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~~February 26, 2023


☐						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 class

Trading symbol(s)

Name of each exchange on which registered

Class A Common Stock, $0.001 par value per share

LEVI

New 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~~March 30, ~~2022,~~2023, the registrant had ~~98,953,422~~98,832,083 shares of Class A common stock, $0.001 par value per share and ~~297,760,924~~297,544,679 shares of Class B common stock, $0.001 par value per share, outstanding.

Table of Contents

LEVI STRAUSS & CO. AND SUBSIDIARIES

INDEX TO FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~MAY 29, 2022~~FEBRUARY 26, 2023


		Page Number

PART I — FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (unaudited):
	Consolidated Balance Sheets as of ~~May 29, 2022~~February 26, 2023 and November ~~28, 2021~~27, 2022	3
	Consolidated Statements of Income for the Three ~~and Six~~ Months Ended ~~May 29,~~February 26, 2023 and February 27, 2022 ~~and May 30, 2021~~	4
	Consolidated Statements of Comprehensive Income for the Three ~~and Six~~ Months Ended ~~May 29,~~February 26, 2023 and February 27, 2022 ~~and May 30, 2021~~	5
	Consolidated Statements of Stockholders' Equity for the Three ~~and Six~~ Months Ended ~~May 29,~~February 26, 2023 and February 27, 2022 ~~and May 30, 2021~~	6
	Consolidated Statements of Cash Flows for the ~~Six~~Three Months Ended ~~May 29,~~February 26, 2023 and February 27, 2022 ~~and May 30, 2021~~	87
	Notes to Consolidated Financial Statements	98
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2423
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5049
Item 4.	Controls and Procedures	5049

PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	5150
Item 1A.	Risk Factors	5150
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5251
Item 3.	Defaults Upon Senior Securities	5251
Item 4.	Mine Safety Disclosures	5251
Item 5.	Other Information	5251
Item 6.	Exhibits	5352
SIGNATURE		5453

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:~~(http://~~levistrauss.com/investors/financial-news)~~investors.levistrauss.com);

•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.

Table of Contents

PART I — FINANCIAL INFORMATION


Item 1.			CONSOLIDATED FINANCIAL STATEMENTS

LEVI STRAUSS & CO. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


		(Unaudited)					(Unaudited)
		May 29, 2022		November 28, 2021			February 26, 2023		November 27, 2022

		(Dollars in thousands)					(Dollars in millions)
ASSETS	ASSETS					ASSETS
Current Assets:	Current Assets:					Current Assets:
Cash and cash equivalents	Cash and cash equivalents	$	601,870	$	810,266	Cash and cash equivalents	$	321.8	$	429.6
Short-term investments in marketable securities	Short-term investments in marketable securities	96,396		91,550		Short-term investments in marketable securities	—		70.6
Trade receivables, net	Trade receivables, net	609,180		707,625		Trade receivables, net	768.7		697.0
Inventories	Inventories	1,112,835		897,950		Inventories	1,335.2		1,416.8
Other current assets	Other current assets	222,081		202,510		Other current assets	223.2		213.9
Total current assets	Total current assets	2,642,362		2,709,901		Total current assets	2,648.9		2,827.9
Property, plant and equipment, net	Property, plant and equipment, net	513,776		502,562		Property, plant and equipment, net	625.2		622.8
Goodwill	Goodwill	368,162		386,880		Goodwill	369.3		365.7
Other intangible assets, net	Other intangible assets, net	289,176		291,332		Other intangible assets, net	285.9		286.7
Deferred tax assets, net	Deferred tax assets, net	556,120		573,114		Deferred tax assets, net	635.5		625.0
Operating lease right-of-use assets, net	Operating lease right-of-use assets, net	1,019,524		1,103,705		Operating lease right-of-use assets, net	955.0		970.0
Other non-current assets	Other non-current assets	348,637		332,575		Other non-current assets	354.1		339.7
Total assets	Total assets	$	5,737,757	$	5,900,069	Total assets	$	5,873.9	$	6,037.8

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:	Current Liabilities:					Current Liabilities:

Short-term debt						Short-term debt	162.0		11.7

Accounts payable	Accounts payable	558,665		524,838		Accounts payable	475.4		657.2
Accrued salaries, wages and employee benefits	Accrued salaries, wages and employee benefits	221,815		274,700		Accrued salaries, wages and employee benefits	168.5		246.7

Accrued sales returns and allowances	Accrued sales returns and allowances	188,467		209,364		Accrued sales returns and allowances	178.1		180.0
Short-term operating lease liabilities	Short-term operating lease liabilities	243,841		245,369		Short-term operating lease liabilities	234.0		235.7
Other accrued liabilities	Other accrued liabilities	517,826		615,347		Other accrued liabilities	556.2		650.3
Total current liabilities	Total current liabilities	1,730,614		1,869,618		Total current liabilities	1,774.2		1,981.6
Long-term debt	Long-term debt	998,484		1,020,700		Long-term debt	993.6		984.5
Postretirement medical benefits		47,033		51,439
Pension liabilities		151,105		155,218
Long-term employee related benefits		104,802		108,544

Long-term operating lease liabilities	Long-term operating lease liabilities	925,049		969,482		Long-term operating lease liabilities	838.2		859.1
Other long-term liabilities		52,338		59,407
Long-term employee related benefits and other liabilities						Long-term employee related benefits and other liabilities	300.4		308.9
Total liabilities	Total liabilities	4,009,425		4,234,408		Total liabilities	3,906.4		4,134.1

Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies

Stockholders’ Equity:	Stockholders’ Equity:					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
Common stock — $0.001 par value; 1,200,000,000 Class A shares authorized, 97,288,774 shares and 96,028,351 shares issued and outstanding as of February 26, 2023 and November 27, 2022, respectively; and 422,000,000 Class B shares authorized, 299,087,988 shares and 297,703,442 shares issued and outstanding, as of February 26, 2023 and November 27, 2022, respectively						Common stock — $0.001 par value; 1,200,000,000 Class A shares authorized, 97,288,774 shares and 96,028,351 shares issued and outstanding as of February 26, 2023 and November 27, 2022, respectively; and 422,000,000 Class B shares authorized, 299,087,988 shares and 297,703,442 shares issued and outstanding, as of February 26, 2023 and November 27, 2022, respectively	0.4		0.4
Additional paid-in capital	Additional paid-in capital	592,827		584,774		Additional paid-in capital	627.2		625.6
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(394,182)		(394,387)		Accumulated other comprehensive loss	(418.5)		(421.7)
Retained earnings	Retained earnings	1,529,290		1,474,874		Retained earnings	1,758.4		1,699.4

Total stockholders’ equity	Total stockholders’ equity	1,728,332		1,665,661		Total stockholders’ equity	1,967.5		1,903.7
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	5,737,757	$	5,900,069	Total liabilities and stockholders’ equity	$	5,873.9	$	6,037.8

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

Table of Contents

LEVI STRAUSS & CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME


		Three Months Ended				Six Months Ended					Three Months Ended
		May 29, 2022		May 30, 2021		May 29, 2022		May 30, 2021			February 26, 2023		February 27, 2022

		(Dollars in thousands, except per share amounts) (Unaudited)									(Dollars in millions, except per share amounts) (Unaudited)
Net revenues	Net revenues	$	1,471,149	$	1,275,971	$	3,062,711	$	2,581,573	Net revenues	$	1,688.9	$	1,591.6
Cost of goods sold	Cost of goods sold	616,126		525,770		1,264,080		1,071,343		Cost of goods sold	746.6		648.0
Gross profit	Gross profit	855,023		750,201		1,798,631		1,510,230		Gross profit	942.3		943.6
Selling, general and administrative expenses	Selling, general and administrative expenses	778,857		643,746		1,488,233		1,226,652		Selling, general and administrative expenses	784.9		709.4

Operating income	Operating income	76,166		106,455		310,398		283,578		Operating income	157.4		234.2
Interest expense	Interest expense	(4,360)		(19,933)		(8,608)		(43,243)		Interest expense	(10.7)		(4.2)

Loss on early extinguishment of debt		—		(30,108)		—		(30,338)
Other income (expense), net		6,004		(715)		21,901		373

Other (expense) income, net										Other (expense) income, net	(7.5)		15.9
Income before income taxes	Income before income taxes	77,810		55,699		323,691		210,370		Income before income taxes	139.2		245.9
Income tax expense (benefit)		28,068		(9,020)		78,106		3,147
Income tax expense										Income tax expense	24.5		50.1
Net income	Net income	$	49,742	$	64,719	$	245,585	$	207,223	Net income	$	114.7	$	195.8

Earnings per common share attributable to common stockholders:	Earnings per common share attributable to common stockholders:									Earnings per common share attributable to common stockholders:
Basic	Basic	$	0.13	$	0.16	$	0.62	$	0.52	Basic	$	0.29	$	0.49
Diluted	Diluted	$	0.12	$	0.16	$	0.61	$	0.50	Diluted	$	0.29	$	0.48
Weighted-average common shares outstanding:	Weighted-average common shares outstanding:									Weighted-average common shares outstanding:
Basic	Basic	397,882,576		401,964,569		398,650,665		400,771,248		Basic	395,956,182		399,445,106
Diluted	Diluted	403,782,416		412,102,841		405,852,351		410,644,463		Diluted	400,360,529		407,017,092

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

Table of Contents

LEVI STRAUSS & CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


		Three Months Ended				Six Months Ended					Three Months Ended
		May 29, 2022		May 30, 2021		May 29, 2022		May 30, 2021			February 26, 2023		February 27, 2022

		(Dollars in thousands) (Unaudited)									(Dollars in millions) (Unaudited)
Net income	Net income	$	49,742	$	64,719	$	245,585	$	207,223	Net income	$	114.7	$	195.8
Other comprehensive income (loss), before related income taxes:	Other comprehensive income (loss), before related income taxes:									Other comprehensive income (loss), before related income taxes:
Pension and postretirement benefits	Pension and postretirement benefits	2,041		2,743		4,226		5,681		Pension and postretirement benefits	2.3		2.2
Derivative instruments	Derivative instruments	34,030		4,579		29,862		(12,736)		Derivative instruments	(24.8)		(4.2)
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
Foreign currency translation gains (losses)										Foreign currency translation gains (losses)	28.1		(11.1)
Unrealized gains (losses) on marketable securities										Unrealized gains (losses) on marketable securities	0.7		(6.0)
Total other comprehensive income (loss), before related income taxes	Total other comprehensive income (loss), before related income taxes	17,607		15,774		(1,459)		12,739		Total other comprehensive income (loss), before related income taxes	6.3		(19.1)
Income tax (benefit) expense related to items of other comprehensive income (loss)		(415)		(3,987)		1,664		(2,784)
Income tax (expense) benefit related to items of other comprehensive income (loss)										Income tax (expense) benefit related to items of other comprehensive income (loss)	(3.1)		2.1
Comprehensive income, net of income taxes	Comprehensive income, net of income taxes	$	66,934	$	76,506	$	245,790	$	217,178	Comprehensive income, net of income taxes	$	117.9	$	178.8

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

Table of Contents

LEVI STRAUSS & CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


		Three Months Ended May 29, 2022								Three Months Ended February 26, 2023

		Class A & Class B Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss			Total Stockholders' Equity			Class A & Class B Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity

		(Dollars in thousands) (Unaudited)								(Dollars in millions) (Unaudited)
Balance at February 27, 2022		$	399	$	575,310	$	1,559,254	$	(411,374)		$	1,723,589
Balance at November 27, 2022													Balance at November 27, 2022	$	0.4	$	625.6	$	1,699.4	$	(421.7)	$	1,903.7
Net income	Net income	—		—		49,742		—			49,742		Net income	—		—		114.7		—		114.7
Other comprehensive loss, net of tax		—		—		—		17,192			17,192
Other comprehensive income, net of tax													Other comprehensive income, net of tax	—		—		—		3.2		3.2
Stock-based compensation and dividends, net	Stock-based compensation and dividends, net	—		16,653		—		—			16,653		Stock-based compensation and dividends, net	—		17.6		—		—		17.6
Employee stock purchase plan	Employee stock purchase plan	—		2,200		—		—			2,200		Employee stock purchase plan	—		2.6		—		—		2.6
Repurchase of common stock	Repurchase of common stock	(2)		—		(40,038)		—			(40,040)		Repurchase of common stock	—		—		(8.1)		—		(8.1)
Tax withholdings on equity awards	Tax withholdings on equity awards	—		(1,336)		—		—			(1,336)		Tax withholdings on equity awards	—		(18.6)		—		—		(18.6)
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
Cash dividends declared ($0.12 per share)													Cash dividends declared ($0.12 per share)	—		—		(47.6)		—		(47.6)
Balance at February 26, 2023													Balance at February 26, 2023	$	0.4	$	627.2	$	1,758.4	$	(418.5)	$	1,967.5

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, net 2 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

~~Table of Contents~~

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, net 2 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, net 4 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


	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 millions) (Unaudited)
Balance at November 28, 2021	$	0.4	$	584.8	$	1,474.9	$	(394.4)	$	1,665.7
Net Income	—		—		195.8		—		195.8
Other comprehensive loss, net of tax	—		—		—		(17.0)		(17.0)
Stock-based compensation and dividends, net	—		14.1		—		—		14.1
Employee stock purchase plan	—		2.3		—		—		2.3
Repurchase of common stock	—		—		(71.6)		—		(71.6)
Tax withholdings on equity awards	—		(25.8)		—		—		(25.8)


Cash dividends declared ($0.10 per share)	—		—		(39.9)		—		(39.9)
Balance at February 27, 2022	$	0.4	$	575.4	$	1,559.2	$	(411.4)	$	1,723.6

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

Table of Contents

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 amortization 77,740 69,926
Property, plant, equipment, right-of-use asset, and goodwill impairments 54,733 5,147
Loss on early extinguishment of debt — 30,338
Stock-based compensation 30,743 30,102
Provision for (benefit from) deferred income taxes 17,435 (46,857)
Other, net 9,847 9,392
Net change in operating assets and liabilities (290,201) (57,253)
Net cash provided by operating activities 145,882 248,018
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 investments 39,027 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, net 213 (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, net 3,563 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 cash 810,580 1,497,648
Ending cash and cash equivalents, and restricted cash 602,216 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 refunds 56,776 30,750


	Three Months Ended
	February 26, 2023		February 27, 2022

	(Dollars in millions) (Unaudited)
Cash Flows from Operating Activities:
Net income	$	114.7	$	195.8
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	39.6		38.9
Property, plant, equipment impairment, and early lease terminations, net	14.9		—









Stock-based compensation	17.6		14.1

(Benefit from) provision for deferred income taxes	(7.9)		19.0
Other, net	(2.8)		0.2
Net change in operating assets and liabilities	(336.9)		(181.9)











Net cash (used for) provided by operating activities	(160.8)		86.1
Cash Flows from Investing Activities:
Purchases of property, plant and equipment	(110.9)		(73.6)

Proceeds on settlement of forward foreign exchange contracts not designated for hedge accounting	21.0		3.1
Payments to acquire short-term investments	—		(28.0)
Proceeds from sale, maturity and collection of short-term investments	70.8		20.3

Net cash used for investing activities	(19.1)		(78.2)
Cash Flows from Financing Activities:



Proceeds from senior revolving credit facility	150.0		—









Repurchase of common stock	(8.1)		(74.2)
Tax withholdings on equity awards	(18.6)		(25.8)

Dividend to stockholders	(47.6)		(39.9)
Other financing, net	2.1		0.6
Net cash provided by (used for) financing activities	77.8		(139.3)
Effect of exchange rate changes on cash and cash equivalents and restricted cash	(5.7)		(0.5)
Net decrease in cash and cash equivalents and restricted cash	(107.8)		(131.9)
Beginning cash and cash equivalents, and restricted cash	430.0		810.6
Ending cash and cash equivalents, and restricted cash	322.2		678.7
Less: Ending restricted cash	(0.4)		(0.3)
Ending cash and cash equivalents	$	321.8	$	678.4

Noncash Investing Activity:
Property, plant and equipment acquired and not yet paid at end of period	$	39.3	$	25.7




Supplemental disclosure of cash flow information:

Cash paid for income taxes during the period, net of refunds	1.7		6.5

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

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE QUARTERLY PERIOD ENDED ~~MAY 29, 2022~~FEBRUARY 26, 2023

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, activewear, 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,~~27, 2022, included in the Company's ~~2021~~2022 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~~February 26, 2023 may not be indicative of the results to be expected for any other interim period or the year ending November ~~27, 2022.~~26, 2023.

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~~2023 and ~~2021~~2022 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~~

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.~~

~~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

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 $7.2 million and $7.5 million as of February 26, 2023 and November 27, 2022, 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 $1.2 billion as of February 26, 2023 and November 27, 2022, respectively.

In the first quarter of 2023, the Company recorded $18.6 million in charges primarily relate to the impairment of capitalized internal-use software, as a result of ~~uncertainty~~the decision to discontinue certain technology projects in connection with the overall restructuring initiative. For more on the restructuring, refer to Note 7. The impairment charges are included in selling, general 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~~administrative expenses ("SG&A") in the ~~near term.~~ accompanying consolidated statements of income.

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

FOR THE QUARTERLY PERIOD ENDED FEBRUARY 26, 2023

Share Repurchases

During the three ~~and six~~ months ended ~~May 29, 2022, 2.0 million and 5.0~~February 26, 2023, the Company repurchased 0.5 million shares ~~were repurchased~~ for ~~$40.0 million and $111.5~~$8.1 million, plus broker's commissions, ~~respectively,~~ in the open ~~market, essentially completing~~market. This equates to an average repurchase price of approximately $17.97 per share. During the ~~Company's $200.0~~three months ended February 27, 2022, the Company repurchased 3.0 million ~~share~~shares for $71.5 million, plus broker's commissions, in the open market. This equates to an average repurchase ~~plan.~~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.

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.

~~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~~February 26, 2023 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~~ 2022 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.10-K.

119

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

FOR THE QUARTERLY PERIOD ENDED ~~MAY 29, 2022~~FEBRUARY 26, 2023

NOTE 2: INVENTORIES

The following table presents the Company's inventory balances:


		May 29, 2022		November 28, 2021			February 26, 2023		November 27, 2022

		(Dollars in thousands)					(Dollars in millions)

Raw materials	Raw materials	$	13,417	$	9,141	Raw materials	$	13.7	$	12.3
Work-in-progress	Work-in-progress	4,852		3,603		Work-in-progress	2.9		4.7
Finished goods	Finished goods	1,094,566		885,206		Finished goods	1,318.6		1,399.8
Total inventories	Total inventories	$	1,112,835	$	897,950	Total inventories	$	1,335.2	$	1,416.8

NOTE 3: FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents the Company’s financial instruments that are carried at fair value:


		May 29, 2022						November 28, 2021							February 26, 2023						November 27, 2022
				Fair Value Estimated Using						Fair Value Estimated Using							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)			Fair Value		Level 1 Inputs(1)		Level 2 Inputs(2)		Fair Value		Level 1 Inputs(1)		Level 2 Inputs(2)

		(Dollars in thousands)													(Dollars in millions)
Financial assets carried at fair value	Financial assets carried at fair value													Financial assets carried at fair value
Rabbi trust assets	Rabbi trust assets	$	72,907	$	72,907	$	—	$	80,188	$	80,188	$	—	Rabbi trust assets	$	72.1	$	72.1	$	—	$	71.5	$	71.5	$	—
Short-term investments in marketable securities	Short-term investments in marketable securities	96,396		—		96,396		91,550		—		91,550		Short-term investments in marketable securities	—		—		—		70.6		—		70.6
Derivative instruments(3)	Derivative instruments(3)	32,857		—		32,857		27,512		—		27,512		Derivative instruments(3)	11.9		—		11.9		21.5		—		21.5
Total	Total	$	202,160	$	72,907	$	129,253	$	199,250	$	80,188	$	119,062	Total	$	84.0	$	72.1	$	11.9	$	163.6	$	71.5	$	92.1
Financial liabilities carried at fair value	Financial liabilities carried at fair value													Financial liabilities carried at fair value

Derivative instruments(3)	Derivative instruments(3)	4,212		—		4,212		13,255		—		13,255		Derivative instruments(3)	21.1		—		21.1		8.1		—		8.1
Total	Total	$	4,212	$	—	$	4,212	$	13,255	$	—	$	13,255	Total	$	21.1	$	—	$	21.1	$	8.1	$	—	$	8.1

_____________

(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~~marketable 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.

1210

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

FOR THE QUARTERLY PERIOD ENDED ~~MAY 29, 2022~~FEBRUARY 26, 2023

The following table presents the amortized cost, gross unrealized gains (losses) and fair values of the Company’s available for sale investments:

May 29, 2022 November 28, 2021
Amortized
Cost Unrealized
Gains Unrealized
Losses Fair Value Amortized
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 securities 96,853 198 (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 assets 54,384 14,222 — 68,606 52,398 23,690 — 76,088
$ 154,645 $ 15,312 $ (656) $ 169,301 $ 146,696 $ 25,122 $ (80) $ 171,738


	November 27, 2022
		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value

		(Dollars in millions)


Available for sale investments
Short-term investments in marketable securities		$	71.1	$	0.3	$	(0.8)	$	70.6

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, 2022				November 28, 2021					February 26, 2023				November 27, 2022
		Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value			Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value

		(Dollars in thousands)									(Dollars in millions)
Financial liabilities carried at adjusted historical cost	Financial liabilities carried at adjusted historical cost									Financial liabilities carried at adjusted historical cost

3.375% senior notes due 2027(1)	3.375% senior notes due 2027(1)	$	508,509	$	487,682	$	531,382	$	541,935	3.375% senior notes due 2027(1)	$	507.0	$	482.0	$	493.9	$	461.4
3.50% senior notes due 2031(1)	3.50% senior notes due 2031(1)	497,897		441,137		497,335		502,881		3.50% senior notes due 2031(1)	502.6		408.7		498.1		404.3
Short-term borrowings	Short-term borrowings	5,943		5,943		5,862		5,862		Short-term borrowings	162.8		162.8		11.7		11.7
Total	Total	$	1,012,349	$	934,762	$	1,034,579	$	1,050,678	Total	$	1,172.4	$	1,053.5	$	1,003.7	$	877.4

_____________

(1)Fair values are estimated using Level 12 inputs and incorporate mid-market price quotes. Level 12 inputs are inputs ~~that consist of~~other than quoted prices, that are observable for the liability, either directly or indirectly and include among other things, quoted prices for similar liabilities in markets that are active ~~markets for identical assets~~ or ~~liabilities~~inactive as well as inputs other than quoted prices that ~~the Company has the ability to access at the measurement date.~~are observable.

1311

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

FOR THE QUARTERLY PERIOD ENDED ~~MAY 29, 2022~~FEBRUARY 26, 2023

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~~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 (expense) income, ~~(expense),~~ net" in the Company's consolidated statements of income. The effective portions of these hedges are recorded in "Accumulated other comprehensive loss" ("AOCL") 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 (expense) income, ~~(expense),~~ net" in the Company’s consolidated statements of income.

As of ~~May 29, 2022,~~February 26, 2023, the Company had forward foreign exchange contracts derivatives that were not designated as hedges in qualifying hedging relationships, of which ~~$740.1~~$993.9 million were contracts to buy and ~~$452.5~~$645.9 million were contracts to sell various foreign currencies. These contracts are at various exchange rates and expire at various dates through May ~~2023.~~2024.

1412

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

FOR THE QUARTERLY PERIOD ENDED ~~MAY 29, 2022~~FEBRUARY 26, 2023

The table below provides data about the carrying values of derivative and non-derivative instruments:


		May 29, 2022								November 28, 2021												February 26, 2023										November 27, 2022
		Assets		(Liabilities)		Derivative Net Carrying Value				Assets				(Liabilities)					Derivative Net Carrying Value			Assets				(Liabilities)				Derivative Net Carrying Value		Assets		(Liabilities)		Derivative Net Carrying Value
		Carrying Value		Carrying Value				Carrying Value				Carrying Value						Carrying Value					Carrying Value					Carrying Value				Carrying Value

		(Dollars in thousands)																				(Dollars in millions)
Derivatives designated as hedging instruments	Derivatives designated as hedging instruments																				Derivatives designated as hedging instruments
Foreign exchange risk cash flow hedges(1)	Foreign exchange risk cash flow hedges(1)	$	25,612	$	—			$	25,612			$	24,858			$	—					$	24,858	Foreign exchange risk cash flow hedges(1)	$	8.2			$		—	$	8.2	$	15.6	$	—	$	15.6
Foreign exchange risk cash flow hedges(2)	Foreign exchange risk cash flow hedges(2)	—		(3,587)		(3,587)				—				(2,030)					(2,030)		Foreign exchange risk cash flow hedges(2)	—				(14.9)				(14.9)		—		(7.2)		(7.2)
Total	Total	$	25,612	$	(3,587)					$	24,858			$	(2,030)						Total	$	8.2			$	(14.9)					$	15.6	$	(7.2)
Derivatives not designated as hedging instruments	Derivatives not designated as hedging instruments																				Derivatives not designated as hedging instruments
Forward foreign exchange contracts(1)	Forward foreign exchange contracts(1)	$	32,858	$	(25,613)	$	7,245			$	27,512			$	(24,858)				$	2,654	Forward foreign exchange contracts(1)	$	11.9			$	(8.2)			$	3.7	$	21.5	$	(15.6)	$	5.9
Forward foreign exchange contracts(2)	Forward foreign exchange contracts(2)	3,573		(4,199)		(626)				2,030				(13,255)					(11,225)		Forward foreign exchange contracts(2)	14.9				(21.1)				(6.2)		7.2		(8.1)		(0.9)
Total	Total	$	36,431	$	(29,812)					$	29,542			$	(38,113)						Total	$	26.8			$	(29.3)					$	28.7	$	(23.7)
Non-derivatives designated as hedging instruments	Non-derivatives designated as hedging instruments																				Non-derivatives designated as hedging instruments
Euro senior notes	Euro senior notes	$	—	$	(509,153)					$	—			$	(532,285)						Euro senior notes	$	—			$	(503.2)					$	—	$	(494.5)

_____________

(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, 2022										November 28, 2021										February 26, 2023															November 27, 2022
		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)	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)
																				Net Amounts of Assets / (Liabilities)															Net Amounts of Assets / (Liabilities)

		(Dollars in thousands)											(Dollars in millions)
Foreign exchange risk contracts and forward foreign exchange contracts	Foreign exchange risk contracts and forward foreign exchange contracts																					Foreign exchange risk contracts and forward foreign exchange contracts
Financial assets	Financial assets	$	62,043		$	(4,509)			$	57,534				$	54,400			$	(10,152)				$	44,248	Financial assets		$	35.0		$	(22.1)	$	12.9						$	44.3		$	(14.6)	$	29.7
Financial liabilities	Financial liabilities	(33,399)		4,509			(28,890)					(40,143)				10,152		(29,991)			Financial liabilities	(44.2)				22.1			(22.1)								(30.9)	14.6			(16.3)
Total	Total						$	28,644										$	14,257		Total								$	(9.2)											$	13.4

1513

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

FOR THE QUARTERLY PERIOD ENDED ~~MAY 29, 2022~~FEBRUARY 26, 2023

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")~~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)									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 Ended				Six Months Ended					As of February 26, 2023		As of November 27, 2022		Three Months Ended
						May 29, 2022		May 30, 2021		May 29, 2022		May 30, 2021							February 26, 2023		February 27, 2022

		(Dollars in thousands)													(Dollars in millions)
Foreign exchange risk contracts	Foreign exchange risk contracts	$	31,034	$	24,304	$	3,080	$	(9,216)	$	3,635	$	(11,094)	Foreign exchange risk contracts	$	6.4	$	22.6	$	11.1	$	0.6
Realized forward foreign exchange swaps (2)	Realized forward foreign exchange swaps (2)	4,637		4,637		—		—		—		—		Realized forward foreign exchange swaps (2)	4.6		4.6		—		—
Yen-denominated Eurobonds	Yen-denominated Eurobonds	(19,811)		(19,811)		—		—		—		—		Yen-denominated Eurobonds	(19.8)		(19.8)		—		—
Euro-denominated senior notes	Euro-denominated senior notes	(22,069)		(45,201)		—		—		—		—		Euro-denominated senior notes	(16.1)		(7.4)		—		—
Cumulative income taxes	Cumulative income taxes	9,070		15,157		—		—		—		—		Cumulative income taxes	12.5		7.2		—		—
Total	Total	$	2,861	$	(20,914)									Total	$	(12.4)	$	7.2

_____________

(1)Amounts reclassified from AOCL were classified as net revenues and cost of goods sold on the Company's 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~~three months ended ~~May 29, 2022.~~February 26, 2023. Within the next 12 months, a ~~$29.2~~$8.1 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				Six Months Ended					Three Months Ended
		May 29, 2022		May 30, 2021		May 29, 2022		May 30, 2021			February 26, 2023		February 27, 2022

		(Dollars in thousands)									(Dollars in millions)
Amount of (Loss) Gain on Cash Flow Hedge Activity
Amount of Gain (Loss) on Cash Flow Hedge Activity										Amount of Gain (Loss) on Cash Flow Hedge Activity
Net revenues	Net revenues	$	(928)	$	(1,529)	$	(1,841)	$	(586)	Net revenues	$	1.6	$	(0.9)
Cost of goods sold	Cost of goods sold	$	4,007	$	(7,687)	$	5,477	$	(10,508)	Cost of goods sold	$	9.5	$	1.5

The table below provides data about the amount of gains and losses related to derivatives instruments included in "Other (expense) income, ~~(expense),~~ net" in the Company's consolidated statements of income:

Three Months Ended Six 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)


	Three Months Ended
	February 26, 2023		February 27, 2022

	(Dollars in millions)
Realized loss	$	9.4	$	(1.4)
Unrealized gain	(5.6)		3.7
Total	$	3.8	$	2.3

1614

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

FOR THE QUARTERLY PERIOD ENDED ~~MAY 29, 2022~~FEBRUARY 26, 2023

NOTE 5: OTHER ACCRUED LIABILITIES

The following table presents the Company's other accrued liabilities:


		May 29, 2022		November 28, 2021			February 26, 2023		November 27, 2022

		(Dollars in thousands)					(Dollars in millions)
Other accrued liabilities	Other accrued liabilities					Other accrued liabilities
Accrued non-trade payables						Accrued non-trade payables	$	185.9	$	268.4

Accrued advertising and promotion	Accrued advertising and promotion	$	91,300	$	111,086	Accrued advertising and promotion	55.8		57.1
Taxes other than income taxes payable						Taxes other than income taxes payable	48.6		53.2
Accrued property, plant and equipment						Accrued property, plant and equipment	39.3		93.3
Accrued income taxes	Accrued income taxes	23,352		14,477		Accrued income taxes	35.1		13.1
Fair value derivatives						Fair value derivatives	21.0		7.5
Restructuring liabilities						Restructuring liabilities	19.4		9.8
Accrued interest payable	Accrued interest payable	8,193		8,281		Accrued interest payable	17.3		8.0
Accrued rent	Accrued rent	12,944		16,612		Accrued rent	9.1		9.1
Fair value derivatives		4,213		13,246
Restructuring liabilities		6,814		19,106
Short-term debt		5,943		5,862
Taxes other than income taxes payable		47,885		48,278
Other	Other	317,182		378,399		Other	124.7		130.8
Total other accrued liabilities	Total other accrued liabilities	$	517,826	$	615,347	Total other accrued liabilities	$	556.2	$	650.3

NOTE 6: DEBT

The following table presents the Company's debt:

May 29,
2022 November 28,
2021
(Dollars in thousands)
Long-term debt
3.375% senior notes due 2027 $ 504,913 $ 527,644
3.50% senior notes due 2031 493,571 493,056
Total long-term debt $ 998,484 $ 1,020,700
Short-term debt
Short-term borrowings 5,943 5,862
Total debt $ 1,004,427 $ 1,026,562

~~Senior Revolving Credit Facility~~

The Company's unused availability under the Credit Facility was $837.4 million at May 29, 2022, as the Company's total availability of $850.0 million was reduced by $12.6 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 and six months ended May 29, 2022 was 4.00% and 3.91%, respectively, as compared to 4.29% and 4.44%, respectively, during the same periods of 2021.


	February 26, 2023		November 27, 2022

	(Dollars in millions)
Long-term debt
Unsecured:

3.375% senior notes due 2027	$	499.6	$	490.6
3.50% senior notes due 2031	494.0		493.9
Total long-term debt	$	993.6	$	984.5
Short-term debt
Secured:
Senior revolving credit facility	$	150.0	$	—
Unsecured:

Short-term borrowings	12.0		11.7

Total short-term debt	$	162.0	$	11.7
Total debt	$	1,155.6	$	996.2

1715

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

FOR THE QUARTERLY PERIOD ENDED ~~MAY 29, 2022~~FEBRUARY 26, 2023

Senior Revolving Credit Facility

The Company's unused availability under the Credit Facility was $835.1 million at February 26, 2023, as the Company's total availability of $850.0 million was reduced by $14.9 million of letters of credit and other credit usage allocated under the Credit Facility. On February 27, 2023, subsequent to quarter end, the Company borrowed an additional $50.0 million under its Credit Facility for total outstanding $200.0 million.

Interest Rates on Borrowings

The Company’s weighted-average interest rate on average borrowings outstanding during the three months ended February 26, 2023 was 3.86%, as compared to 3.83% during the same period of 2022.

NOTE 7: RESTRUCTURING ACTIVITIES

In the fourth quarter of 2022, the Company began a restructuring initiative designed to reduce costs and streamline operations in support of enterprise prioritization efforts. The plan is expected to continue through 2023 and will include further prioritization, cost reductions, and organizational changes.

For the three-month period ended February 26, 2023, the Company recognized net restructuring charges of $11.4 million, which primarily relate to severance benefits, based on separation benefits provided by Company policy or statutory benefit plans. The Company also recognized $18.2 million in charges related to the impairment of capitalized internal-use software, as a result of the decision to discontinue certain technology projects. Both charges were recorded in SG&A in the accompanying consolidated statements of income.

For the three-month period ended February 27, 2022, the Company recognized a net reduction in restructuring charges of $2.0 million, which was recorded in SG&A in the accompanying consolidated statements of income. The charges represent revisions of estimates around severance and employee-related benefits in relation to the previous restructuring initiative.

NOTE 7:8: 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 ~~May 29, 2022,~~February 26, 2023, 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.~~

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

FOR THE QUARTERLY PERIOD ENDED FEBRUARY 26, 2023

NOTE 8:9: DIVIDENDS

Dividends are declared at the discretion of the Board. In ~~both~~ January 2023 and ~~April~~ 2022, the Company declared cash dividends ~~each~~of $0.12 and $0.10 per share, respectively, to holders of record of its Class A and Class B common stock. ~~In January and April 2021, the Company declared cash dividends of $0.04 and $0.06 per share, respectively. During the three and six months ended May 29, 2022, dividends were paid~~Dividends in the amount of ~~$39.6~~$47.6 million and ~~$79.5~~$39.9 million, respectively, ~~compared to $24.1 million~~were paid out during the three months ended February 26, 2023 and ~~$40.1 million for the same prior-year periods.~~February 27, 2022.

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 $0.12 per share was declared to holders of record of its Class A and Class B common stock at the close of business on ~~August 1, 2022,~~May 4, 2023, for a total quarterly dividend of approximately ~~$48~~$47 million.

1817

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

FOR THE QUARTERLY PERIOD ENDED ~~MAY 29, 2022~~FEBRUARY 26, 2023

NOTE 9:10: ACCUMULATED OTHER COMPREHENSIVE LOSS

The following is a summary of the components of "Accumulated other comprehensive loss," net of related income taxes:

May 29,
2022 November 28,
2021 May 30,
2021
(Dollars in thousands)
Pension and postretirement benefits $ (192,312) $ (195,481) $ (217,809)
Derivative instruments 2,861 (20,914) (85,501)
Foreign currency translation losses (215,427) (196,763) (146,013)
Unrealized gains on marketable securities 10,696 18,771 17,834
Accumulated other comprehensive loss $ (394,182) $ (394,387) $ (431,489)


	Three Months Ended February 26, 2023
	Pension and Postretirement Benefits(1)		Translation Adjustments				Unrealized (Loss) Gain on Marketable Securities(1)
			Derivative Instruments(2)		Foreign Currency Translation				Total

	(Dollars in millions)
Accumulated other comprehensive (loss) income at November 27, 2022	$	(179.5)	$	7.2	$	(248.7)	$	(0.7)	$	(421.7)
Other comprehensive income (loss) before reclassifications	(0.5)		(8.5)		20.3		0.1		11.4
Amounts reclassified from accumulated other comprehensive income (loss)	2.3		(11.1)		—		0.6		(8.2)
Net increase (decrease) in other comprehensive income (loss)	1.8		(19.6)		20.3		0.7		3.2

Accumulated other comprehensive (loss) income at February 26, 2023	$	(177.7)	$	(12.4)	$	(228.4)	$	—	$	(418.5)


	Three Months Ended February 27, 2022
	Pension and Postretirement Benefits(1)		Translation Adjustments				Unrealized Gain (Loss) on Marketable Securities(1)
			Derivative Instruments(2)		Foreign Currency Translation				Total

	(Dollars in millions)
Accumulated other comprehensive (loss) income at November 28, 2021	$	(195.5)	$	(20.9)	$	(196.8)	$	18.8	$	(394.4)
Other comprehensive income (loss) before reclassifications	(0.5)		(2.5)		(10.9)		(4.7)		(18.6)
Amounts reclassified from accumulated other comprehensive income (loss)	2.2		(0.6)		—		—		1.6
Net increase (decrease) in other comprehensive income (loss)	1.7		(3.1)		(10.9)		(4.7)		(17.0)

Accumulated other comprehensive (loss) income at February 27, 2022	$	(193.8)	$	(24.0)	$	(207.7)	$	14.1	$	(411.4)

_____________

(1)Amounts reclassified were recorded in other (expense) income, net.

(2)Amounts reclassified were recorded within net revenues and cost of goods sold. For more information, refer to Note 4.

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

FOR THE QUARTERLY PERIOD ENDED FEBRUARY 26, 2023

NOTE 11: NET REVENUES

Disaggregated Revenue

The table below provides the Company's revenues disaggregated by segment and channel.


	Three Months Ended February 26, 2023
	Levi's Brands
	Americas		Europe		Asia		Other Brands		Total

	(Dollars in millions)
Net revenues by channel:
Wholesale	$	530.6	$	244.1	$	134.0	$	76.2	$	984.9
Direct-to-consumer	292.4		211.0		155.5		45.1		704.0
Total net revenues	$	823.0	$	455.1	$	289.5	$	121.3	$	1,688.9


	Three Months Ended February 27, 2022
	Levi's Brands
	Americas		Europe		Asia		Other Brands		Total

	(Dollars in millions)
Net revenues by channel:
Wholesale	$	510.8	$	265.7	$	122.8	$	63.8	$	963.1
Direct-to-consumer	255.1		203.7		135.6		34.1		628.5
Total net revenues	$	765.9	$	469.4	$	258.4	$	97.9	$	1,591.6

The Company did not have any material ~~amounts were reclassified out~~contract assets or contract liabilities recorded in the consolidated balance sheets as 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.~~February 26, 2023 and November 27, 2022.

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

FOR THE QUARTERLY PERIOD ENDED ~~MAY 29, 2022~~FEBRUARY 26, 2023

NOTE ~~10:~~12: OTHER (EXPENSE) INCOME, NET ~~REVENUES~~

~~Disaggregated Revenue~~The following table summarizes significant components of "Other (expense) income, net":


	Three Months Ended
	February 26, 2023		February 27, 2022

	(Dollars in millions)
Foreign exchange management gains(1)	$	3.8	$	2.3
Foreign currency transaction losses(2)	(10.6)		(2.2)
Marketable securities losses(3)	(1.1)		—

COVID-19 government subsidy gain(4)	—		12.5
Other, net	0.4		3.3
Total other (expense) income, net	$	(7.5)	$	15.9

_____________

(1)Gains on forward foreign exchange contracts primarily result 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. Losses in the three-month period ended February 26, 2023 were primarily due to U.S. Dollar weakening against the Euro and the Mexican Peso.

(3)Marketable securities losses includes unrealized gains and losses from marketable equity securities held in an irrevocable grantor’s Rabbi trust in connection with the Company's deferred compensation plan.

(4)COVID-19 government subsidy gain reflects a payment received from the German government as reimbursement for COVID-19 losses incurred in prior years.

NOTE 13: INCOME TAXES

The ~~table below provides~~Company's effective income tax rate was 17.6% for the ~~Company's revenues disaggregated by segment and channel.~~

Three Months Ended May 29, 2022
Levi's Brands
Americas Europe Asia Other Brands Total
(Dollars in thousands)
Net revenues by channel:
Wholesale $ 547,717 $ 190,618 $ 107,285 $ 74,872 $ 920,492
Direct-to-consumer 228,377 176,519 114,563 31,198 550,657
Total net revenues $ 776,094 $ 367,137 $ 221,848 $ 106,070 $ 1,471,149

Six Months Ended May 29, 2022
Levi's Brands
Americas Europe Asia Other Brands Total
(Dollars in thousands)
Net revenues by channel:
Wholesale $ 1,058,452 $ 456,336 $ 230,048 $ 138,727 $ 1,883,563
Direct-to-consumer 483,494 380,158 250,205 65,291 1,179,148
Total net revenues $ 1,541,946 $ 836,494 $ 480,253 $ 204,018 $ 3,062,711

Three Months Ended May 30, 2021
Levi's Brands
Americas Europe Asia Other Brands Total
(Dollars in thousands)
Net revenues by channel:
Wholesale $ 458,921 $ 211,642 $ 79,506 $ 52,415 $ 802,484
Direct-to-consumer 202,514 143,244 112,283 15,446 473,487
Total net revenues $ 661,435 $ 354,886 $ 191,789 $ 67,861 $ 1,275,971

Six Months Ended May 30, 2021
Levi's Brands
Americas Europe Asia Other Brands Total
(Dollars in thousands)
Net revenues by channel:
Wholesale $ 870,126 $ 488,427 $ 196,319 $ 86,371 $ 1,641,243
Direct-to-consumer 397,430 283,176 228,386 31,338 940,330
Total net revenues $ 1,267,556 $ 771,603 $ 424,705 $ 117,709 $ 2,581,573

three months ended February 26, 2023, compared to 20.4% for the same prior-year period. The ~~Company did not have any material contract assets or contract liabilities recorded~~lower effective tax rate in the ~~consolidated balance sheets~~current period is driven by higher tax benefits from incentive tax deductions related to intellectual property income, and the reversal of deferred tax liabilities on a foreign branch as a result of ~~May 29, 2022 and November 28, 2021.~~newly-effective U.S. foreign tax credit regulations, partially offset by the impact of non-deductible executive compensation, which became effective in 2023.

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

FOR THE QUARTERLY PERIOD ENDED ~~MAY 29, 2022~~FEBRUARY 26, 2023

~~NOTE 11: OTHER INCOME (EXPENSE), NET~~

~~The following table summarizes significant components of "Other income (expense), net":~~

Three Months Ended Six Months Ended
May 29,
2022 May 30,
2021 May 29,
2022 May 30,
2021
(Dollars in thousands)
Foreign exchange management losses(1)
$ (7,526) $ (2,094) $ (5,205) $ (1,727)
Foreign currency transaction gains (losses)(2)
8,707 (1,326) 6,496 (4,561)
COVID-19 government subsidy gain(3)
— — 12,524 —
Other, net 4,823 2,705 8,086 6,661
Total other income (expense), net $ 6,004 $ (715) $ 21,901 $ 373

~~_____________~~

~~(1)Losses on forward foreign exchange contracts primarily resulted from currency fluctuations relative to negotiated contract rates.~~

~~(2)Foreign currency transaction gains (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.~~

~~NOTE 12: INCOME TAXES~~

The Company's effective income tax rate was 36.1% for the three months ended May 29, 2022, compared to (16.2)% for the same prior-year period. The increase in the effective tax rate was primarily driven by lower tax benefits from stock-based compensation equity awards as compared to the same prior-year period, as well as a 16% tax rate increase resulting from non-deductible charges related to the Russia-Ukraine crisis.

The Company's effective income tax rate was 24.1% for the six months ended May 29, 2022, compared to 1.5% 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 as compared to the same prior-year period, as well as an increase resulting from non-deductible charges related to the Russia-Ukraine crisis.

~~LEVI STRAUSS & CO. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)~~

~~FOR THE QUARTERLY PERIOD ENDED MAY 29, 2022~~

NOTE ~~13:~~14: 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				Six Months Ended					Three Months Ended
		May 29, 2022		May 30, 2021		May 29, 2022		May 30, 2021			February 26, 2023		February 27, 2022

		(Dollars in thousands, except per share amounts)									(Dollars in millions, except per share amounts)
Numerator:	Numerator:									Numerator:
Net income	Net income	$	49,742	$	64,719	$	245,585	$	207,223	Net income	$	114.7	$	195.8
Denominator:	Denominator:									Denominator:
Weighted-average common shares outstanding - basic	Weighted-average common shares outstanding - basic	397,882,576		401,964,569		398,650,665		400,771,248		Weighted-average common shares outstanding - basic	395,956,182		399,445,106
Dilutive effect of stock awards	Dilutive effect of stock awards	5,899,840		10,138,272		7,201,686		9,873,215		Dilutive effect of stock awards	4,404,347		7,571,986
Weighted-average common shares outstanding - diluted	Weighted-average common shares outstanding - diluted	403,782,416		412,102,841		405,852,351		410,644,463		Weighted-average common shares outstanding - diluted	400,360,529		407,017,092
Earnings per common share attributable to common stockholders:	Earnings per common share attributable to common stockholders:									Earnings per common share attributable to common stockholders:
Basic	Basic	$	0.13	$	0.16	$	0.62	$	0.52	Basic	$	0.29	$	0.49
Diluted	Diluted	$	0.12	$	0.16	$	0.61	$	0.50	Diluted	$	0.29	$	0.48
Anti-dilutive securities excluded from calculation of diluted earnings per share attributable to common stockholders	Anti-dilutive securities excluded from calculation of diluted earnings per share attributable to common stockholders	3,599,395		565,147		1,673,530		877,617		Anti-dilutive securities excluded from calculation of diluted earnings per share attributable to common stockholders	5,507,675		1,192,463

NOTE ~~14:~~15: RELATED PARTIES

Charles V. Bergh, President and Chief Executive Officer is a member of the board ~~member~~of directors of the Levi Strauss Foundation, which is not a consolidated entity of the Company. Seth R. Jaffe, Executive Vice President and ~~General Counsel,~~Chief Legal Officer, is Vice President of the Levi Strauss Foundation. During the three ~~and six~~ months ended ~~May 29, 2022,~~February 26, 2023, the Company donated ~~$0.5~~$9.8 million ~~and $11.9 million, respectively,~~ to the Levi Strauss Foundation as compared to ~~$0.4 million and $2.8~~$11.4 million for the same prior-year ~~periods.~~period.

2221

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

FOR THE QUARTERLY PERIOD ENDED ~~MAY 29, 2022~~FEBRUARY 26, 2023

NOTE ~~15:~~16: BUSINESS SEGMENT INFORMATION

InThe Company manages its business according to three reportable segments: Americas, Europe, and Asia, collectively comprising 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~~Company's 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 3 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 3 reportable segments: Americas, Europe, and Asia, collectively comprising the Company's Levi's Brands business, and~~brands. Other Brands, which includes Dockers® and ~~the newly acquired~~ Beyond Yoga® ~~business, which~~businesses 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 Six Months Ended
May 29,
2022 May 30,
2021 May 29,
2022 May 30,
2021
(Dollars in thousands)
Net revenues:
Americas $ 776,094 $ 661,435 $ 1,541,946 $ 1,267,556
Europe 367,137 354,886 836,494 771,603
Asia 221,848 191,789 480,253 424,705
Other Brands 106,070 67,861 204,018 117,709
Total net revenues $ 1,471,149 $ 1,275,971 $ 3,062,711 $ 2,581,573
Operating income:
Americas $ 158,713 $ 147,542 $ 336,552 $ 276,192
Europe 66,562 59,387 203,355 169,974
Asia 19,110 6,254 62,693 35,498
Other Brands 4,022 2,430 13,603 3,373
Corporate expenses(1)
(172,241) (109,158) (305,805) (201,459)
Total operating income 76,166 106,455 310,398 283,578
Interest expense (4,360) (19,933) (8,608) (43,243)
Loss on early extinguishment of debt — (30,108) — (30,338)
Other income, net 6,004 (715) 21,901 373
Income before income taxes $ 77,810 $ 55,699 $ 323,691 $ 210,370

~~_____________~~

~~(1)~~Corporate staff costs and expenses for the three-month and six-month periods ended May 29, 2022 include $51.1 million in impairment charges as a result of the Russia-Ukraine crisis related to our Europe segment. Refer to Note 1 for additional information.


	Three Months Ended
	February 26, 2023		February 27, 2022

	(Dollars in millions)
Net revenues:
Americas	$	823.0	$	765.9
Europe	455.1		469.4
Asia	289.5		258.4
Other Brands	121.3		97.9
Total net revenues	$	1,688.9	$	1,591.6
Operating income:
Americas	$	134.6	$	177.8
Europe	117.4		136.8
Asia	53.7		43.6
Other Brands	3.4		9.6
Restructuring charges, net	(11.4)		2.0
Corporate expenses	(140.3)		(135.6)
Total operating income	157.4		234.2
Interest expense	(10.7)		(4.2)


Other (expense) income, net	(7.5)		15.9
Income before income taxes	$	139.2	$	245.9

2322

Table of Contents


Item 2.			MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited consolidated financial statements and related notes thereto included in Part I, Item 1 of this Quarterly Report and with our audited financial statements and related notes in our Annual Report on Form 10-K for the year ended November ~~28, 2021,~~27, 2022, filed with the Securities and Exchange Commission on January ~~26, 2022.~~25, 2023. We use a 52- or 53-week fiscal year, with each fiscal year ending on the Sunday in November that is closest to November 30 of that year. References to ~~2021~~2022 and ~~2022~~2023 below in this section are references to our fiscal years ending in November ~~2021~~2022 and ~~2022,~~2023, respectively. See "-Financial Information Presentation."

~~Non-GAAP~~This Management’s Discussion and Analysis of Financial ~~Measures~~Condition and Results of Operations is designed to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results.

To supplement our consolidated financial statements prepared and presented in accordance with generally accepted accounting principles in the United States ("GAAP"), we use certain non-GAAP financial measures throughout this Quarterly Report, as described further below, to provide investors with additional useful information about our financial performance, to enhance the overall understanding of our past performance and future prospects and to allow for greater transparency with respect to important metrics used by our management for financial and operational decision-making. We are presenting these non-GAAP financial measures to assist investors in seeing our financial performance from management’s view and because we believe they provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry.

However, non-GAAP financial measures have limitations in their usefulness to investors because they have no standardized meaning prescribed by GAAP and are not prepared under any comprehensive set of accounting rules or principles. In addition, non-GAAP financial measures may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies. As a result, non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, our consolidated financial statements prepared and presented in accordance with GAAP.

Overview

We are an iconic American company with a rich history of profitable growth, quality, innovation and corporate citizenship. Our story began in San Francisco, California, in 1853 as a wholesale dry goods business. We invented the blue jean 20 years later. Today we design, market and sell products that include jeans, casual and dress pants, activewear, tops, shorts, skirts, dresses, jackets, footwear and related accessories for men, women and children around the world under our Levi’s®, Dockers®, Signature by Levi Strauss & Co.™ ~~and~~, Denizen® and Beyond Yoga® brands. We service consumers through our global infrastructure, developing, sourcing, and marketing our products around the world. ~~In September 2021, we acquired Beyond Yoga~~®~~, our newest brand.~~

~~Our iconic, enduring brands are brought to life every day around the world by our talented and creative employees and partners. The Levi’s~~® ~~brand epitomizes classic, authentic American style and effortless cool. We have cultivated Levi’s~~® ~~as a lifestyle brand that is inclusive and democratic in the eyes of consumers while offering products that feel exclusive, personalized, and original. This approach has enabled the Levi’s~~® ~~brand to evolve with the times and continually reach a new, younger audience, while our rich heritage continues to drive relevance and appeal across demographics. The Dockers~~® brand helped drive "Casual Friday" in the 1990s and has been a cornerstone of casual menswear for more than 30 years. Seen as the khaki leader, Dockers has returned to its California roots and is bringing a full range of casual, versatile styles for men and women to show up with cool confidence every day. The Signature by Levi Strauss & Co.™ and Denizen® ~~brands, which we developed for value-conscious consumers, offer quality craftsmanship and great fit and style at affordable prices. The newly acquired Beyond Yoga~~® ~~brand is a body positive, premium athleisure apparel brand focused on quality, fit and comfort.~~

We recognize wholesale revenue from sales of our products through third-party retailers such as department stores, specialty retailers, third-party e-commerce sites and franchise locations dedicated to our brands. We also sell our products directly to consumers ("direct-to-consumer" or "DTC") through a variety of formats, including our own company-operated mainline and outlet stores, company-operated e-commerce sites and select shop-in-shops that we operate within department stores and other third-party retail locations. As of ~~May 29, 2022,~~February 26, 2023, our products were sold in approximately 50,000 retail locations in more than 110 countries, including approximately 3,200 brand-dedicated stores and shop-in-shops. As of ~~May 29, 2022,~~February 26, 2023, we had ~~1,059~~1,092 company-operated stores located in 37 countries and approximately ~~600~~550 company-operated shop-in-shops. The remainder of our brand-dedicated stores and shop-in-shops were operated by franchisees and other partners.

2423

Table of Contents

Across all of our brands, pants – including jeans, casual pants, dress pants, shorts, skirts and activewear – represented 68% and 67% of our total units sold in the first ~~six~~three months of ~~both 2021~~2023 and ~~2022.~~2022, respectively. Tops – including shirts, sweaters, jackets, dresses and jumpsuits – represented 25% of our total units sold in the first ~~six~~three months of both ~~2021~~2023 and 2022. The remainder of our products are footwear and accessories. Men's products generated 64% and 65% of our net revenues in the first ~~six~~three months of ~~both~~2023 and 2022, ~~and 2021.~~respectively. Women's products generated 35% and 34% of our net revenues in the first ~~six~~three months of 2023 and 2022, respectively. The remainder of our products are non-gendered. Products other than denim bottoms – which include tops, footwear and accessories and pants excluding jeans – represented 38% of our net revenues in the first three months of both ~~2022~~2023 and ~~2021 with the remaining 2% of our products being non-gendered in both periods. Sales of Levi’s~~® ~~brand products represented 87% of our total net sales in the first six months of both 2022 and 2021.~~2022.

Our Europe and Asia businesses, collectively, contributed ~~43%~~44% of our net revenues and ~~43%~~55% of our segment operating income in the first ~~six~~three months of ~~2022,~~2023, as compared to 46% of our net revenues and ~~42%~~49% of our segment operating income in the same period in ~~2021.~~2022. Revenues from our international business, which includes our Europe and Asia segments, as well as Canada and Latin America from our Americas segment, was ~~54%~~56% in the first ~~six~~three months of ~~2022, as compared to 56%~~both 2023 and 2022. Sales of Levi’s® brand products represented 87% of our total net sales in the ~~same period in 2021.~~first three months of both 2023 and 2022.

Our wholesale channel generated ~~62%~~58% and ~~64%~~61% of our net revenues in the first ~~six~~three months of ~~2022~~2023 and ~~2021,~~2022, respectively. Our DTC channel generated ~~38%~~42% and ~~36%~~39% of our net revenues in the first ~~six~~three months of ~~2022~~2023 and ~~2021,~~2022, respectively, with sales through our company operated e-commerce sites representing ~~20% and 25%~~22% of DTC channel net revenues in the first ~~six~~three months of ~~2022~~both 2023 and ~~2021, and 8%~~2022, and 9% of total net revenues in the first ~~six~~three months of ~~2022~~both 2023 and 2021, respectively. Our global digital business, which includes our e-commerce site as well as the online businesses of our wholesale customers, including that of traditional wholesalers as well as pure play (online-only) wholesalers represented approximately 20% of our total net revenues in the second quarter of 2022, versus approximately 23% of our total net revenues in the second quarter of 2021.2022.

~~Our Business Strategies~~

On June 1, 2022, we updated our long-term growth strategy, which aims to accelerate profitable growth over the next five years. Our new long-term growth strategy aims to achieve 6-8% revenue growth annually and 15% Adjusted EBIT margin by 2027. For more information on our calculation of Adjusted EBIT margin, a non-GAAP financial measure, see “– Non-GAAP Financial Measures.”

~~The following three “where to play” choices serve as our strategic framework for what we intend to achieve and have been aligned with our new long-term growth strategy:~~

•~~Brand Led:~~ ~~We plan to continue to elevate and strengthen the Levi’s~~® ~~Brands (which include Signature by Levi Strauss & Co.~~TM ~~and Denizen~~®~~), Dockers~~® ~~and Beyond Yoga~~® by more effectively integrating product, design, marketing and consumer in-store experiences with a global vision executed consistently across all markets. These actions are expected to support targeted revenue growth for the Levi’s® ~~Brands of approximately $2 billion to $2.5 billion and for the combined revenue of Dockers~~® ~~and Beyond Yoga~~® ~~to approach $1 billion by 2027.~~

•~~DTC First:~~ We plan to accelerate investment in stores, online platforms and other digital capabilities, while creating an integrated omni-channel shopping experience, which is expected to profitably drive our DTC channel to 55% of total annual net revenues by 2027 while tripling the e-commerce business.

•~~Diversify the Portfolio:~~ We plan to further capitalize on the substantial opportunity to amplify each brands’ reach and grow market share across geographies, categories, genders and channels and our intention is to nearly double both the women’s and tops revenue by 2027.

We believe that a strong cash position, incremental growth and improved cash earnings will enable us to further enhance stockholder returns. See "Liquidity and Capital Resources" for additional information.

Impact of Russia-Ukraine Crisis on our Business

As a result of Russia's invasion of Ukraine, we suspended our business initiatives and the majority of our commercial activity in Russia and Ukraine in the second quarter of ~~2022. This included the closure of~~2022, including closing the majority of our company-operated stores in Russia, as well as ~~the suspension of~~suspending shipments to our wholesale and licensing customers in Russia and Ukraine. ~~In response to this crisis, the United States~~Since then, we have closed all company-operated stores and ~~other countries have implemented economic and other sanctions. These sanctions currently, and any additional sanctions may~~ceased substantially all commercial activity in ~~the future, impact our ability to conduct business in~~ Russia.

Given the high level of uncertainty surrounding the future operations of our business in Russia, including the ability to generate future cash flows, the carrying value of our long-lived assets specific to our commercial business in Russia were deemed to be not recoverable. As a result, ~~of the Russia-Ukraine crisis,~~net revenues in Russia declined during the ~~second quarter~~three months ended February 26, 2023 and represented approximately 1% of ~~2022, we recorded~~our total charges of $60.4 million, ($0.15 per diluted share). The charges reflect the full impairment of long-lived assets, including $35.4 million related to certain store right-of-use assets, $11.6 million related to goodwill and $4.1 million related to property,

~~Table of Contents~~

~~plant and equipment, as well as $9.3 million of other incremental charges. All charges are included in selling, general and administrative expenses ("SG&A")~~net revenues in the ~~accompanying consolidated statements~~current quarter as compared to 2% of ~~income.~~our total net revenues in the prior year.

~~We are monitoring the effects of this conflict and expect that we will adjust our plans accordingly as the situation progresses.~~ For the three ~~and six~~ months ended ~~May 29, 2022,~~February 26, 2023, the results of operations for our businesses in Russia and Ukraine were not material to our consolidated financial statements. ~~Net revenues from Russia represented approximately 2% of our total~~On a constant currency basis, net revenues ~~for fiscal~~in our Europe segment were negatively impacted by approximately $16 million as compared to the prior year ~~2021. We do not expect significant disruption~~as of result of the decreased activities in Russia.

There is still uncertainty regarding the extent to which the war and its broader macroeconomic implications, will impact our Europe segment and overall business, ~~resulting from the conflict.~~

financial condition and results of operations. For additional information, see the risk factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended November ~~28, 2021~~27, 2022.

Supply Chain and U.S. Distribution Center Capacity Constraints

The elevated inventory levels within our U.S. distribution centers that we experienced during the latter half of 2022 have eased in the first quarter of 2023, and our inventory levels have begun to normalize. Compared to the first quarter of 2022, inventory increased 21% on a unit basis. As compared to the same quarters in the prior year, this quarter our inventory levels have increased 33% whereas in the fourth quarter of 2022, we had inventory growth of 58%. The 25 points of sequential improvement was largely due to deliberate actions taken during the quarter including reducing receipts and clearing inventory in the U.S.

Additionally, inflationary pressures, competition for, and price volatility of, resources throughout the supply chain have increased, resulting in higher labor and raw materials. Trends such as ~~well as Part II, Item 1A~~these can result in higher product costs and increased pressure to reduce costs and raise product prices, which could have a negative impact on demand. We continue to pursue mitigation strategies and create new efficiencies in our global supply chain.

Effects of Inflation

Inflationary pressures have negatively impacted our revenue, operating margins and net income in both of the three-month periods ended February 26, 2023 and February 27, 2022, including increased costs of labor and products. In an effort to mitigate the effect of higher costs, we implemented price increases on many of our ~~Form 10-Q~~products in 2022, although, the impact of price increases on consumer demand and on our business and results of operations is uncertain. If these inflationary pressures continue, our revenue, gross and operating margins and net income may be impacted for the ~~quarter ended February 27, 2022.~~remainder of 2023.

Table of Contents

Impact of COVID-19 on Our Business

~~While~~The COVID-19 pandemic continues to have a lingering affect our business and results of operations, although to a lesser extent than in prior years. In December 2022, the strict lockdowns and zero-tolerance policy shutdowns in China were lifted, although COVID-19 outbreaks continued to impact the country throughout December. By January 2023, all of our company-operated stores in China were open and operating, and traffic was improving. Across the rest of our markets, most of our company-operated stores and wholesale customer doors were open during the first half of 2022, the COVID-19 pandemic has continued to impact our business and results of operations during this time, although to a much lesser extent than in the prior-year period in all markets except China, as strict lockdowns resulted in temporary store closures throughout the country. Additionally, our supply chain partners, including third party manufacturers, logistic providers and other vendors continue to be adversely impacted by macroeconomic factors in connection with the pandemic. In the second quarter of 2022, supply chain disruptions resulted in the inability to fulfill all customer orders with an estimated impact on net revenues of approximately $20 million. We have also incurred higher distribution costs, including freight and labor costs, in the first half of 2022. We will continue to monitor these and other potential disruptions in our supply chain and implement mitigation plans as needed.both periods.

Although many government-imposed restrictions have been lightened or removed, the future impact of the COVID-19 pandemic continues to be highly uncertain. Consequently, our business and results of operations, including our net revenues, earnings and cash flows, could continue to be adversely impacted, including as a result of:

•Risk of future additional operating restrictions and temporary closures of our owned and operated retail stores globally as well as the doors owned by our wholesale customers, including third-party retailers and franchise partners;

•~~Decreased foot traffic in retail stores;~~

•Decreased consumer confidence and consumer spending habits, including spending for the merchandise that we sell and negative trends in consumer purchasing patterns due to changes in consumers’ disposable income, credit availability and debt levels;

•~~Disruption to the supply chain caused by the pandemic affecting production, distribution and other logistical issues, including port closures and shipping backlogs; and~~

•~~Challenges filling staffing requirements at our company-operated retail stores and distribution centers due to labor shortages affecting retail businesses.~~

Other Factors Affecting Our Business

We believe the other key business and marketplace factors ~~independent of the health and economic impact of the COVID-19 pandemic,~~ that are impacting our business include the following:

•AInflation and other macroeconomic pressures in the U.S. and the global economy such as rising interest rates, energy prices and recession fears are creating a complex and challenging retail environment for us and our customers ~~characterized by unpredictable traffic patterns~~as consumers reduce discretionary spending. A decline in consumer spending, for any reason, could have an adverse effect on our revenues, operating margins and net income. Inabilities to appropriately forecast consumer demand could lead to elevated inventory levels both with us and our customers, resulting in fewer full-priced sales and a ~~general~~more promotional environment. ~~In developed economies, mixed real wage growth~~Additionally, elevated inventory levels, combined with the uneven flow of receipts and ~~shifting consumer spending also~~shipments could cause further capacity pressures within our U.S. distribution centers, resulting in higher costs and limiting our ability to fulfill our customer's demand. These trends may impact our financial results, affecting inventory, revenue, operating margins and net income.

•Consumer expectations and related competitive pressures have increased and are expected to continue to ~~pressure global discretionary spending. Consumers~~increase relative to various aspects of our e-commerce business, including speed of product delivery, shipping charges, return privileges, and other evolving expectations. We continue to ~~focus on value pricing~~invest in our online platforms, information systems, digital, data and ~~increased~~AI capabilities, as well as in personnel to support the creation of a fully integrated omni-channel shopping experience. There can be no assurance that we will be able to successfully meet these expectations ~~for real-time delivery.~~which may impact our financial results.

•The diversification of our business model across geographies, channels, brands, and categories affects our gross margin. For example, if our sales in higher gross margin geographies, channels, brands and categories grow at a faster rate than in our lower gross margin business geographies, channels, brands and categories, we would expect a favorable impact to aggregate gross margin over time. Gross margin in our Europe segment is generally higher than in our Americas and Asia segments. DTC sales generally have higher gross margins than sales through third parties, although DTC sales also typically have higher selling expenses. Value brands, which are focused on the value-conscious consumer, generally generate lower gross margin. Enhancements to our existing product offerings, or our expansion into new brands and products categories, may also impact our future gross margin.

•Foreign currencies continue to be volatile. Significant fluctuations of the U.S. Dollar against various foreign currencies, including the Euro and British Pound, may negatively impact our financial results, revenue, operating margins and net income.

•The current domestic and international political environment, including volatile trade relations, the conflict involving Russia and Ukraine, and civil unrest taking place in certain parts of the world have resulted in uncertainty surrounding the future state of the global economy. There is greater uncertainty with respect to potential changes in trade regulations, sanctions and export controls which also increase volatility in the global economy. Such changes may require us to modify our current sourcing practices, which may impact our product costs, and, if not mitigated, could have a material adverse effect on our business and results of operations.

•There continues to be uncertainty with respect to potential changes in tax laws and regulations. Proposals to reform U.S. and foreign tax laws, including a 15% global minimum tax, could significantly impact how we are taxed on our U.S. and foreign earnings. If enacted into law, these types of tax law changes may have an adverse impact on our effective tax rate, income tax expense and cash flows.

•As climate change evolves, we expect an increase in both the frequency and severity of seasonal and severe weather events, which may affect our consumer traffic and demand, as well as the activities of our suppliers, manufacturers, and customers. Weather events, such as droughts, heatwaves, floods, wildfires and winter storms could impact store traffic and conversion as the timing for seasonal products may be unpredictable. Additionally, weather events could impact the cost or availability of raw materials integral to our products such as cotton.

•There has been increased focus from our stakeholders, including consumers, employees and investors, and more recently regulatory organizations on corporate environmental, social, and governance (“ESG”) practices, including practices related to the causes and impacts of climate change. We expect that stakeholder expectations with respect

2625

Table of Contents

•More competitors are seeking growth globally, thereby increasing competition across geographies. Some of these competitors are entering markets where we already have a mature business such as the United States, Mexico, Western Europeto ESG practices will continue to evolve rapidly, which may necessitate additional resources to monitor, report on, and ~~Japan, and may provide consumers discretionary purchase alternatives or lower-priced apparel offerings.~~adjust our operations.

•Wholesaler/retailer dynamics and wholesale channels remain challenged by mixed growth prospects due to increased competition from e-commerce shopping, pricing transparency enabled by the proliferation of online technologies, and vertically-integrated specialty stores. Retailers, including our top customers, have in the past and may in the future decide to consolidate, undergo restructurings or rationalize their stores, which could result in a reduction in the number of stores that carry our products.

•Many apparel companies that have traditionally relied on wholesale distribution channels have invested in expanding their own retail store and e-commerce distribution and consumer-facing technologies, which has increased competition in the retail market.

•Competition for, and price volatility of, resources throughout the supply chain have increased, causing us and other apparel manufacturers to continue to seek alternative sourcing channels and create new efficiencies in our global supply chain. Trends affecting the supply chain include the proliferation of lower-cost sourcing alternatives, resulting in reduced barriers to entry for new competitors, and the impact of fluctuating prices of labor and raw materials as well as the consolidation of suppliers. Trends such as these can bring additional pressure on us and other wholesalers and retailers to shorten lead-times, reduce costs and raise product prices.

•Foreign currencies continue to be volatile. Significant fluctuations of the U.S. Dollar against various foreign currencies, including the Euro, British Pound and Mexican Peso, will impact our financial results, affecting translation, revenue, operating margins and net income.

•The current environment has introduced greater uncertainty with respect to potential tax and trade regulations, and sanctions and export controls. The current domestic and international political environment, including changes to other U.S. policies related to global trade, tariffs and sanctions, as well as the conflict involving Russia and Ukraine and the potential impact on global economic and geopolitical conditions, have resulted in uncertainty surrounding the future state of the global economy. Such changes may require us to modify our current sourcing practices, which may impact our product costs, and, if not mitigated, could have a material adverse effect on our business and results of operations.

•There has been increased focus from our stakeholders, including consumers, employees and investors, on corporate environmental, social, and governance (“ESG”) practices, including practices related to the causes and impacts of climate change. We expect that stakeholder expectations with respect to ESG practices will continue to evolve rapidly, which may necessitate additional resources to monitor, report on, and adjust our operations.

These factors contribute to a global market environment of intense competition, constant product innovation and continuing cost pressure, and combine with the continuing global economic conditions to create a challenging commercial and economic environment. We evaluate these factors as we develop and ~~execute~~modify our ~~strategies.~~strategies as appropriate to mitigate these risks to our business.

For additional information regarding these risks, as well as other risks ~~related to the COVID-19 pandemic,~~we face, see the risk factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended November ~~28, 2021 as well as Part II, Item 1A~~27, 2022.

Seasonality of Sales

We typically achieve our largest quarterly revenues in the fourth quarter. In fiscal year 2022, our net revenues in the first, second, third and fourth quarters represented 26%, 24%, 24% and 26%, respectively, of our ~~Form 10-Q~~total net revenues for the year.

During the first quarter ~~ended February 27, 2022.~~

~~Effects~~ of ~~Inflation~~

~~We do not believe that inflation has had a material effect on our results~~2023, we accelerated wholesale shipments typically made in the second quarter of ~~operations~~2023, mostly in preparation for the ~~three-month and six-month periods ended May 29, 2022 and May 30, 2021; however, our business could be affected by inflation~~implementation of a new U.S. ERP in second quarter of 2023. As a result, we estimate that approximately $100 million of corresponding net revenues shifted from the ~~future which we plan~~second quarter to ~~mitigate through a combination~~the first quarter of ~~pricing actions and operating efficiencies, although these actions could have an adverse impact on demand.~~2023.

~~Table of Contents~~

Our ~~Second~~First Quarter ~~2022~~2023 Results

•Net revenues. Consolidated net revenues increased ~~15.3%~~6.1% on a reported basis and ~~19.7%~~8.8% on a constant-currency basis compared to the ~~second~~first quarter of ~~2021. The~~2022. Excluding the effects of currency, the increase was driven by ~~strong~~ growth across all segments as a result of higher ~~traffic~~units and ~~demand in~~average unit selling prices, with a large portion of the ~~current year. Additionally, revenue in the prior year was adversely impacted by reduced traffic as certain markets continued to be impacted by COVID-19 resurgences.~~growth coming from both our DTC and international businesses.

•Operating income. ~~Consolidated~~Compared to the first quarter of 2022, consolidated operating income decreased ~~28.5%~~32.8% to ~~$76.2~~$157.4 million from ~~$106.5 million in the second quarter of 2021.~~$234.2 million. The decrease is due to lower gross margins and higher SG&A expenses in the current ~~year, which included $60.4 million of impairment and other charges related to the Russia-Ukraine crisis. The decrease was partially offset with higher net revenues. Operating~~year. As a result, operating margin was ~~5.2%~~9.3%, ~~310~~540 basis points lower than the ~~second~~first quarter of ~~2021, as a result of the additional charges.~~2022.

•Net income. ~~Consolidated~~Compared to the first quarter of 2022, consolidated net income of ~~$49.7~~$114.7 million decreased from ~~$64.7 million in the second quarter of 2021.~~$195.8 million. The decrease is driven by lower operating income described above. ~~Additionally, higher income taxes in the current year were partially offset with lower interest expense and $30.1 million in prior year costs related to the early extinguishment of debt.~~

•Adjusted EBIT. A~~djusted EBIT increased 26.9%~~Compared to ~~$145.4 million as compared to $114.6 million in~~ the ~~second~~first quarter of ~~2021.~~2022, Adjusted EBIT decreased 22.1% to $185.3 million from $237.9 million. The ~~increase~~decrease is due to ~~higher net revenues partially offset with~~a lower Adjusted gross margin as well as higher Adjusted SG&A expenses in the current year. As a result, Adjusted EBIT margin was ~~9.9%~~11.0%, ~~90 basis points higher than the second quarter of 2021 on a reported basis, and 120 basis points higher on a constant-currency basis.~~

•~~Adjusted net income.~~ Compared to the second quarter of 2021, Adjusted net income increased 24.9% to $116.7 million from $93.4 million. The increase is due to higher Adjusted EBIT as described above. Additionally, we recognized lower interest expense in the current year, offset with higher income taxes.

•~~Diluted earnings per share.~~ Compared to the second quarter of 2021, diluted earnings per share decreased to $0.12 from $0.16 due to the lower net income described above, including $0.15 unfavorable per diluted share impact of charges related to the Russia-Ukraine crisis.

•~~Adjusted diluted earnings per share.~~ Compared to the second quarter of 2021, Adjusted diluted earnings per share increased to $0.29 from $0.23, mainly due to the higher Adjusted net income described above. Currency translation unfavorably affected Adjusted diluted earnings per share by $0.02.

~~Our Year-to-Date 2022 Results~~

•~~Net revenues.~~ Consolidated net revenues increased 18.6% on a reported basis and 22.7% on a constant-currency basis compared to the first six months of 2021. The increase was driven by strong growth across all segments as a result of higher traffic and demand in the current year. Additionally, revenue in the prior year was adversely impacted by reduced traffic as certain markets continued to be impacted by COVID-19 resurgences.

•~~Operating income~~. Compared to the first six months of 2021, operating income increased 9.4% to $310.4 million from $283.6 million due to higher net revenues and gross margin partially offset with higher SG&A expenses in the current year, which included $60.4 million of impairment and other charges related to the Russia-Ukraine crisis. As a result of the additional charges, operating margin was 10.1%, 90390 basis points lower than the first ~~six months~~quarter of ~~2021.~~

•~~Net income.~~ Compared to the first six months of 2021, consolidated net income increased to $245.6 million from $207.2 million, primarily due to higher operating income described above. Additionally, higher income taxes in the current year were partially offset by lower interest expense and $30.3 million in prior year costs related to the early extinguishment of debt.

•~~Adjusted EBIT.~~ Compared to the first six months of 2021, Adjusted EBIT increased 32.8% to $383.2 million from $288.6 million, primarily due to higher net revenues and higher Adjusted gross margin in the current year partially offset with higher Adjusted SG&A expenses. As a result, Adjusted EBIT margin was 12.5%, 130 basis points higher than the first six months of 20212022 on a reported basis, and ~~170~~380 basis points ~~higher~~lower on a constant-currency basis.

•Adjusted net income. Compared to the first ~~six months~~quarter of ~~2021,~~2022, Adjusted net income ~~increased 30.9%~~decreased 28.7% to ~~$305.9~~$134.9 million from ~~$233.7 million, primarily~~$189.2 million. The decrease is due to ~~higher~~lower Adjusted EBIT as described above. ~~Additionally, we recognized lower interest expense in the current year, offset with higher income taxes.~~

•Diluted earnings per share. Compared to the first ~~six months~~quarter of ~~2021,~~2022, diluted earnings per share ~~increased~~decreased to ~~$0.61~~$0.29 from ~~$0.50, mainly~~$0.48 due to the ~~higher~~lower net income described above.

•Adjusted diluted earnings per share. Compared to the first ~~six months~~quarter of ~~2021,~~2022, Adjusted diluted earnings per share ~~increased~~decreased to ~~$0.75~~$0.34 from ~~$0.57,~~$0.46, mainly due to the ~~higher~~lower Adjusted net income described above. Currency translation unfavorably affected Adjusted diluted earnings per share by ~~$0.04.~~$0.01.

•

~~Table~~Inventory. Compared to the first quarter of ~~Contents~~2022, total inventories increased 33% on a dollar basis, whereas in the fourth quarter of 2022, we had inventory growth of 58%. The 25 points of sequential improvement was largely due to the deliberate actions taken during the quarter including reducing receipts and clearing excess inventory in the U.S.

For more information on our calculation of Adjusted EBIT, Adjusted net income, and Adjusted diluted earnings per share, non-GAAP financial measures and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP, see “– Non-GAAP Financial Measures.”

Table of Contents

Financial Information Presentation

Fiscal year. We use a 52- or 53- week fiscal year, with each fiscal year ending on the Sunday in November that is closest to November 30 of that year. Certain of our foreign subsidiaries have fiscal years ending November 30. Each fiscal year generally consists of four 13-week ~~quarters.~~quarters, with each quarter ending on the Sunday that is closest to the last day of the last month of that quarter. Each quarter of fiscal years ~~2022~~2023 and ~~2021~~2022 consists of 13 weeks.

Segments. Our Levi's Brands business, which includes Levi's®, Signature by Levi Strauss & Co.™ and Denizen® brands, is defined by geographical regions into three segments: Americas, Europe and Asia. Our Dockers® and Beyond Yoga® businesses are managed separately and do not meet the quantitative thresholds of a reportable segment and are reported in our financial statements under the caption of Other Brands.

In the fourth quarter of fiscal 2021, we changed our segment reporting. 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. For additional information, including the financial results of our segments, see Note 15 to our unaudited consolidated financial statements included in this report.

Classification. Our classification of certain significant revenues and expenses reflects the following:

•Net revenues comprise net sales and licensing revenues. Net sales include sales of products to wholesale customers, including franchised stores, and direct sales to consumers at our company-operated stores and shop-in-shops located within department stores and other third-party locations, as well as company-operated e-commerce sites. Net revenues include discounts, allowances for estimated returns and incentives. Licensing revenues, which include revenues from the use of our trademarks in connection with the manufacturing, advertising and distribution of trademarked products by third-party licensees, are earned and recognized as products are sold by licensees based on royalty rates as set forth in the applicable licensing agreements.

•Cost of goods sold primarily comprises product costs, labor and related overhead, sourcing costs, inbound freight, internal transfers and the cost of operating our remaining manufacturing facilities, including the related depreciation expense. On both a reported and constant-currency basis, cost of goods sold reflects the transactional currency impact resulting from the purchase of products in a currency other than the functional currency.

•Selling expenses include, among other things, all occupancy costs and depreciation associated with our company-operated stores and commissions associated with our company-operated shop-in-shops, as well as costs associated with our e-commerce operations.

•We reflect substantially all distribution costs in SG&A, including costs related to receiving and inspection at distribution centers, warehousing, shipping to our customers, handling, and certain other activities associated with our distribution network.

2927

Table of Contents

Results of Operations ~~for Three and Six Months Ended May 29, 2022, as Compared to Comparable Periods in 2021~~

The following table presents, for the periods indicated, our consolidated statements of income, the changes in these items from period to period and these items expressed as a percentage of net revenues:


		Three Months Ended											Six Months Ended												Three Months Ended
		May 29, 2022		May 30, 2021			% Increase (Decrease)		May 29, 2022		May 30, 2021		May 29, 2022		May 30, 2021			% Increase (Decrease)		May 29, 2022		May 30, 2021			February 26, 2023		February 27, 2022			% Increase (Decrease)		February 26, 2023		February 27, 2022
						% of Net Revenues			% of Net Revenues								% of Net Revenues			% of Net Revenues									% of Net Revenues			% of Net Revenues

				(Dollars and shares in millions, except per share amounts)																							(Dollars and shares in millions, except per share amounts)
Net revenues	Net revenues	$	1,471.1	$	1,276.0		15.3	%	100.0	%	100.0	%	$	3,062.7	$	2,581.6		18.6	%	100.0	%	100.0	%	Net revenues	$	1,688.9	$	1,591.6		6.1	%	100.0	%	100.0	%
Cost of goods sold	Cost of goods sold	616.1		525.8			17.2	%	41.9	%	41.2	%	1,264.1		1,071.4			18.0	%	41.3	%	41.5	%	Cost of goods sold	746.6		648.0			15.2	%	44.2	%	40.7	%
Gross profit	Gross profit	855.0		750.2			14.0	%	58.1	%	58.8	%	1,798.6		1,510.2			19.1	%	58.7	%	58.5	%	Gross profit	942.3		943.6			(0.1)	%	55.8	%	59.3	%
Selling, general and administrative expenses	Selling, general and administrative expenses	778.8		643.7			21.0	%	52.9	%	50.4	%	1,488.2		1,226.6			21.3	%	48.6	%	47.5	%	Selling, general and administrative expenses	784.9		709.4			10.6	%	46.5	%	44.6	%

Operating income	Operating income	76.2		106.5			(28.5)	%	5.2	%	8.3	%	310.4		283.6			9.4	%	10.1	%	11.0	%	Operating income	157.4		234.2			(32.8)	%	9.3	%	14.7	%
Interest expense	Interest expense	(4.4)		(19.9)			77.9	%	(0.3)	%	(1.6)	%	(8.6)		(43.2)			80.1	%	(0.3)	%	(1.7)	%	Interest expense	(10.7)		(4.2)			(154.8)	%	(0.6)	%	(0.3)	%

Loss on early extinguishment of debt		—		(30.1)			100.0	%	—	%	(2.4)	%	—		(30.3)			100.0	%	—	%	(1.2)	%
Other income (expense), net		6.0		(0.8)			*		0.4	%	(0.1)	%	21.9		0.3			*		0.7	%	—	%

Other (expense) income, net																								Other (expense) income, net	(7.5)		15.9			(147.2)	%	(0.4)	%	1.0	%
Income before income taxes	Income before income taxes	77.8		55.7			39.7	%	5.3	%	4.4	%	323.7		210.4			53.8	%	10.6	%	8.1	%	Income before income taxes	139.2		245.9			(43.4)	%	8.2	%	15.4	%
Income tax expense (benefit)		28.1		(9.0)			*		1.9	%	(0.7)	%	78.1		3.2			*		2.6	%	0.1	%
Income tax expense																								Income tax expense	24.5		50.1			(51.1)	%	1.5	%	3.1	%
Net income	Net income	$	49.7	$	64.7		(23.2)	%	3.4	%	5.1	%	$	245.6	$	207.2		18.5	%	8.0	%	8.0	%	Net income	$	114.7	$	195.8		(41.4)	%	6.8	%	12.3	%

Earnings per common share attributable to common stockholders:	Earnings per common share attributable to common stockholders:																							Earnings per common share attributable to common stockholders:
Basic	Basic	$	0.13	$	0.16		(18.8)	%	*		*		$	0.62	$	0.52		19.2	%	*		*		Basic	$	0.29	$	0.49		(40.8)	%	*		*
Diluted	Diluted	$	0.12	$	0.16		(25.0)	%	*		*		$	0.61	$	0.50		22.0	%	*		*		Diluted	$	0.29	$	0.48		(39.6)	%	*		*
Weighted-average common shares outstanding:	Weighted-average common shares outstanding:																							Weighted-average common shares outstanding:
Basic	Basic	397.9		402.0			(1.0)	%	*		*		398.7		400.8			(0.5)	%	*		*		Basic	396.0		399.4			(0.9)	%	*		*
Diluted	Diluted	403.8		412.1			(2.0)	%	*		*		405.9		410.6			(1.1)	%	*		*		Diluted	400.4		407.0			(1.6)	%	*		*

_____________

* Not meaningful

3028

Table of Contents

Net revenues

The following table presents net revenues by ~~reporting~~reportable segment for the periods indicated and the changes in net revenues by ~~reporting~~reportable segment on both reported and constant-currency basis from period to period.


		Three Months Ended								Six Months Ended									Three Months Ended
						% Increase								% Increase									% Increase (Decrease)
		May 29, 2022		May 30, 2021		As Reported		Constant Currency		May 29, 2022		May 30, 2021		As Reported		Constant Currency			February 26, 2023		February 27, 2022		As Reported		Constant Currency

		(Dollars in millions)																	(Dollars in millions)
Net revenues:	Net revenues:																	Net revenues:
Levi's Brands:	Levi's Brands:																	Levi's Brands:
Americas	Americas	$	776.1	$	661.4	17.3	%	17.4	%	$	1,541.9	$	1,267.6	21.6	%	21.9	%	Americas	$	823.0	$	765.9	7.5	%	6.9	%
Europe	Europe	367.1		354.9		3.4	%	15.1	%	836.5		771.6		8.4	%	18.2	%	Europe	455.1		469.4		(3.0)	%	1.5	%
Asia	Asia	221.8		191.8		15.6	%	21.0	%	480.3		424.7		13.1	%	17.0	%	Asia	289.5		258.4		12.0	%	22.2	%
Total Levi's Brands net revenues	Total Levi's Brands net revenues	1,365.0		1,208.1		13.0	%	17.4	%	2,858.7		2,463.9		16.0	%	20.0	%	Total Levi's Brands net revenues	1,567.6		1,493.7		4.9	%	7.8	%
Other Brands	Other Brands	106.1		67.9		56.3	%	61.3	%	$	204.0	$	117.7	73.3	%	79.9	%	Other Brands	121.3		97.9		23.9	%	24.6	%
Total net revenues	Total net revenues	$	1,471.1	$	1,276.0	15.3	%	19.7	%	$	3,062.7	$	2,581.6	18.6	%	22.7	%	Total net revenues	$	1,688.9	$	1,591.6	6.1	%	8.8	%

Total net revenues increased on both a reported and constant-currency basis for the three-month ~~and six-month periods~~period ended ~~May 29, 2022,~~February 26, 2023, as compared to the same ~~periods~~period in ~~2021.~~2022.

Americas. On both a reported and constant-currency basis, net revenues in our Americas segment increased for the three-month ~~and six-month periods~~period ended ~~May 29, 2022. Currency~~February 26, 2023, with currency translation ~~did not have a significant impact on~~affecting net revenues favorably by approximately $4 million. Excluding the effects of currency, net revenues increased for the three-month period ended February 26, 2023, driven by growth in both our DTC and ~~had an unfavorable impact of approximately $3 million for the six-month period ended May 29, 2022.~~wholesale channels.

The increase in ~~net revenues for the three-month and six-month periods ended May 29, 2022 was driven by~~DTC revenue growth across both our wholesale and DTC channels. In comparison to prior year, wholesale channel revenue increased in both periods due to the combination of more products sold and price increases taken during the first quarter of 2022. The growth was across ~~most~~all markets, ~~with a large portion from~~led by the United States, ~~as sales of our Levi's~~® ~~brand products increased, both to our traditional and digital wholesale customers.~~

~~DTC channel revenue increased in both periods and was across most markets primarily due to~~driven by strong store performance, ~~within our company-operated stores,~~ as a result of higher ~~traffic in the current year in comparison to the prior year, where traffic remained tempered from the ongoing pandemic. Higher full price sales~~units sold and price increases taken in the ~~current year also attributed to revenue growth.~~prior year. Additionally, we benefited from 28 more company-operated stores in operation as of ~~May 29, 2022~~February 26, 2023 as compared to ~~May 30, 2021.~~February 27, 2022. E-commerce net revenues increased due to higher average selling prices and higher online traffic.

Wholesale channel revenue ~~decreased in~~increased for the three-month period ended ~~May 29, 2022~~February 26, 2023 driven by growth in Canada as well as the United States as a result of higher units sold, and price increases taken in the prior year. The growth in the U.S. was ~~flat for the six-month period ended May 29, 2022~~primarily due to increased shipments in advance of our U.S. ERP implementation, with an estimated impact of approximately $100 million. This was partially offset with increased promotional activity as ~~increases in~~we took actions to clear out excess inventory and slow selling goods. Additionally, higher ~~average selling prices were~~sales of our Levi's brand products offset by lower ~~traffic as consumers returned to in-person shopping.~~sales of our value brands products.

Europe. Net revenues in Europe decreased on a reported basis and increased on ~~both~~ a ~~reported and~~ constant-currency basis for the three-month ~~and six-month periods~~period ended ~~May 29, 2022,~~February 26, 2023, with currency translation affecting net revenues unfavorably by approximately ~~$36 million and $64 million, respectively.~~

~~Constant-currency~~$21 million. The increase in constant-currency net revenues for the three-month period ended ~~May 29, 2022 increased~~February 26, 2023 was driven by ~~growth~~higher DTC channel revenue despite an approximate $16 million decrease in net revenues due to the Russia-Ukraine crisis.

The increase in DTC revenue was due to strong store performance in our ~~DTC channel primarily due to customers returning to in-person shopping this year,~~company-operated stores as higher in-store traffic and increased promotional activity drove higher unit sales in the current period as compared to the ~~same prior-year periods,~~prior year which ~~were impacted by lower traffic and store closures as a result of the~~included lingering COVID-19 ~~pandemic. Additionally, we benefited from price increases in the second half of 2021. Partially offsetting the increase in net revenues for the quarter,~~impacts. This was ~~a $13.8 million decrease related to our Russia DTC business as a result of the Russia-Ukraine crisis. We also had 22~~partially offset with 73 fewer company-operated stores in operation as of ~~May 29, 2022~~February 26, 2023 as compared to ~~May 30, 2021,~~February 27, 2022, primarily due to the closure of stores in Russia. ~~For the three-month and six-month periods ended May 29, 2022, e-commerce~~E-commerce revenue ~~declined~~increased primarily due to ~~lower traffic as more consumers shifted to in-person shopping as compared to the prior year when some stores were closed.~~

~~Table of Contents~~

higher traffic.

Excluding the effects of currency, wholesale channel revenue ~~was flat for the three-month period ended May 29, 2022 and increased slightly for the six-month period ended May 29, 2022 as increased sales~~decreased primarily due to ~~franchise partners, and higher average selling prices were mostly offset with~~ a ~~decrease~~decline in units sold as wholesale customers continued to ~~our traditional wholesale customers. As a result~~rebalance inventory levels. This was partially offset by the benefit of the Russia-Ukraine crisis, our Russia wholesale business resulted in a $8.5 million decrease in net revenues for the three-month period as compared to the same prior-year period. Additionally, partial and full COVID-19 related lockdowns in most markets negatively impacted demand and net revenuesprice increases taken in the ~~prior-year periods. Compared to the same periods in 2021, net revenues of our digital wholesale customers decreased in both periods as more consumers shifted to in-person shopping.~~prior year.

Asia. Net revenues in Asia increased on both a reported and constant-currency basis for the three-month ~~and six-month periods~~period ended ~~May 29, 2022,~~February 26, 2023, with currency affecting net revenues unfavorably by approximately ~~$8 million and $14 million, respectively.~~

$22 million. Excluding the effects of currency, net revenues for the three-month ~~and six-month periods~~period ended ~~May 29, 2022~~February 26, 2023 grew across both our DTC and wholesale ~~and DTC~~ channels, ~~in most markets despite lockdowns~~inclusive of an approximate $2 million decline in China ~~and Hong Kong due to COVID-19 resurgences in 2022, which resulted in an $19.0 million decrease in~~ net revenues ~~for~~as COVID-19 outbreaks impacted the ~~three-month period comparison. Wholesale revenue increased in both periods primarily due to higher demand in several markets as compared to~~beginning of the prior year, which included partial and full government-imposed lockdowns as a result of COVID-19 resurgences. Net revenues of our digital wholesale customers for both periods also grew in comparison to the same periods in the prior year.quarter.

The increase in DTC revenue ~~for both periods~~ was primarily due to strong performance in our company-operated stores, as a result of higher in-person traffic and price increases taken in ~~fiscal 2022~~the prior year. Additionally, there were 30 more company-operated stores in

Table of Contents

operation as of February 26, 2023 as compared to ~~the prior year. Many markets were impacted by COVID-19 related restrictions and lockdowns in the prior-year periods. Additionally, there were eight more stores in operation as of May 29,~~February 27, 2022 ~~as compared to May 30, 2021~~ as well as the addition of approximately 80 company-operated shop in shops which were previously licensed in Thailand. ~~E-commerce revenue for~~For the three-month period ended ~~was essentially flat~~February 26, 2023, e-commerce revenue grew, primarily due to increased online traffic, as compared to the ~~same~~ prior-year ~~period and higher for the six-month period ended May 29, 2022~~period. Wholesale revenue increased primarily due to ~~traffic.~~higher demand in most markets, particularly in India, as well as price increases taken in the prior year.

Other Brands. Net revenues in Other Brands increased on both a reported and constant-currency basis for the three-month ~~and six-month periods~~period ended ~~May 29, 2022, with currency~~February 26, 2023. Currency translation ~~affecting net revenues unfavorably by approximately $2 million and $4 million, respectively.~~did not have a significant impact for the three-month period ended February 26, 2023. The increase in net revenues for the three-month ~~and six-month periods~~period ended ~~May 29, 2022 were~~February 26, 2023 was driven by ~~the inclusion of~~growth in both our Dockers ® and Beyond Yoga® ~~revenues in the current year, which had $22.8 million in net revenues for the quarter, as well as broad-based growth~~brands.

Table of ~~our Dockers~~® ~~brand.~~Contents

Gross profit

The following table shows consolidated gross profit and gross margin for the periods indicated and the changes in these items from period to period:


		Three Months Ended								Six Months Ended									Three Months Ended
		May 29, 2022			May 30, 2021			% Increase		May 29, 2022			May 30, 2021			% Increase			February 26, 2023			February 27, 2022			% Increase

		(Dollars in millions)																	(Dollars in millions)
Net revenues	Net revenues	$	1,471.1		$	1,276.0		15.3	%	$	3,062.7		$	2,581.6		18.6	%	Net revenues	$	1,688.9		$	1,591.6		6.1	%
Cost of goods sold	Cost of goods sold	616.1			525.8			17.2	%	1,264.1			1,071.4			18.0	%	Cost of goods sold	746.6			648.0			15.2	%
Gross profit	Gross profit	$	855.0		$	750.2		14.0	%	$	1,798.6		$	1,510.2		19.1	%	Gross profit	$	942.3		$	943.6		(0.1)	%
Gross margin	Gross margin	58.1		%	58.8		%			58.7		%	58.5		%			Gross margin	55.8		%	59.3		%

Currency translation unfavorably impacted gross profit by approximately ~~$30 million and $53~~$26 million for the three-month ~~and six-month periods~~period ended ~~May 29, 2022, respectively.~~February 26, 2023.

For the three-month period ended ~~May 29, 2022,~~February 26, 2023, the decrease in gross margin was primarily due to ~~$7.2 million in reductions in COVID-19 related inventory costs recognized in the prior year. Higher~~higher product costs, ~~including $11.5 million of air freight, were mostly offset by the impact of a higher proportion of sales in our DTC channel,~~ lower ~~promotions, higher~~ full price sales and approximately 30 basis points of unfavorable currency exchange, including transaction and translation impacts. These were partially offset by favorable channel mix, price ~~increases.~~

~~For the six-month period ended May 29, 2022, the increase in~~increases, and lower air freight expenses. Higher product costs include increased cotton prices, ocean freight and demurrage charges, which unfavorably impacted gross margin ~~was primarily due to a higher proportion~~by approximately 200 basis points. Lower full price sales include the impact of ~~sales in our DTC channel, which has higher margins~~increased promotional activity as well as ~~lower promotions,~~the impact of our actions to clear inventory, which unfavorably impacted gross margin by approximately 300 basis points. Additionally, we estimate the shift in wholesale revenues from the second quarter to the first quarter in preparation for the implementation of a higher share of full price sales and price increases, partially offsetting higher product costs, including $15.1 million of air freight. The fiscal 2021 period also included $14.4 million in reductions in COVID-19 related inventory costs.new U.S. ERP system unfavorably impacted our gross margin by approximately 40 basis points.

3231

Table of Contents

Selling, general and administrative expenses

The following table shows SG&A for the periods indicated, the changes in these items from period to period and these items expressed as a percentage of net revenues:


		Three Months Ended										Six Months Ended																			Three Months Ended
		May 29, 2022		May 30, 2021		% Increase		May 29, 2022		May 30, 2021		May 29, 2022				May 30, 2021				% Increase				May 29, 2022				May 30, 2021			February 26, 2023				February 27, 2022				% Increase (Decrease)				February 26, 2023				February 27, 2022
								% of Net Revenues		% of Net Revenues																% of Net Revenues			% of Net Revenues																% of Net Revenues

		(Dollars in millions)																													(Dollars in millions)
Selling	Selling	$	297.3	$	263.0	13.0	%	20.2	%	20.6	%			$	609.5			$	541.5			12.6	%			19.9	%			21.0	%	Selling	$	346.0			$	312.2			10.8	%			20.5	%			19.6	%
Advertising and promotion	Advertising and promotion	130.6		112.0		16.6	%	8.9	%	8.8	%	223.3				175.4				27.3	%			7.3	%			6.8	%	Advertising and promotion	103.2				92.7				11.3	%			6.1	%			5.8	%
Administration	Administration	170.6		131.5		29.7	%	11.6	%	10.3	%	299.6				236.8				26.5	%			9.8	%			9.2	%	Administration	127.4				131.0				(2.7)	%			7.5	%			8.2	%
Other	Other	180.3		137.2		31.4	%	12.3	%	10.8	%	355.8				272.9				30.4	%			11.6	%			10.6	%	Other	196.9				175.5				12.2	%			11.7	%			11.0	%

Restructuring charges, net																														Restructuring charges, net	11.4				(2.0)				*				0.7	%			(0.1)	%
Total SG&A	Total SG&A	$	778.8	$	643.7	21.0	%	52.9	%	50.4	%	$	1,488.2			$	1,226.6			21.3	%			48.6	%			47.5	%	Total SG&A	$	784.9			$	709.4			10.6	%			46.5	%			44.6	%

______________

* Not meaningful

Currency translation impacted SG&A favorably by approximately ~~$22 million and $36~~$17 million for the three-month ~~and six-month periods~~period ended ~~May 29, 2022, respectively.~~February 26, 2023.

Selling. Currency translation impacted selling expenses favorably by approximately ~~$12 million and $20~~$11 million for the three-month ~~and six-month periods~~period ended ~~May 29, 2022, respectively.~~February 26, 2023. For the three-month ~~and six-month periods~~period ended ~~May 29, 2022,~~February 26, 2023, the increase in selling expenses iswas primarily due to higher sales volume in the current year as compared to the prior year ~~which included temporary~~as well as increased labor and store ~~closures in certain markets~~costs as a result of ~~the pandemic.~~inflation.

Advertising and promotion. Currency translation impacted advertising and promotion expenses favorably by approximately ~~$4 million and $6~~$2 million for the three-month ~~and six-month periods~~period ended ~~May 29, 2022, respectively.~~February 26, 2023. The increase in advertising and promotion expenses for the three-month ~~and six-month periods~~period ended ~~May 29, 2022 is~~February 26, 2023 was primarily due to increased spend on media, ~~and demand generation~~ as we ~~returned to pre-pandemic advertising and promotion investment levels.~~prioritized marketing the 150th anniversary of our 501® jean.

Administration. Administration expenses include functional administrative and organization costs. Currency translation impacted administration expenses favorably by approximately ~~$3 million and $5~~$2 million for the three-month ~~and six-month periods~~period ended ~~May 29, 2022, respectively.~~February 26, 2023. The ~~increase~~decrease in administration costs for the three-month ~~and six-month periods~~period ended ~~May 29, 2022~~February 26, 2023 was primarily due to the recognition of $60.4 million in charges related to the Russia-Ukraine crisis, mostly impairment charges, including $35.4 million related to certain store right-of-use assets, $11.6 million related to goodwill and $4.1 million related to other property, plant and equipment. Also included in the three-month period ended May 29, 2022 were lower employee incentive ~~and stock-based compensation~~ costs as compared to the same prior-year ~~period.~~period as well as the recognition of a $3.5 million gain in the current year on the early termination of store leases related to the Russia-Ukraine crisis. This was partially offset by the recognition of $18.2 million in charges related to the impairment of capitalized internal-use software, as a result of the decision to discontinue certain technology projects in connection with the overall restructuring initiative.

Other. Other costs include distribution, information resources and marketing organization costs. Currency translation impacted other costs favorably by approximately ~~$3 million and $5~~$2 million for the three-month ~~and six-month periods~~period ended ~~May 29, 2022, respectively.~~February 26, 2023. For the three-month ~~and six-month periods~~period ended ~~May 29, 2022,~~February 26, 2023, the increase in other costs was primarily due to higher distribution expenses attributable to ~~increased~~higher labor costs as a result of higher sales volume as well as inflation.

Restructuring charges, net. During the three-month period ended February 26, 2023, we recognized restructuring charges of $11.4 million. The charges primarily include the recognition of severance and ~~higher labor costs. Higher information technology expenses also attributed~~other post-employment benefits related to a restructuring initiative that commenced in the fourth quarter of 2022 and is expected to continue through 2023. For the three-month period ended February 27, 2022, we recognized a net reduction in restructuring charges of $2.0 million. The charges represent revisions of estimates related to the ~~increase~~previous restructuring initiative ending in ~~costs as we continued to invest in digital technology, data and artificial intelligence, and upgrading our enterprise resource planning system.~~2021.

3332

Table of Contents

Operating income

The following table shows operating income by reportable segment, restructuring charges and corporate expenses for the periods indicated, the changes in these items from period to period and these items expressed as a percentage of net revenues:


		Three Months Ended														Six Months Ended																							Three Months Ended
		May 29, 2022			May 30, 2021			% Increase (Decrease)		May 29, 2022			May 30, 2021			May 29, 2022					May 30, 2021					% Increase (Decrease)				May 29, 2022				May 30, 2021					February 26, 2023					February 27, 2022					% Increase (Decrease)				February 26, 2023				February 27, 2022
										% of Net Revenues			% of Net Revenues																			% of Net Revenues			% of Net Revenues																		% of Net Revenues

		(Dollars in millions)																																							(Dollars in millions)
Operating income:	Operating income:																																					Operating income:
Levi's Brands:	Levi's Brands:																																					Levi's Brands:
Americas	Americas	$	158.7		$	147.6		7.5	%	20.4	%		22.3	%					$	336.5				$	276.2			21.8	%			21.8	%			21.8	%			Americas		$	134.6				$	177.8			(24.3)	%			16.4	%			23.2	%
Europe	Europe	66.6			59.4			12.1	%	18.1	%		16.7	%		203.4					170.0					19.6	%			24.3	%			22.0	%			Europe	117.4					136.8					(14.2)	%			25.8	%			29.1	%
Asia	Asia	19.1			6.3			203.2	%	8.6	%		3.3	%		62.7					35.5					76.6	%			13.1	%			8.4	%			Asia	53.7					43.6					23.2	%			18.5	%			16.9	%
Total Levi's Brands operating income	Total Levi's Brands operating income	244.4			213.3			14.6	%	17.9	%		17.7	%		602.6					481.7					25.1	%			21.1	%			19.6	%			Total Levi's Brands operating income	305.7					358.2					(14.7)	%			19.5	%			24.0	%
Other Brands	Other Brands	4.0			2.4			65.6	%	3.8	%		3.5	%		13.6					3.4					*				6.7	%			2.9	%			Other Brands	3.4					9.6					(64.0)	%			2.8	%			9.8	%

Restructuring charges, net																																						Restructuring charges, net	(11.4)					2.0					*				(0.7)	%	v		0.1	%	v
Corporate expenses	Corporate expenses	(172.2)			(109.2)			57.7	%	(11.7)	%	v	(8.6)	%	v	(305.8)					(201.5)					51.8	%			(10.7)	%	v		(8.2)	%	v		Corporate expenses	(140.3)					(135.6)					(3.5)	%			(8.3)	%	v		(8.5)	%	v
Total operating income	Total operating income	$	76.2		$	106.5		(28.5)	%	5.2	%	v	8.3	%	v	$	310.4				$	283.6				9.4	%			10.9	%	v		11.5	%	v		Total operating income	$	157.4				$	234.2				(32.8)	%			9.3	%	v		14.7	%	v
Operating margin	Operating margin	5.2		%	8.3		%									10.9		%			11.5		%															Operating margin	9.3		%			14.7		%

______________

v Percentage of consolidated net revenues

* Not ~~meaningful.~~meaningful

Currency translation unfavorably impacted total operating income by approximately ~~$7 million and $17~~$9 million for the three-month ~~and six-month periods~~period ended ~~May 29, 2022, respectively.~~February 26, 2023.

Segment operating income.

•Americas. Currency translation did not have a significant impact for the three-month ~~and six-month periods~~period ended ~~May 29, 2022.~~February 26, 2023. The ~~increase~~decrease in operating income for ~~both periods~~the three-month period ended was primarily due to a lower gross margin and higher ~~net revenues in the current year~~SG&A expenses as a percentage of revenue as compared to the ~~same prior-year periods. This was~~prior year, partially offset ~~with~~by higher ~~selling and advertising and promotion expenses to support revenue growth and higher distribution costs due to higher labor costs and volume.~~net revenues.

•Europe. Currency translation had an unfavorable impact of approximately ~~$8 million and $17~~$6 million for the three-month ~~and six-month periods~~period ended ~~May 29, 2022, respectively.~~February 26, 2023. The ~~increase~~decrease in operating income for ~~both periods~~the three-month period ended was primarily due to ~~higher net revenues and~~a lower gross margin ~~in the current year~~and higher SG&A expenses as a percentage of revenue as compared to the ~~same prior-year periods. This was partially offset with higher selling expenses to support our stores, as well as higher advertising and promotion expenses to support revenue growth.~~prior year.

•Asia. Currency translation ~~did not have a significant~~had an unfavorable impact of approximately $5 million for the three-month ~~and six-month periods~~period ended ~~May 29, 2022.~~February 26, 2023. The increase in operating income for ~~both periods~~the three-month period ended was primarily due to higher net revenues in the current year as compared to the prior ~~year. This was~~year and lower SG&A expenses as a percentage of revenue, partially offset ~~with higher selling expenses to support our stores and higher advertising and promotion expenses to support revenue growth.~~by a lower gross margin.

•Other Brands. Currency translation did not have a significant impact for the three-month ~~and six-month periods~~period ended ~~May 29, 2022.~~February 26, 2023. The ~~increase~~decrease in operating income for ~~both periods~~the three-month period ended was primarily due to ~~higher net revenues and~~a lower gross margin ~~this year, partially offset with~~and higher SG&A ~~expenses.~~expenses as a percent of revenue, partially offset by higher net revenues.

3433

Table of Contents

Restructuring charges, net. Currency translation did not have a significant impact for the three-month period ended February 26, 2023. The increase in restructuring charges, net for the three-month period ended February 26, 2023 is primarily due to the recognition of severance and other post-employment benefits.

Corporate. Corporate expenses represent costs that management does not attribute to any of our operating segments. Included in corporate expenses are other corporate staff costs and costs associated with our global inventory sourcing organization which are reported as a component of consolidated gross margin. Currency translation ~~had~~did not have a ~~favorable~~significant impact ~~of approximately $2 million and $3 million~~ on corporate expenses for the three-month ~~and six-month periods~~period ended ~~May 29, 2022, respectively.~~February 26, 2023.

The increase in corporate expenses for the three-month ~~and six-month periods~~period ended ~~May 29, 2022~~February 26, 2023 primarily reflects ~~charges recognized~~$18.2 million in ~~the second quarter of 2022~~charges related to the ~~Russia-Ukraine crisis, including $51.1 million in~~ impairment ~~charges and $9.3 million in other related charges. Higher global sourcing costs, including foreign currency transaction losses related to the procurement~~ of ~~inventory on behalf of our foreign subsidiaries, and higher information technology expenses also attributed to the increase in corporate expenses for both periods. This was~~capitalized internal-use software, partially offset ~~with a decrease in restructuring charges as compared to both periods in prior year.~~by lower employee incentives.

Interest expense

Interest expense was ~~$4.4 million and $8.6~~$10.7 million for the three-month ~~and six-month periods~~period ended ~~May 29, 2022,~~February 26, 2023, as compared to ~~$19.9 million and $43.2~~$4.2 million for the comparable prior-year ~~periods. Interest expense decreased in both periods due to lower interest on debt borrowings~~period. The increase is primarily related the inclusion of $5.6 million of gains in the ~~current~~prior year related to ~~our debt refinancing activities performed~~the change in the ~~second quarter~~value of ~~2021. Additionally, in comparison to both prior-year periods, interest expense related to our~~the deferred compensation ~~plans was $12.0 million and $21.3 million lower, respectively, due to~~plans. Effective as of the ~~favorable~~beginning of the current fiscal year, the impact of changes in ~~market conditions.~~the value of the deferred compensation plans have been classified as Other (expense) income, net.

Our weighted-average interest rate on average borrowings outstanding during the three-month ~~and six-month periods~~period ended ~~May 29, 2022~~February 26, 2023 was ~~4.00% and 3.91%~~3.86%, ~~respectively,~~ as compared to ~~4.29% and 4.44%~~3.83%, during the comparable ~~periods~~period in ~~2021.~~

~~Loss on early extinguishment of debt~~

For the three-month and six-month periods ended May 30, 2021, a loss of $30.1 million and $30.3 million, respectively, was recognized, related to our debt refinancing activities. The loss recognized included $20.0 million of call premium on the retired debt.2022.

Other (expense) income, ~~(expense),~~ net

For the three-month ~~and six-month periods~~period ended ~~May 29, 2022,~~February 26, 2023, we recorded ~~other income~~expense of ~~$6.0~~$7.5 million, ~~and $21.9 million, respectively,~~ as compared to ~~other expense of $0.8 million and other~~ income of ~~$0.3~~$15.9 million for the same prior-year ~~periods.~~period. The ~~increase~~decrease in other (expense) income ~~(expense), net~~recognized for the ~~three-month and six-month periods~~three months ended ~~May 29, 2022~~February 26, 2023 was primarily due to the current year including $10.6 million of foreign currency transaction ~~gains recognized in the current periods as compared to foreign currency transaction losses recognized in the same~~losses. The prior-year ~~periods. Additionally, the six-month~~ period included the recognition of a $12.5 million COVID-19 related subsidy gain received from the German ~~government in the current year as reimbursement for COVID-19 losses incurred in prior years.~~government.

Income tax expense ~~(benefit)~~

The effective income tax rate was ~~36.1%~~17.6% for the three months ended ~~May 29, 2022,~~February 26, 2023, compared to ~~(16.2)%~~20.4% for the same prior-year period. The ~~increase in the~~lower effective tax rate ~~was primarily~~in the current period is driven by ~~lower~~higher tax benefits from ~~stock-based compensation equity awards as compared~~incentive tax deductions related to intellectual property income, and the ~~same prior-year period, as well~~reversal of deferred tax liabilities on a foreign branch as a ~~16%~~result of newly-effective U.S. foreign tax ~~rate increase resulting from~~credit regulations, partially offset by the impact of non-deductible ~~charges related to the Russia-Ukraine crisis.~~

~~The~~executive compensation, which became effective ~~income tax rate was 24.1% for the six months ended May 29, 2022, compared to 1.5% 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 as compared to the same prior-year period, as well as an increase resulting from non-deductible charges related to the Russia-Ukraine crisis.2023.

3534

Table of Contents

Liquidity and Capital Resources

Liquidity outlook

We believe we will have adequate liquidity over the next 12 months and in the longer term to operate our business and to meet our cash requirements. We plan to deploy capital across all four of our capital allocation priorities: (1) to reinvest 3.5-4% of our revenue in capital investments, including in high growth investment opportunities and initiatives, to grow our business organically; (2) to return capital to our stockholders in the form of cash dividends, with a dividend payout ratio target of 25-35% of net income; (3) to pursue high return on investment acquisitions, both organic and inorganic, that support our current strategies; and (4) to repurchase shares with the goal of offsetting dilution or opportunistic buybacks or both, while maintaining an adequate public float of our shares. Our aim is to return 55-65% of our Adjusted free cash flow to stockholders in the form of dividends and share repurchases. We will continue to concentrate our capital investments in new stores, distribution capacity and technology to accelerate the profitable growth of our business. For more information on our calculation of Adjusted free cash flow, a non-GAAP financial measure, see “– Non-GAAP Financial Measures.”

Future determinations regarding the declaration and payment of dividends, if any, will be at the discretion of our Board and will depend on then-existing economic conditions, including our results of operations, payout ratio, capital requirements, financial condition, prospects, contractual arrangements, any limitations on payment of dividends present in our current and future debt agreements and other factors that our Board may deem relevant.

Cash sources

We have historically relied primarily on cash flows from operations, borrowings under credit facilities, issuances of notes and other forms of debt financing. We regularly explore financing and debt reduction alternatives, including new credit agreements, unsecured and secured note issuances, equity financing, equipment and real estate financing, securitizations and asset sales.

~~We are party to the Second Amended and Restated~~Our Credit Agreement ~~that~~ provides for aan asset-based, senior secured revolving credit ~~facility. The maximum availability under our credit~~ facility is $850.0 million, of which $800.0 million is available to us for revolving loans in U.S. Dollars and $50.0 million is available to us for revolving loans either in U.S. Dollars or Canadian Dollars. This credit facility is an asset-based facility,("Credit Facility"), in which the borrowing availability is primarily based on the value of our U.S. Levi’s® trademarks and the levels of accounts receivable and inventory in the United States and Canada. The maximum availability under the facility is $1.0 billion, of which $950.0 million is available to us for revolving loans in U.S. Dollars and $50.0 million is available to us for revolving loans either in U.S. Dollars or Canadian Dollars.

As of ~~May 29, 2022,~~February 26, 2023, we ~~did not have any~~had $150.0 million in borrowings under the ~~credit facility.~~Credit Facility. Unused availability under the facility was ~~$837.4~~$835.1 million and our total availability of $850.0 million ~~based~~(based on collateral levels as defined by the agreement less outstanding borrowings under the Credit Facility) was reduced by ~~$12.6~~$14.9 million from other credit-related instruments. We also had cash and cash equivalents totaling approximately ~~$601.9 million and short-term investments of $96.4~~$321.8 million resulting in a total liquidity position (unused availability and cash and cash ~~equivalents and short-term investments)~~equivalents) of approximately ~~$1.5~~$1.2 billion. Of our $321.8 million in cash and cash equivalents, approximately $250.0 million was held by foreign subsidiaries.

Cash uses

Our principal cash requirements include working capital, capital expenditures, payments of principal and interest on our debt, payments of taxes, contributions to our pension plans and payments for postretirement health benefit plans, settlement of shares issued under our equity incentive plans and, if market conditions warrant, occasional investments in, or acquisitions of, business ventures in our line of business. In addition, we regularly evaluate our ability to pay dividends or repurchase shares, all consistent with the terms of our debt agreements.

During the three ~~and six~~ months ended ~~May 29, 2022, 2.0 million and 5.0~~February 26, 2023, we repurchased 0.5 million shares ~~were repurchased~~ for ~~$40.0 million and $111.5~~$8.1 million, plus broker's commissions ~~respectively,~~ in the open ~~market, completing our previously-announced $200.0~~market. This equates to an average repurchase price of approximately $17.97 per share. During the three months ended February 27, 2022, we repurchased 3.0 million ~~share~~shares for $71.5 million, plus broker's commissions, in the open market. This equates to an average repurchase ~~plan.~~

~~On May 31, 2022, subsequent to quarter end, the Board approved a new share repurchase program that authorizes the repurchase~~price of ~~up to $750.0 million of our Class A common stock.The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions and alternate uses of capital.The share repurchase program may be suspended or discontinued at any time and does not have an expiration date.~~approximately $23.56 per share.

In ~~July 2022,~~April 2023, a cash dividend of $0.12 per share was declared to holders of record of our Class A and Class B common stock at the close of business on ~~August 1, 2022,~~May 4, 2023, for a total quarterly dividend of approximately ~~$48~~$47 million.

3635

Table of Contents

Cash flows

The following table summarizes, for the periods indicated, selected items in our consolidated statements of cash flows:


		Six Months Ended					Three Months Ended
		May 29, 2022		May 30, 2021			February 26, 2023		February 27, 2022

		(Dollars in millions)					(Dollars in millions)
Cash provided by operating activities		$	145.9	$	248.0
Cash (used for) provided by operating activities						Cash (used for) provided by operating activities	$	(160.8)	$	86.1
Cash used for investing activities	Cash used for investing activities	(135.2)		(70.4)		Cash used for investing activities	(19.1)		(78.2)
Cash used for financing activities		(217.1)		(453.1)
Cash provided by (used for) financing activities						Cash provided by (used for) financing activities	77.8		(139.3)
Cash and cash equivalents at period end	Cash and cash equivalents at period end	601.9		1,224.1		Cash and cash equivalents at period end	321.8		678.4

Cash flows from operating activities

Cash ~~provided by~~used for operating activities was ~~$145.9~~$160.8 million for the ~~six-month~~three-month period ended ~~May 29, 2022,~~February 26, 2023, as compared to ~~$248.0~~cash provided of $86.1 million for the comparable period in ~~2021.~~2022. The decrease in cash ~~provided by~~from operating activities is primarily driven by higher spending on inventory and SG&A expenses, ~~partially offset by higher~~and lower collections of trade ~~receivables reflective of the increase in sales in comparison to the same period in prior year.~~receivables.

Cash flows from investing activities

Cash used for investing activities was ~~$135.2~~$19.1 million for the ~~six-month~~three-month period ended ~~May 29, 2022,~~February 26, 2023, as compared to ~~$70.4~~$78.2 million for the comparable period in ~~2021.~~2022. The ~~increase~~decrease in cash used for investing activities is primarily due to higher ~~capital expenditures and lower~~net proceeds from short-term ~~investments.~~investments and foreign exchange contracts, partially offset by higher capital expenditures.

Cash flows from financing activities

Cash ~~used for~~provided by financing activities was ~~$217.1~~$77.8 million for the ~~six-month~~three-month period ended ~~May 29, 2022,~~February 26, 2023, as compared to cash used of ~~$453.1~~$139.3 million for the comparable period in ~~2021.~~2022. Cash provided in 2023 primarily reflects proceeds from the senior revolving credit facility of $150.0 million. Cash used in 2022 primarily reflects common stock repurchases of ~~$114.2 million and dividend payments of $79.5 million. Cash used in 2021 primarily reflects repayments of long-term debt of $800.0 million partially offset with proceeds from senior notes of $500.0~~$74.2 million.

Indebtedness

Of our total debt of ~~$1.0~~$1.2 billion as of ~~May 29, 2022, 100% of it was~~February 26, 2023, we had fixed rate debt of $1.0 billion (87% of total debt), net of capitalized debt issuance ~~costs.~~costs and variable rate debt of $150.0 million (13% of total debt). As of ~~May 29, 2022,~~February 26, 2023, our required aggregate debt principal payments on our unsecured long-term debt were $1.0 billion, with payments starting in 2027. Short-term borrowings of ~~$5.9~~$12.0 million at various foreign subsidiaries and $150.0 million under the Credit Facility are expected to be either paid over the next twelve months or refinanced at the end of their applicable terms.

Our long-term debt agreements contain customary covenants restricting our activities as well as those of our subsidiaries. We were in compliance with all of these covenants as of ~~May 29, 2022.~~February 26, 2023.

3736

Table of Contents

Non-GAAP Financial Measures

Adjusted Gross Profit, Adjusted Gross Margin, Adjusted SG&A, Adjusted SG&A margin, Adjusted EBIT, Adjusted EBIT Margin, Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income Margin and Adjusted Diluted Earnings per Share

~~For the three-month, six-month and twelve-month periods ended May 29, 2022 and the comparable periods in 2021, we~~We define the following non-GAAP ~~financial~~ measures as follows:

•~~Adjusted gross profit, as gross profit excluding COVID-19 and acquisition related inventory costs.~~

•~~Adjusted gross margin, as Adjusted gross profit as a percentage of net revenues;~~

•Adjusted SG&A, as SG&A less charges related to changes in fair value on cash-settled stock-based compensation, COVID-19 related charges, acquisition and integration related charges, impairment changes, and restructuring and restructuring related charges, severance and other, net;

•Adjusted EBIT, as net income excluding income tax expense, interest expense, other (income) expense, net, loss on early extinguishment of debt, impact of changes in fair value on cash-settled stock-based compensation, COVID-19 related inventory costs and other charges, acquisition and integration related charges, impairment charges, and restructuring and restructuring related charges, severance and other, net;

•~~Adjusted EBIT margin as Adjusted EBIT as a percentage of net revenues;~~

•~~Adjusted EBITDA as Adjusted EBIT excluding depreciation and amortization expense;~~

•Adjusted net income, as net income excluding charges related to the impact of changes in fair value on cash-settled stock-based compensation, loss on early extinguishment of debt, COVID-19 related inventory costs and other charges, net with a COVID-19 government subsidy gain, acquisition and integration related charges, impairment charges, and restructuring and restructuring related charges, severance and other, net, adjusted to give effect to the income tax impact of such adjustments, using an effective tax rate equal to our year to date income tax expense divided by our year to date income before income taxes, each as reflected in our statements of income for the relevant period with any impacts of changes in effective tax rate being recognized in the current three-month period;

•~~Adjusted net income margin as Adjusted net income as a percentage of net revenues; and~~

•~~Adjusted diluted earnings per share as Adjusted net income per weighted-average number of diluted common shares outstanding.~~

Most comparable GAAP measure

Non-GAAP measure

Non-GAAP measure definition

Gross profit

Adjusted gross profit

Gross profit excluding COVID-19 and acquisition related inventory costs

Gross margin

Adjusted gross margin

Adjusted gross profit as a percentage of net revenues

Selling, general and administration ("SG&A") expenses

Adjusted SG&A

SG&A expenses excluding changes in fair value on cash-settled stock-based compensation, COVID-19 related charges, acquisition and integration related charges, impairment charges and early termination gains, net and restructuring and restructuring related charges, severance and other, net.

SG&A margin

Adjusted SG&A margin

Adjusted SG&A as a percentage of net revenues

Net income

Adjusted EBIT

Net income excluding income tax expense, interest expense, other (income) expense, net, impact of changes in fair value on cash-settled stock-based compensation, COVID-19 related inventory costs and other charges, acquisition and integration related charges, and restructuring and restructuring related charges, severance and other, net.

Net income margin

Adjusted EBIT margin

Adjusted EBIT as a percentage of net revenues.

Net income

Adjusted EBITDA

Adjusted EBIT excluding depreciation and amortization expense

Net income

Adjusted net income

Net income excluding loss on early extinguishment of debt, COVID-19 government subsidy gains, unrealized gains on marketable securities originating in prior years, charges related to the impact of changes in fair value on cash-settled stock-based compensation, COVID-19 related inventory costs and other charges, acquisition and integration related charges, and restructuring and restructuring related charges, severance and other, net, and re-measurement of our deferred tax assets and liabilities based on the lower rates as a result of the Tax Cuts and Jobs Act ("Tax Act"), adjusted to give effect to the income tax impact of such adjustments.

Net income margin

Adjusted net income margin

Adjusted net income as a percentage of net revenues

Diluted earnings per share

Adjusted diluted earnings per share

Adjusted net income per weighted-average number of diluted common shares outstanding

We believe Adjusted gross profit, Adjusted gross margin, Adjusted SG&A, Adjusted SG&A margin, Adjusted EBIT, Adjusted EBIT margin, Adjusted EBITDA, Adjusted net income, Adjusted net income margin and Adjusted diluted earnings per share are useful to investors because they help identify underlying trends in our business that could otherwise be masked by certain expenses that we include in calculating net income but that can vary from company to company depending on its financing, capital structure and the method by which its assets were acquired, and can also vary significantly from period to period. Our management also uses Adjusted EBIT in conjunction with other GAAP financial measures for planning purposes, including as a measure of our core operating results and the effectiveness of our business strategy, and in evaluating our financial performance.

Adjusted gross profit, Adjusted gross margin, Adjusted SG&A, Adjusted SG&A margin, Adjusted EBIT, Adjusted EBIT margin, Adjusted EBITDA, Adjusted net income, Adjusted net income margin and Adjusted diluted earnings per share have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of our results prepared and presented in accordance with GAAP. Some of these limitations include:

•Adjusted EBIT, Adjusted EBIT margin and Adjusted EBITDA do not reflect income tax payments that reduce cash available to us;

•Adjusted EBIT, Adjusted EBIT margin and Adjusted EBITDA do not reflect interest expense, or the cash requirements necessary to service interest or principal payments on our indebtedness, which reduces cash available to us;

Table of Contents

•Adjusted EBIT, Adjusted EBIT margin and Adjusted EBITDA exclude other expense (income) ~~expense,~~, net, which includes realized and unrealized gains and losses on our forward foreign exchange contracts and transaction gains and losses on our foreign exchange balances, although these items affect the amount and timing of cash available to us when these gains and losses are realized;

•Adjusted net income, Adjusted net income margin and Adjusted diluted earnings per share exclude COVID-19 government subsidy ~~gains and loss on early extinguishment of debt;~~gains;

~~Table of Contents~~

•all of these non-GAAP financial measures exclude the expense resulting from the impact of changes in fair value on our cash-settled stock-based compensation ~~awards, even though, prior to March 2019, such awards were required to be settled in cash;~~awards;

•all of these non-GAAP financial measures exclude COVID-19 related inventory costs and other charges, acquisition and integration related charges, impairment charges and early termination gains, and restructuring and restructuring related charges, severance and other, net which can affect our current and future cash requirements;

•the expenses and other items that we exclude in our calculations of all of these non-GAAP financial measures may differ from the expenses and other items, if any, that other companies may exclude from all of these non-GAAP financial measures or similarly titled measures;

•Adjusted EBITDA excludes the recurring, non-cash expenses of depreciation of property and equipment and, although these are non-cash expenses, the assets being depreciated may need to be replaced in the future; and

•Adjusted net income, Adjusted net income margin and Adjusted diluted earnings per share do not include all of the effects of income taxes and changes in income taxes reflected in net income.

Because of these limitations, all of these non-GAAP financial measures should be considered along with net income and other operating and financial performance measures prepared and presented in accordance with GAAP. The following tables present reconciliations of historic non-GAAP financial measures to their most comparable GAAP financial measure. A reconciliation of forward-looking non-GAAP information to the corresponding GAAP measures cannot be provided without unreasonable efforts due to the challenge in quantifying various items including, but not limited to, the effects of foreign currency fluctuations, taxes, and any future restructuring, restructuring-related severance and other charges.

Table of Contents

Adjusted Gross ~~Profit:~~Profit, Adjusted SG&A, Adjusted Net Income and Adjusted Diluted Earnings per Share:

The following ~~table presents a reconciliation~~tables present our statement of ~~gross profit,~~operations on an as reported basis, as well as on an as adjusted basis, which is after the ~~most directly comparable~~consideration of non-GAAP adjustments. All of these non-GAAP financial ~~measure calculated~~measures should be considered along with net income and other operating and financial performance measures prepared and presented in accordance with ~~GAAP, to Adjusted Gross Profit for each of the periods presented.~~GAAP.

Three Months Ended Six Months Ended
May 29,
2022 May 30,
2021 May 29,
2022 May 30,
2021
(Dollars in millions)
(Unaudited)
Most comparable GAAP measure:
Gross profit $ 855.0 $ 750.2 $ 1,798.6 $ 1,510.2
Non-GAAP measure:
Gross profit $ 855.0 $ 750.2 $ 1,798.6 $ 1,510.2
COVID-19 related inventory costs(1)
1.4 (7.2) 1.4 (14.4)
Acquisition related charges(2)
— — 2.0 —
Adjusted gross profit $ 856.4 $ 743.0 $ 1,802.0 $ 1,495.8
Adjusted gross margin 58.2 % 58.2 % 58.8 % 57.9 %



	Three Months Ended February 26, 2023

	As reported			Non-GAAP Adjustments		As adjusted

	(Dollars in millions)
Net revenues	$	1,688.9		$	—	$	1,688.9
Cost of goods sold	746.6			—		746.6
Gross profit/Adjusted gross profit	942.3			—		942.3
Gross margin/Adjusted gross margin	55.8		%			55.8		%
SG&A expenses/Adjusted SG&A(1)	784.9			(27.9)		757.0
SG&A margin/Adjusted SG&A margin	46.5		%			44.8		%

Operating income/Adjusted EBIT(2)	157.4			27.9		185.3
Operating margin/Adjusted EBIT margin(2)	9.3		%			11.0		%
Interest expense	(10.7)			—		(10.7)

Other expense, net	(7.5)			—		(7.5)
Income before income taxes	139.2			27.9		167.1
Income tax expense(3)	24.5			7.7		32.2
Net income/Adjusted net income	$	114.7		$	20.2	$	134.9
Net income margin/Adjusted net income margin	6.8		%			8.0		%
Diluted earnings per share/Adjusted diluted earnings per share	$	0.29		$	0.05	$	0.34

_____________

(1)~~For~~Adjustments include (i) $11.4 million in severance charges recognized in connection with the ~~three-month and six-month periods ended May 30, 2021, the reductions~~2022 restructuring initiative; (ii) $18.2 million in ~~COVID-19 related inventory~~ charges ~~is primarily~~ related to ~~reductions in our estimate~~the impairment of ~~adverse fabric purchase commitments, initially recorded in~~capitalized internal-use software as a result of the ~~second quarter~~decision to discontinue certain technology projects, net of ~~2020.~~a $3.5 million gain on the early termination of store leases related to the Russia-Ukraine crisis; and (iii) $1.3 million of charges associated with the Beyond Yoga acquisition, including acquisition-related compensation subject to the continued employment of certain Beyond Yoga® employees.

(2)~~Acquisition~~Adjusted EBIT and Adjusted EBIT margin are reconciled from net income and net income margin, respectively, which are the most comparable GAAP measures. Refer to the "Adjusted EBIT and Adjusted EBITDA" table for more information.

(3)Tax impact calculated using the annual effective tax rate, excluding discrete costs and benefits.

Table of Contents



	Three Months Ended February 27, 2022

	As reported			Non-GAAP Adjustments		As adjusted

	(Dollars in millions)
Net revenues	$	1,591.6		$	—	$	1,591.6
Cost of goods sold	648.0			(2.0)		646.0
Gross profit/Adjusted gross profit(1)	943.6			2.0		945.6
Gross margin/Adjusted gross margin	59.3		%			59.4		%
SG&A expenses/Adjusted SG&A(2)	709.4			(1.7)		707.7
SG&A margin/Adjusted SG&A margin	44.6		%			44.5		%

Operating income/Adjusted EBIT(3)	234.2			3.7		237.9
Operating margin/Adjusted EBIT margin(3)	14.7		%			14.9		%
Interest expense	(4.2)			—		(4.2)

Other income, net(4)	15.9			(12.5)		3.4
Income before income taxes	245.9			(8.8)		237.1
Income tax expense(5)	50.1			(2.2)		47.9
Net income/Adjusted net income	$	195.8		$	(6.6)	$	189.2
Net income margin/Adjusted net income margin	12.3		%			11.9		%
Diluted earnings per share/Adjusted diluted earnings per share	$	0.48		$	(0.02)	$	0.46

_____________

(1)Adjustments include $2.0 million in acquisition charges related ~~charges include~~to the inventory markup above historical carrying value associated with the Beyond Yoga acquisition.

(2)

~~Table of Contents~~

~~Adjusted SG&A:~~

~~The following table presents a reconciliation of SG&A, the most directly comparable financial measure calculated~~Adjustments include $2.1 million in ~~accordance with GAAP, to Adjusted SG&A for each of the periods presented.~~

Three Months Ended Six Months Ended
May 29,
2022 May 30,
2021 May 29,
2022 May 30,
2021
(Dollars in millions)
(Unaudited)
Most comparable GAAP measure:
Selling, general and administrative expenses $ 778.8 $ 643.7 $ 1,488.2 $ 1,226.6
Non-GAAP measure:
Selling, general and administrative expenses $ 778.8 $ 643.7 $ 1,488.2 $ 1,226.6
Impact of changes in fair value on cash-settled stock-based compensation — (1.6) (0.6) (2.5)
COVID-19 related charges(1)
(3.9) 10.0 (3.9) 6.9
Acquisition and integration related charges (1.1) — (3.1) —
Impairment charges(2)
(51.1) — (51.1) —
Restructuring and restructuring related charges, severance and other, net(3)
(11.7) (23.7) (10.7) (23.8)
Adjusted SG&A $ 711.0 $ 628.4 $ 1,418.8 $ 1,207.2

~~_____________~~

~~(1)For the three-month~~acquisition and ~~six-month periods ended May 30, 2021, the net reduction in COVID-19~~integration related charges ~~is primarily reductions in allowances related to customer receivables.~~

~~(2)For~~associated with the three-month and six-month periods ended May 29, 2022, impairment charges include $4.1 million of property, plant and equipment, $11.6 million of goodwill and $35.4 million of certain store right-of-use assets related to the Russia-Ukraine crisis.Beyond Yoga acquisition.

(3)~~For~~Adjusted EBIT and Adjusted EBIT margin is reconciled from net income and net income margin, respectively, which are the ~~three-month and six-month periods ended May 29, 2022, restructuring and restructuring related charges, severance and other, net includes $9.3 million of charges related~~most comparable GAAP measures. Refer to the ~~Russia-Ukraine crisis. Other, net includes transaction~~"Adjusted EBIT and ~~deal related costs.~~Adjusted EBITDA" table for more information.

(4)Adjustments include a $12.5 million gain reflecting a payment received from the German government as reimbursement for COVID-19 losses incurred in prior years.

(5)Tax impact calculated using the annual effective tax rate, excluding discrete costs and benefits.

Table of Contents

Adjusted EBIT and Adjusted EBITDA:

The following table presents a reconciliation of net income, the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted EBIT and Adjusted EBITDA for each of the periods presented.


		Three Months Ended						Six Months Ended						Twelve Months Ended					Three Months Ended						Twelve Months Ended
		May 29, 2022			May 30, 2021			May 29, 2022			May 30, 2021			May 29, 2022		May 30, 2021			February 26, 2023			February 27, 2022				February 26, 2023		February 27, 2022

		(Dollars in millions)																	(Dollars in millions)
		(Unaudited)																	(Unaudited)
Most comparable GAAP measure:	Most comparable GAAP measure:																	Most comparable GAAP measure:
Net income	Net income	$	49.7		$	64.7		$	245.6		$	207.2		$	591.9	$	291.0	Net income	$	114.7		$	195.8			$	488.0	$	606.8

Non-GAAP measure:	Non-GAAP measure:																	Non-GAAP measure:
Net income	Net income	$	49.7		$	64.7		$	245.6		$	207.2		$	591.9	$	291.0	Net income	$	114.7		$	195.8			$	488.0	$	606.8
Income tax expense (benefit)		28.1			(9.0)			78.1			3.2			101.6		23.1
Income tax expense																		Income tax expense	24.5			50.1				54.9		64.6
Interest expense	Interest expense	4.4			19.9			8.6			43.2			38.3		97.5		Interest expense	10.7			4.2				32.2		53.8
Other (income) expense, net		(6.0)			0.8			(21.9)			(0.3)			(25.0)		26.1
Other expense (income), net																		Other expense (income), net	7.5			(15.9)				(5.4)		(18.4)

Loss on early extinguishment of debt	Loss on early extinguishment of debt	—			30.1			—			30.3			6.2		30.3		Loss on early extinguishment of debt	—			—				—		36.5
Impact of changes in fair value on cash-settled stock-based compensation~~(1)~~	Impact of changes in fair value on cash-settled stock-based compensation~~(1)~~	—			1.6			0.6			2.5			2.3		5.4		Impact of changes in fair value on cash-settled stock-based compensation~~(1)~~	—			0.6				—		3.9
COVID-19 related inventory costs and other charges~~(2)~~	COVID-19 related inventory costs and other charges~~(2)~~	5.3			(17.2)			5.3			(21.3)			16.9		(36.3)		COVID-19 related inventory costs and other charges~~(2)~~	—			—				5.3		(5.6)
Acquisition and integration related charges~~(3)~~(1)	Acquisition and integration related charges~~(3)~~(1)	1.1			—			5.1			—			12.8		—		Acquisition and integration related charges~~(3)~~(1)	1.3			4.1				5.2		11.8
Impairment charges(4)		51.1			—			51.1			—			51.1		—
Impairment charges and early termination gains, net(2)																		Impairment charges and early termination gains, net(2)	14.7			—				47.9		—
Restructuring and restructuring related charges, severance and other, net~~(5)~~(3)	Restructuring and restructuring related charges, severance and other, net~~(5)~~(3)	11.7			23.7			10.7			23.8			11.4		49.2		Restructuring and restructuring related charges, severance and other, net~~(5)~~(3)	11.9			(1.0)				32.3		23.4
Adjusted EBIT	Adjusted EBIT	$	145.4		$	114.6		$	383.2		$	288.6		$	807.5	$	486.3	Adjusted EBIT	$	185.3		$	237.9			$	660.4	$	776.8
Depreciation and amortization~~(6)~~(4)	Depreciation and amortization~~(6)~~(4)	37.6			34.4			75.5			69.7			147.8		137.9		Depreciation and amortization~~(6)~~(4)	38.4			37.8				155.1		144.6
Adjusted EBITDA	Adjusted EBITDA	$	183.0		$	149.0		$	458.7		$	358.3		$	955.3	$	624.2	Adjusted EBITDA	$	223.7		$	275.7			$	815.5	$	921.4
Adjusted EBIT margin	Adjusted EBIT margin	9.9		%	9.0		%	12.5		%	11.2		%					Adjusted EBIT margin	11.0		%	14.9		%

_____________

(1)Includes the impact of changes in fair value of Class B common stock following the grant date on awards that were granted as cash-settled and subsequently replaced with stock-settled awards concurrent with the IPO.

~~(2)~~For the three-month and six-month periods ended May 30, 2021, the net reduction in COVID-19 related inventory costs and other charges mainly represents reductions in COVID-19 related inventory charges, as a result of reductions in our estimate of adverse fabric purchase commitments, the recoveries of receivables previously estimated to be not collectible, partially offset by incremental impairment costs in response to the global pandemic.

~~(3)~~Acquisition and integration related charges includes the inventory markup above historical carrying value, as well as SG&A expenses associated with the Beyond Yoga ~~acquisition.~~acquisition, including acquisition-related compensation subject to the continued employment of certain Beyond Yoga® employees.

~~(4)~~(2)For the three-month ~~and six-month periods~~period ended ~~May 29, 2022,~~February 26, 2023, impairment charges ~~include $4.1~~and early termination gains, net includes $18.2 million in charges related to the impairment of ~~property, plant and equipment, $11.6 million of goodwill and $35.4 million of certain store right-of-use assets~~capitalized internal-use software, as a result of the decision to discontinue certain technology projects, net of a $3.5 million gain on the early termination of store leases related to the Russia-Ukraine crisis.

~~(5)~~(3)For the three-month ~~and six-month periods~~period ended ~~May 29, 2022,~~February 26, 2023, restructuring and restructuring related charges, severance and other, net includes ~~$9.3~~$11.4 million of severance charges recognized in connection with the 2022 restructuring initiative. Other charges included in restructuring and restructuring related ~~to the Russia-Ukraine crisis. Other,~~charges, severance and other, net ~~includes~~include transaction and deal related costs.

~~(6)~~(4)Depreciation and amortization amount net of amortization included in Restructuring and restructuring related charges, severance and other, net.

~~Table of Contents~~

~~Adjusted Net Income and Adjusted Diluted Earnings per Share:~~

The following table presents a reconciliation of net income, the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted net income for each of the periods presented and the calculation of Adjusted diluted earnings per share for each of the periods presented.

Three Months Ended Six Months Ended
May 29,
2022 May 30,
2021 May 29,
2022 May 30,
2021
(Dollars in millions, except per share amounts)
(Unaudited)
Most comparable GAAP measure:
Net income $ 49.7 $ 64.7 $ 245.6 $ 207.2
Non-GAAP measure:
Net income $ 49.7 $ 64.7 $ 245.6 $ 207.2
Impact of changes in fair value on cash-settled stock-based compensation(1)
— 1.6 0.6 2.5
Loss on early extinguishment of debt — 30.1 — 30.3
COVID-19 related inventory costs and other charges, net(2)
5.3 (17.2) (7.2) (21.3)
Acquisition and integration related costs(3)
1.1 — 5.1 —
Impairment charges(4)
51.1 — 51.1 —
Restructuring and restructuring related charges, severance and other, net(5)
11.7 23.7 10.7 23.8
Tax impact of adjustments(6)
(2.2) (9.5) — (8.8)
Adjusted net income $ 116.7 $ 93.4 $ 305.9 $ 233.7
Adjusted net income margin 7.9 % 7.3 % 10.0 % 9.1 %
Adjusted diluted earnings per share $ 0.29 $ 0.23 $ 0.75 $ 0.57

~~_____________~~

~~(1)~~Includes the impact of changes in fair value of Class B common stock following the grant date on awards that were granted as cash-settled and subsequently replaced with stock-settled awards concurrent with the IPO.

~~(2)~~For the three-month and six-month periods ended May 29, 2022, the net reduction primarily reflects a payment received from the German government as reimbursement for COVID-19 losses incurred in prior years.

For the three-month and six-month periods ended May 30, 2021, the net reduction in COVID-19 related inventory costs and other charges recognized mainly represents reductions in COVID-19 related inventory charges, as a result of reductions in our estimate of adverse fabric purchase commitments, the recoveries of receivables previously estimated to be not collectible, partially offset by incremental impairment costs in response to the global pandemic.

~~(3)Acquisition and integration related charges includes the inventory markup above historical carrying value, as well as SG&A expenses associated with the Beyond Yoga acquisition.~~

~~(4)~~For the three-month and six-month periods ended May 29, 2022, impairment charges include $4.1 million of property, plant and equipment, $11.6 million of goodwill and $35.4 million of certain store right-of-use assets as a result of the Russia-Ukraine crisis.

~~(5)~~For the three-month and six-month periods ended May 29, 2022, restructuring and restructuring related charges, severance and other, net includes $9.3 million of charges related to the Russia-Ukraine crisis. Other charges included are transaction and deal related costs.

~~(6)~~Tax impact calculated using the annual effective tax rate, excluding discrete costs and benefits. Charges associated with the Russia-Ukraine crisis are non-deductible and therefore have not been tax effected. Refer to Note 12 for more information on the effective tax rate.

Table of Contents

Net Debt and Leverage Ratio:

We define net debt, a non-GAAP financial measure, as total debt, excluding finance leases, less cash and cash equivalents and short-term investments in marketable securities. We define leverage ratio, a non-GAAP financial measure, as the ratio of total debt, excluding finance leases, to the last 12 months Adjusted EBITDA. Our management believes net debt and leverage ratio are important measures to monitor our financial flexibility and evaluate the strength of our balance sheet. Net debt and leverage ratio have limitations as analytical tools and may vary from similarly titled measures used by other companies. Net debt and leverage ratio should not be considered in isolation or as a substitute for an analysis of our results prepared and presented in accordance with GAAP.

The following table presents a reconciliation of total debt, excluding finance leases, the most directly comparable financial measure calculated in accordance with GAAP, to net debt for each of the periods presented.


		May 29, 2022		November 28, 2021			February 26, 2023		November 27, 2022

		(Dollars in millions)					(Dollars in millions)
		(Unaudited)					(Unaudited)
Most comparable GAAP measure:	Most comparable GAAP measure:					Most comparable GAAP measure:
Total debt, excluding finance leases	Total debt, excluding finance leases	$	1,004.4	$	1,026.6	Total debt, excluding finance leases	$	1,155.6	$	996.2

Non-GAAP measure:	Non-GAAP measure:					Non-GAAP measure:
Total debt, excluding finance leases	Total debt, excluding finance leases	$	1,004.4	$	1,026.6	Total debt, excluding finance leases	$	1,155.6	$	996.2
Cash and cash equivalents	Cash and cash equivalents	(601.9)		(810.3)		Cash and cash equivalents	(321.8)		(429.6)
Short-term investments in marketable securities	Short-term investments in marketable securities	(96.4)		(91.5)		Short-term investments in marketable securities	—		(70.6)
Net debt	Net debt	$	306.1	$	124.8	Net debt	$	833.8	$	496.0

The following table presents a reconciliation of total debt, excluding finance leases, the most directly comparable financial measure calculated in accordance with GAAP, to leverage ratio for each of the periods presented.


		May 29, 2022		May 30, 2021			February 26, 2023		February 27, 2022

		(Dollars in millions)					(Dollars in millions)
		(Unaudited)					(Unaudited)
Total debt, excluding finance leases	Total debt, excluding finance leases	$	1,004.4	$	1,273.1	Total debt, excluding finance leases	$	1,155.6	$	1,024.7
Last Twelve Months Adjusted EBITDA(1)	Last Twelve Months Adjusted EBITDA(1)	$	955.3	$	624.2	Last Twelve Months Adjusted EBITDA(1)	$	815.5	$	921.4
Leverage ratio	Leverage ratio	1.1		2.0		Leverage ratio	1.4		1.1

_____________

(1)Last Twelve Months Adjusted EBITDA is reconciled from net income which is the most comparable GAAP measure. Refer to Adjusted EBIT and Adjusted EBITDA table for more information.

4342

Table of Contents

Adjusted Free Cash Flow:

~~Previously, we defined~~We define Adjusted free cash flow, a non-GAAP financial measure, as net cash flow from operating activities less purchases of property, plant and equipment, plus proceeds on settlement of forward foreign exchange contracts not designated for hedge accounting, less repurchases of common stock, tax withholdings on equity award exercises, and cash dividends to stockholders. Effective with the second quarter of 2022, the definition of Adjusted free cash flow is revised to include net cash flow from operating activities less purchases of property, plant and equipment. We believe this is a more representative measure of our free cash flow, assists in the comparability of results, and is consistent with how management reviews performance. The table below includes the recast of prior period results. Additionally, we will provide updated non-GAAP reconciliations under this revised definition in future reports for the relevant prior year periods.

We believe Adjusted free cash flow is an important liquidity measure of the cash that is available after capital expenditures for operational expenses and investment in our business. We believe Adjusted free cash flow is useful to investors because it measures our ability to generate or use cash. Once our business needs and obligations are met, cash can be used to maintain a strong balance sheet, invest in future growth and return capital to stockholders.

Our use of Adjusted free cash flow has limitations as an analytical tool and should not be considered in isolation or as a substitute for an analysis of our results under GAAP. First, Adjusted free cash flow is not a substitute for net cash flow from operating activities. Second, other companies may calculate Adjusted free cash flow or similarly titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of Adjusted free cash flow as a tool for comparison. Additionally, the utility of Adjusted free cash flow is further limited as it does not reflect our future contractual commitments and does not represent the total increase or decrease in our cash balance for a given period. Because of these and other limitations, Adjusted free cash flow should be considered along with net cash flow from operating activities and other comparable financial measures prepared and presented in accordance with GAAP.

The following table presents a reconciliation of net cash flow from operating activities, the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted free cash flow for each of the periods presented.


		Three Months Ended				Six Months Ended					Three Months Ended
		May 29, 2022		May 30, 2021		May 29, 2022		May 30, 2021			February 26, 2023		February 27, 2022

		(Dollars in millions)				(Dollars in millions)					(Dollars in millions)
		(Unaudited)				(Unaudited)					(Unaudited)
Most comparable GAAP measure:	Most comparable GAAP measure:									Most comparable GAAP measure:
Net cash provided by operating activities		$	59.8	$	178.5	$	145.9	$	248.0
Net cash (used for) provided by operating activities										Net cash (used for) provided by operating activities	$	(160.8)	$	86.1
Net cash used for investing activities	Net cash used for investing activities	(57.0)		(35.5)		(135.2)		(70.4)		Net cash used for investing activities	(19.1)		(78.2)
Net cash used for financing activities		(77.7)		(892.8)		(217.1)		$	(453.1)
Net cash provided by (used for) financing activities										Net cash provided by (used for) financing activities	77.8		(139.3)

Non-GAAP measure:	Non-GAAP measure:									Non-GAAP measure:
Net cash provided by operating activities		$	59.8	$	178.5	$	145.9	$	248.0
Net cash (used for) provided by operating activities										Net cash (used for) provided by operating activities	$	(160.8)	$	86.1
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(46.9)		(30.5)		(120.5)		(67.5)		Purchases of property, plant and equipment	(110.9)		(73.6)

Adjusted free cash flow	Adjusted free cash flow	$	12.9	$	148.0	$	25.4	$	180.5	Adjusted free cash flow	$	(271.7)	$	12.5

Constant-Currency:

We report our operating results in accordance with GAAP, as well as on a constant-currency basis in order to facilitate period-to-period comparisons of our results without regard to the impact of fluctuating foreign currency exchange rates. The term foreign currency exchange rates refers to the exchange rates we use to translate our operating results for all countries where the functional currency is not the U.S. Dollar into U.S. Dollars. Because we are a global company, foreign currency exchange rates used for translation may have a significant effect on our reported results. In general, our reported financial results are affected positively by a weaker U.S. Dollar and are affected negatively by a stronger U.S. Dollar as compared to the foreign currencies in which we conduct our business. References to our operating results on a constant-currency basis mean our operating results without the impact of foreign currency translation fluctuations.

4443

Table of Contents

We believe disclosure of constant-currency results is helpful to investors because it facilitates period-to-period comparisons of our results by increasing the transparency of our underlying performance by excluding the impact of fluctuating foreign currency exchange rates. However, constant-currency results are non-GAAP financial measures and are not meant to be considered in isolation or as a substitute for comparable measures prepared in accordance with GAAP. Constant-currency results have no standardized meaning prescribed by GAAP, are not prepared under any comprehensive set of accounting rules or principles and should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. Constant-currency results have limitations in their usefulness to investors and may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies.

We calculate constant-currency amounts by translating local currency amounts in the prior-year period at actual foreign exchange rates for the current period. Our constant-currency results do not eliminate the transaction currency impact, which primarily include the realized and unrealized gains and losses recognized from the measurement and remeasurement of purchases and sales of products in a currency other than the functional currency. Additionally, gross margin and Adjusted gross margin are impacted by gains and losses related to the procurement of inventory, primarily products sourced in Euros and U.S. ~~dollars,~~Dollars, by our global sourcing organization on behalf of our foreign subsidiaries.

Constant-Currency Net Revenues

The table below sets forth the calculation of net revenues for each of our operating segments on a constant-currency basis for the comparison ~~periods~~period applicable to the three-month ~~and six-month periods~~period ended ~~May 29, 2022:~~February 26, 2023:


		Three Months Ended						Six Months Ended							Three Months Ended
		May 29, 2022		May 30, 2021		% Increase		May 29, 2022		May 30, 2021		% Increase			February 26, 2023		February 27, 2022		% Increase (Decrease)

		(Dollars in millions)													(Dollars in millions)
		(Unaudited)													(Unaudited)
Total net revenues	Total net revenues													Total net revenues
As reported	As reported	$	1,471.1	$	1,276.0	15.3	%	$	3,062.7	$	2,581.6	18.6	%	As reported	$	1,688.9	$	1,591.6	6.1	%
Impact of foreign currency exchange rates	Impact of foreign currency exchange rates	—		(47.3)		*		—		(85.6)		*		Impact of foreign currency exchange rates	—		(39.7)		*
Constant-currency net revenues	Constant-currency net revenues	$	1,471.1	$	1,228.7	19.7	%	$	3,062.7	$	2,496.0	22.7	%	Constant-currency net revenues	$	1,688.9	$	1,551.9	8.8	%

Americas	Americas													Americas
As reported	As reported	$	776.1	$	661.4	17.3	%	$	1,541.9	$	1,267.6	21.6	%	As reported	$	823.0	$	765.9	7.5	%
Impact of foreign currency exchange rates	Impact of foreign currency exchange rates	—		(0.6)		*		—		(3.1)		*		Impact of foreign currency exchange rates	—		3.6		*
Constant-currency net revenues - Americas	Constant-currency net revenues - Americas	$	776.1	$	660.8	17.4	%	$	1,541.9	$	1,264.5	21.9	%	Constant-currency net revenues - Americas	$	823.0	$	769.5	6.9	%

Europe	Europe													Europe
As reported	As reported	$	367.1	$	354.9	3.4	%	$	836.5	$	771.6	8.4	%	As reported	$	455.1	$	469.4	(3.0)	%
Impact of foreign currency exchange rates	Impact of foreign currency exchange rates	—		(36.1)		*		—		(64.0)		*		Impact of foreign currency exchange rates	—		(21.2)		*
Constant-currency net revenues - Europe	Constant-currency net revenues - Europe	$	367.1	$	318.8	15.1	%	$	836.5	$	707.6	18.2	%	Constant-currency net revenues - Europe	$	455.1	$	448.2	1.5	%

Asia	Asia													Asia
As reported	As reported	$	221.8	$	191.8	15.6	%	$	480.3	$	424.7	13.1	%	As reported	$	289.5	$	258.4	12.0	%
Impact of foreign currency exchange rates	Impact of foreign currency exchange rates	—		(8.5)		*		—		(14.2)		*		Impact of foreign currency exchange rates	—		(21.5)		*
Constant-currency net revenues - Asia	Constant-currency net revenues - Asia	$	221.8	$	183.3	21.0	%	$	480.3	$	410.5	17.0	%	Constant-currency net revenues - Asia	$	289.5	$	236.9	22.2	%

Other Brands	Other Brands													Other Brands
As reported	As reported	$	106.1	$	67.9	56.3	%	$	204.0	$	117.7	73.3	%	As reported	$	121.3	$	97.9	23.9	%
Impact of foreign currency exchange rates	Impact of foreign currency exchange rates	—		(2.1)		*		—		(4.3)		*		Impact of foreign currency exchange rates	—		(0.6)		*
Constant-currency net revenues - Other Brands	Constant-currency net revenues - Other Brands	$	106.1	$	65.8	61.3	%	$	204.0	$	113.4	79.9	%	Constant-currency net revenues - Other Brands	$	121.3	$	97.3	24.6	%

_____________

* Not meaningful

4544

Table of Contents

Constant-Currency Adjusted ~~EBIT:~~EBIT and Constant-Currency Adjusted EBIT margin:

The table below sets forth the calculation of Adjusted EBIT on a constant-currency basis for the comparison ~~periods~~period applicable to the three-month ~~and six-month periods~~period ended ~~May 29, 2022.~~February 26, 2023.


		Three Months Ended								Six Months Ended									Three Months Ended
		May 29, 2022			May 30, 2021			% Increase		May 29, 2022			May 30, 2021			% Increase			February 26, 2023			February 27, 2022			% Increase (Decrease)

		(Dollars in millions)																	(Dollars in millions)
		(Unaudited)																	(Unaudited)
Adjusted EBIT(1)	Adjusted EBIT(1)	$	145.4		$	114.6		26.9	%	$	383.2		$	288.6		32.8	%	Adjusted EBIT(1)	$	185.3		$	237.9		(22.1)	%
Impact of foreign currency exchange rates	Impact of foreign currency exchange rates	—			(8.2)			*		—			(18.0)			*		Impact of foreign currency exchange rates	—			(8.7)			*
Constant-currency Adjusted EBIT	Constant-currency Adjusted EBIT	$	145.4		$	106.4		36.7	%	$	383.2		$	270.6		41.6	%	Constant-currency Adjusted EBIT	$	185.3		$	229.2		(19.2)	%

Adjusted EBIT margin																		Adjusted EBIT margin	11.0		%	14.9		%	(26.2)	%
Impact of foreign currency exchange rates																		Impact of foreign currency exchange rates	—			(0.1)			*
Constant-currency Adjusted EBIT margin(2)	Constant-currency Adjusted EBIT margin(2)	9.9		%	8.7		%			12.5		%	10.8		%			Constant-currency Adjusted EBIT margin(2)	11.0		%	14.8		%	(25.7)	%

_____________

(1)Adjusted EBIT is reconciled from net income which is the most comparable GAAP measure. Refer to Adjusted EBIT and Adjusted EBITDA table for more information.

(2)We define constant-currency Adjusted EBIT margin as constant-currency Adjusted EBIT as a percentage of constant-currency net revenues.

* Not meaningful

Constant-Currency Adjusted Net Income and Adjusted Diluted Earnings per Share:

The table below sets forth the calculation of Adjusted net income and Adjusted diluted earnings per share on a constant-currency basis for the comparison ~~periods~~period applicable to the three-month ~~and six-month periods~~period ended ~~May 29, 2022.~~February 26, 2023.


		Three Months Ended								Six Months Ended									Three Months Ended
		May 29, 2022			May 30, 2021			% Increase		May 29, 2022			May 30, 2021			% Increase			February 26, 2023			February 27, 2022			% Increase (Decrease)

		(Dollars in millions, except per share amounts)																	(Dollars in millions, except per share amounts)
		(Unaudited)																	(Unaudited)
Adjusted net income (1)	Adjusted net income (1)	$	116.7		$	93.4		24.9	%	$	305.9		$	233.7		30.9	%	Adjusted net income (1)	$	134.9		$	189.2		(28.7)	%
Impact of foreign currency exchange rates	Impact of foreign currency exchange rates	—			(7.9)			*		—			(16.0)			*		Impact of foreign currency exchange rates	—			(7.6)			*
Constant-currency Adjusted net income	Constant-currency Adjusted net income	$	116.7		$	85.5		36.5	%	$	305.9		$	217.7		40.5	%	Constant-currency Adjusted net income	$	134.9		$	181.6		(25.7)	%
Constant-currency Adjusted net income margin(2)	Constant-currency Adjusted net income margin(2)	7.9		%	7.0		%			10.0		%	8.7		%			Constant-currency Adjusted net income margin(2)	8.0		%	11.7		%

Adjusted diluted earnings per share	Adjusted diluted earnings per share	$	0.29		$	0.23		26.1	%	$	0.75		$	0.57		31.6	%	Adjusted diluted earnings per share	$	0.34		$	0.46		(26.1)	%
Impact of foreign currency exchange rates	Impact of foreign currency exchange rates	—			(0.02)			*		—			(0.04)			*		Impact of foreign currency exchange rates	—			(0.01)			*
Constant-currency Adjusted diluted earnings per share	Constant-currency Adjusted diluted earnings per share	$	0.29		$	0.21		38.1	%	$	0.75		$	0.53		41.5	%	Constant-currency Adjusted diluted earnings per share	$	0.34		$	0.45		(24.4)	%

_____________

(1)Adjusted net income is reconciled from net income which is the most comparable GAAP measure. Refer to Adjusted net income table for more information.

(2)We define constant-currency Adjusted net income margin as constant-currency Adjusted net income as a percentage of constant-currency net revenues.

* Not meaningful

4645

Table of Contents

Off-Balance Sheet Arrangements, Guarantees and Other Contingent Obligations

As of ~~May 29, 2022,~~February 26, 2023, there had been no significant changes to our off-balance sheet arrangements or contractual commitments from those disclosed in our ~~2021~~2022 Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the related notes. There have been no significant changes to our critical accounting policies from those disclosed in our ~~2021~~2022 Annual Report on Form 10-K.

Recently Issued Accounting Standards

See Note 1 to our unaudited consolidated financial statements included in this Quarterly Report for recently issued accounting standards, including the expected dates of adoption and estimated effects on our consolidated financial statements.

4746

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain matters discussed in this Quarterly Report, including (without limitation) statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations" contain forward-looking statements. Although we believe that, in making any such statements, our expectations are based on reasonable assumptions, any such statement may be influenced by factors that could cause actual outcomes and results to be materially different from those projected.

These forward-looking statements include statements relating to our anticipated financial performance and business prospects, including debt reduction, currency values and financial impact, foreign exchange counterparty exposures, the impact of pending legal proceedings, adequate liquidity levels, dividends, share repurchases or other capital deployment initiatives and/or statements preceded by, followed by or that include the words "believe", "will", "so we can", "when", "anticipate", "intend", "estimate", "expect", "project", "aim", "could", "plans", "seeks" and similar expressions. These forward-looking statements speak only as of the date stated, and 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, even if experience or future events make it clear that any expected results expressed or implied by these forward-looking statements will not be realized. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these expectations may not prove to be correct or we may not achieve the financial results, savings or other benefits anticipated in the forward-looking statements. These forward-looking statements are necessarily estimates reflecting the best judgment of our senior management and involve a number of risks and uncertainties, some of which may be beyond our control. These risks and uncertainties, including those disclosed in Part I, Item 1A – Risk Factors of our Annual Report on Form 10-K for the fiscal year ended November ~~28, 2021, in Part II, Item 1A of the Form 10-Q for the quarter ended February~~ 27, 2022, and in our other filings with the Securities and Exchange Commission, could cause actual results to differ materially from those suggested by the forward-looking statements and include, without limitation:

•the conflict involving Russia and Ukraine and the potential impact on global economic and geopolitical conditions;

•changes in general economic and financial conditions, inflationary pressures and the resulting impact on the level of discretionary consumer spending for apparel and pricing trend fluctuations, and our ability to plan for and respond to the impact of those changes;

•the ~~potential~~ duration and impact of COVID-19 on our projected customer demand, store closures, supply chain and our business, as well as our consolidated financial position, consolidated results of operations, and consolidated cash flows in fiscal ~~2022;~~2023;

•the risk of future non-cash asset impairment charges, including to goodwill, operating right-of-use assets and/or other store assets;

•our ability to effectively manage any global productivity and outsourcing actions as planned, which are intended to increase productivity and efficiency in our global operations, take advantage of lower-cost service-delivery models in our distribution network and streamline our procurement practices to maximize efficiency in our global operations, without business disruption or mitigation to such disruptions;

•our ability to effectively manage our inventory and supply chain and the potential strain on our U.S distribution centers;

•consequences of impacts to the businesses of our wholesale customers, including significant store closures or a significant decline in a wholesale customer's financial condition leading to restructuring actions, bankruptcies, liquidations or other unfavorable events for our wholesale customers, caused by factors such as, among other things, inability to secure financing, decreased discretionary consumer spending, inconsistent foot and online traffic patterns and an increase in promotional activity as a result of decreased foot and online traffic, pricing fluctuations, general economic and financial conditions and changing consumer preferences;

•our and our wholesale customers' decisions to modify strategies and adjust product mix and pricing, and our ability to manage any resulting product transition costs, including liquidating inventory or increasing promotional activity;

•our ability to purchase products through our independent contract manufacturers that are made with quality raw materials and our ability to mitigate the variability of costs related to manufacturing, sourcing, and raw materials supply and to manage consumer response to such mitigating actions;

•our ability to gauge and adapt to changing U.S. and international retail environments and fashion trends and changing consumer preferences in product, price-points, as well as in-store and digital shopping experiences;

•our ability to respond to price, innovation and other competitive pressures in the global apparel industry, on and from our key customers and in our key ~~markets;~~markets and to increasing consumer expectations;

Table of Contents

•our ability to increase the number of dedicated stores for our products, including through opening and profitably operating company-operated stores;

~~Table of Contents~~

•our future business expectations, products, strategies, and goals, including our future financial, strategic, and operating performance and our long-term goals and targets;

•the extent to which wholesale customer forward demand signals result in actual sales;

•consequences of inflation, foreign currency exchange and interest rate fluctuations;

•the impact on our consumer traffic and demand, our business operations and the operations of our suppliers and manufacturers as climate change evolves and the frequency and severity of weather events increase;

•the impact of seasonality of our sales;

•our ability to successfully prevent or mitigate the impacts of data security breaches;

•our ability to attract and retain key executives and other key employees;

•our ability to achieve our diversity, equity and inclusion, ESG and sustainability and climate change goals;

•our ability to protect our trademarks and other intellectual property;

•the impact of the variables that affect the net periodic benefit cost and future funding requirements of our postretirement benefits and pension plans;

•our dependence on key distribution channels, customers and suppliers;

•our ability to utilize our tax credits and net operating loss carryforwards;

•potential future paydowns of existing debt;

•future acquisitions of or investments in new businesses, including the Beyond Yoga integration;

•the process and risks relating to the implementation of a new enterprise resource planning (ERP) system;

•ongoing or future litigation matters and disputes and regulatory developments;

•changes in or application of trade and tax ~~laws,~~ laws;

•potential increases in import tariffs or taxes, and the implementation of trade restrictions or sanctions; and

•political, social and economic instability, or natural disasters, in countries where we or our customers do business.

We have based the forward-looking statements contained in this Quarterly Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, prospects, business strategy and financial needs. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, assumptions and other factors described under Part I, Item 1A – Risk Factors of our Annual Report on Form 10-K for the fiscal year ended November ~~28, 2021, Part II, Item 1A of the Form 10-Q for the quarter ended February~~ 27, 2022, in our other filings with the SEC and ~~elsewhere~~ in this Quarterly Report. These risks are not exhaustive. Other sections of this Quarterly Report include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

The forward-looking statements made in this Quarterly Report relate only to events as of the date on which such statements are made. We undertake no obligation to update any forward-looking statements after the date of this Quarterly Report or to conform such statements to actual results or revised expectations, except as required by law.

Additional information regarding factors that could cause results to differ can be found in our Annual Report on Form 10-K for the fiscal year ended November ~~28, 2021, in Part II, Item 1A of the Form 10-Q for the quarter ended February~~ 27, 2022, in this Quarterly Report and our other filings with the U.S. Securities and Exchange Commission. We suggest that this document be read in conjunction with our other filings with the U.S. Securities and Exchange Commission.

4948

Table of Contents


Item 3.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our primary market risk exposures or how those exposures are managed from the information disclosed in our ~~2021~~2022 Annual Report on Form 10-K.


Item 4.			CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We have evaluated, under the supervision and with the participation of management, including our chief executive officer and our chief financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act") as of ~~May 29, 2022.~~February 26, 2023. Based on that evaluation, our chief executive officer and our chief financial officer concluded that as of ~~May 29, 2022,~~February 26, 2023, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

We maintain a system of internal control over financial reporting that is designed to provide reasonable assurance that our books and records accurately reflect our transactions and that our established policies and procedures are followed. There were no changes to our internal control over financial reporting ~~during our last fiscal quarter~~for the quarterly period ended February 26, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

5049

Table of Contents

PART II — OTHER INFORMATION


Item 1.			LEGAL PROCEEDINGS

In the ordinary course of business, we have 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. We do not believe any of these pending claims, complaints and legal proceedings will have a material impact on our financial condition, results of operations or cash flows.


Item 1A.			RISK FACTORS

For information regarding factors that could affect our results of operations, financial condition and liquidity, see the risk factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended November ~~28, 2021 as such Risk Factors are supplemented by the information contained in Part II, Item 1A of our Form 10-Q for the quarter ended February~~ 27, 2022. There have been no material changes to our previously reported Risk Factors.

5150

Table of Contents


Item 2.			UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) Recent Sales of Unregistered Securities

None.

(b) Use of Proceeds from Securities

None.

Period
Total number of shares purchased(1)
Average price paid per share(2)
Total number of shares purchased as part of publicly announced plans or programs(1)
Approximate maximum dollar value of shares that may yet be purchased under the plans or programs(1)
February 28, 2022 - April 3, 2022 2,032,649 $ 19.68 2,032,649 $ —
April 4, 2022 - May 1, 2022 — $ — — $ —
May 2, 2022 - May 29, 2022 — $ — — $ —
Total 2,032,649 $ 19.68 2,032,649


Period	Total number of shares purchased(1)	Average price paid per share(2)		Total number of shares purchased as part of publicly announced plans or programs(1)	Approximate maximum dollar value of shares that may yet be purchased under the plans or programs(1)
November 28, 2022 - January 1, 2023	—	$	—	—	$	688,609,045
January 2, 2023 - January 29, 2023	31,331	$	17.94	31,331	$	688,046,854
January 30, 2023 - February 26, 2023	423,545	$	17.97	423,545	$	680,434,314
Total	454,876	$	17.97	454,876

_________

(1)We maintain a share repurchase program authorized by the Board. Under this program, we may repurchase shares from time to time. The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions and alternate uses of capital. The share repurchase program may be effected through Rule 10b5-1 plans, open market purchases or privately negotiated transactions, each in compliance with Rule 10b-18 under the Exchange Act. The program may be suspended or discontinued at any time and does not have an expiration date.

~~In October 2021,~~During the ~~Board approved a~~first quarter of 2023, we repurchased 0.5 million shares for $8.1 million, excluding any broker commissions. Such repurchases were made pursuant to the Company's share repurchase program described above. Share repurchase authority was $680.4 million as of up to $200.0 million of our Class A common stock. During the second quarter of 2022, we completed the remaining share repurchases under this program. On May 31, 2022, the Board approved a new share repurchase program that authorizes the repurchase of up to $750.0 million of our Class A common stock.March 30, 2023.

(2)The average price paid per share excludes any broker commissions.

Shares withheld related to the vesting or exercise of stock-based compensation awards are excluded from the disclosure.


Item 3.			DEFAULTS UPON SENIOR SECURITIES

None.


Item 4.			MINE SAFETY DISCLOSURES

Not applicable.


Item 5.			OTHER INFORMATION

None.

5251

Table of Contents


Item 6.			EXHIBITS

Incorporated by Reference
Exhibit Number Description of Document Form SEC File No. Exhibit Filing Date
3.1
Amended and Restated Certificate of Incorporation of the Registrant.
8-K 001-06631 3.1 3/25/2019
3.2
Amended and Restated Bylaws.
10-K 001-06631 3.2 1/27/2021
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
32.1†
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. Filed herewith.
101.SCH Inline XBRL Taxonomy Extension Schema Document. Filed herewith.
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. Filed herewith.
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. Filed herewith.
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. Filed herewith.
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. Filed herewith.
104 Cover Page Interactive Data File (formatted as inline XBRL and contained within Exhibit 101). Filed herewith.

Incorporated by Reference

Exhibit Number

Description of Document

Form

SEC File No.

Exhibit

Filing Date

3.1

Amended and Restated Certificate of Incorporation of the Registrant.

8-K

001-06631

3.1

3/25/2019

3.2

Amended and Restated Bylaws.

10-K

001-06631

3.2

1/27/2021

10.1

Amendment No. 6 and Waiver to Second Amended and Restated Credit Agreement, dated as of March 21, 2023 , among the Registrant, Levi Strauss & Co. (Canada) Inc., the lenders party thereto, JP Morgan Chase Bank, N.A., as Administrative Agent, and JPMorgan Chase Bank, N.A. Toronto Branch, as Multicurrency Administrative Agent. Filed herewith.

31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

32.1†

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.

101.INS

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. Filed herewith.

101.SCH

Inline XBRL Taxonomy Extension Schema Document. Filed herewith.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document. Filed herewith.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document. Filed herewith.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document. Filed herewith.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document. Filed herewith.

104

Cover Page Interactive Data File (formatted as inline XBRL and contained within Exhibit 101). Filed herewith.

† The certification attached as Exhibit 32.1 accompanies this Quarterly Report on Form 10-Q, is not deemed filed with the Commission and is not to be incorporated by reference into any filing of Levi Strauss & Co. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

5352

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Date:	~~July 7, 2022~~April 6, 2023		LEVI STRAUSS & CO.
			(Registrant)


		By:	/s/ LISA W. STIRLING
			Lisa W. Stirling Vice President and Global Controller
			(Principal Accounting Officer and Duly Authorized Officer)

5453



	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, net	2		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


	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, net	2		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, net	4		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