period$47,211 $29,579 
Supplemental disclosure of cash flow information:
Cash paid for interest during the period$18,947 $29,926 
Cash paid for income taxes during the period, net of refunds56,776 30,750 


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

8


LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTERLY PERIOD ENDED MAY 29, 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 and six months ended May 29, 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 $8.9 million and $11.6 million as of May 29, 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.
In the second quarter of 2022, as a result of the Russia-Ukraine crisis, the Company reviewed certain long-lived assets for impairment and recorded $4.1 million of non-cash impairment charges. The impairment charges are included in selling, general and administrative expenses ("SG&A") in the accompanying consolidated statements of income.
Property, plant and equipment, net includes accumulated depreciation of $1.2 billion and $1.1 billion as of May 29, 2022 and November 28, 2021, respectively.


9


LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED MAY 29, 2022

Goodwill and Intangible Assets
The Company tests goodwill and indefinite-lived intangible assets for impairment annually, or more frequently as warranted by events or changes in circumstances which indicate that the carrying amount may not be recoverable. The Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit or indefinite-lived asset is less than its carrying amount.
If, based on the results of the qualitative assessment, it is concluded that it is not more likely than not that the fair value of a reporting unit or indefinite-lived asset exceeds its carrying value, a quantitative test is performed. Under the quantitative test, the Company compares the carrying value of the reporting unit or indefinite-lived asset to its fair value. If the carrying value exceeds its fair value, the Company records an impairment charge equal to the excess of the carrying value over the related fair value.
In the second quarter of 2022, the Company reviewed the goodwill assigned to its Russia business for impairment and recorded $11.6 million of non-cash impairment charges. The impairment charges are included in SG&A in the accompanying consolidated statements of income.
Right-of-Use Assets and Lease Liabilities
In the second quarter of 2022, the Company reviewed the operating lease right-of-use ("ROU") assets impacted by the Russia-Ukraine crisis for impairment and recorded $35.4 million of non-cash impairment charges. The impairment charges are included in SG&A in the accompanying consolidated statements of income.
As of May 29, 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 third quarter of fiscal year 2023. Once the 20-year lease term commences, the Company expects to recognize a ROU asset and corresponding lease liability of between $90 million and $100 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 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 as well as the Russia-Ukraine crisis and their potential impact on global economic conditions, estimates may change frequently and in the near term.     
Share Repurchases
During the three and six months ended May 29, 2022, 2.0 million and 5.0 million shares were repurchased for $40.0 million and $111.5 million, plus broker's commissions, respectively, in the open market, essentially completing the Company's $200.0 million share repurchase plan.
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.
On May 31, 2022, subsequent to the Company's quarter end, the Board approved a new share repurchase program that authorizes the repurchase of up to $750.0 million of the Company's Class A common stock.

10


LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED MAY 29, 2022

Reclassification
Certain insignificant amounts on the consolidated balance sheets and consolidated statements of cash flow have been conformed to the May 29, 2022 presentation.
Recently Adopted Accounting Principles
In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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, except for the following:
First Quarter 2023
In March 2020 and January 2021, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting and ASU 2021-01, Reference Rate Reform: Scope, respectively. Together, the ASUs provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This guidance is effective beginning on March 12, 2020, and the Company may elect to apply the amendments through December 31, 2022. The Company does not expect that the adoption will have a material impact on its consolidated financial statements and related disclosures.

11


LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED MAY 29, 2022

NOTE 2: INVENTORIES
The following table presents the Company's inventory balances: 
May 29,
2022
November 28,
2021
 (Dollars in thousands)
Raw materials$13,417 $9,141 
Work-in-progress4,852 3,603 
Finished goods1,094,566 885,206 
Total inventories$1,112,835 $897,950 
NOTE 3: FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the Company’s financial instruments that are carried at fair value:
 May 29, 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$72,907 $72,907 $ $80,188 $80,188 $ 
Short-term investments in marketable securities96,396  96,396 91,550  91,550 
Derivative instruments(3)
32,857  32,857 27,512  27,512 
Total$202,160 $72,907 $129,253 $199,250 $80,188 $119,062 
Financial liabilities carried at fair value
Derivative instruments(3)
4,212  4,212 13,255  13,255 
Total$4,212 $ $4,212 $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.

12


LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED MAY 29, 2022

The following table presents the amortized cost, gross unrealized gains (losses) and fair values of the Company’s available for sale investments:
 May 29, 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$3,408 $892 $ $4,300 $2,823 $1,277 $ $4,100 
Short-term investments in marketable securities96,853 198 (656)96,395 91,475 155 (80)91,550 
100,261 1,090 (656)100,695 94,298 1,432 (80)95,650 
Long-term investments
Rabbi trust assets54,384 14,222  68,606 52,398 23,690  76,088 
$154,645 $15,312 $(656)$169,301 $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:
 May 29, 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)
$508,509 $487,682 $531,382 $541,935 
3.50% senior notes due 2031(1)
497,897 441,137 497,335 502,881 
Short-term borrowings5,943 5,943 5,862 5,862 
Total$1,012,349 $934,762 $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.

13


LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED MAY 29, 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 income (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 (expense), 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 (expense), net" in the Company’s consolidated statements of income.
As of May 29, 2022, the Company had forward foreign exchange contracts derivatives that were not designated as hedges in qualifying hedging relationships, of which $740.1 million were contracts to buy and $452.5 million were contracts to sell various foreign currencies. These contracts are at various exchange rates and expire at various dates through May 2023.

14


LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED MAY 29, 2022

The table below provides data about the carrying values of derivative and non-derivative instruments: 
 May 29, 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)
$25,612 $ $25,612 $24,858 $ $24,858 
Foreign exchange risk cash flow hedges(2)
 (3,587)(3,587) (2,030)(2,030)
Total
$25,612 $(3,587)$24,858 $(2,030)
Derivatives not designated as hedging instruments
Forward foreign exchange contracts(1)
$32,858 $(25,613)$7,245 $27,512 $(24,858)$2,654 
Forward foreign exchange contracts(2)
3,573 (4,199)(626)2,030 (13,255)(11,225)
Total
$36,431 $(29,812)$29,542 $(38,113)
Non-derivatives designated as hedging instruments
Euro senior notes
$ $(509,153)$ $(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:
May 29, 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$62,043 $(4,509)$57,534 $54,400 $(10,152)$44,248 
Financial liabilities(33,399)4,509 (28,890)(40,143)10,152 (29,991)
Total$28,644 $14,257 

15


LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED MAY 29, 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
May 29,
2022
As of
November 28,
 2021
Three Months EndedSix Months Ended
May 29,
2022
May 30,
2021
May 29,
2022
May 30,
2021
 (Dollars in thousands)
Foreign exchange risk contracts$31,034 $24,304 $3,080 $(9,216)$3,635 $(11,094)
Realized forward foreign exchange swaps (2)
4,637 4,637     
Yen-denominated Eurobonds(19,811)(19,811)    
Euro-denominated senior notes(22,069)(45,201)    
Cumulative income taxes9,070 15,157     
Total$2,861 $(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 six months ended May 29, 2022. Within the next 12 months, a $29.2 million gain from cash flow hedges is expected to be reclassified from AOCL into net income.
The table below presents the effects of the Company's cash flow hedges of foreign exchange risk contracts on the consolidated statements of income:
Three Months EndedSix Months Ended
May 29,
2022
May 30,
2021
May 29,
2022
May 30,
2021
(Dollars in thousands)
Amount of (Loss) Gain on Cash Flow Hedge Activity
Net revenues$(928)$(1,529)$(1,841)$(586)
Cost of goods sold$4,007 $(7,687)$5,477 $(10,508)
The table below provides data about the amount of gains and losses related to derivatives instruments included in "Other income (expense), net" in the Company's consolidated statements of income:
 Three Months EndedSix Months Ended
 May 29,
2022
May 30,
2021
May 29,
2022
May 30,
2021
 (Dollars in thousands)
Realized (loss) gain$(17,757)$(1,051)$(19,111)$698 
Unrealized gain (loss)10,231 (1,043)13,906 (2,425)
Total$(7,526)$(2,094)$(5,205)$(1,727)


16


LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED MAY 29, 2022

NOTE 5: OTHER ACCRUED LIABILITIES
The following table presents the Company's other accrued liabilities:
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