Business Wire | Oct 6, 2020 04:05PM EDT

Levi Strauss & Co. Reports Third-Quarter 2020 Financial Results

Oct. 06, 2020

SAN FRANCISCO--(BUSINESS WIRE)--Oct. 06, 2020--Levi Strauss & Co. (NYSE: LEVI) today announced financial results for the third quarter ended August 23, 2020.

Adjusted EBIT and adjusted diluted EPS were positive and adjusted free cash flow was even higher than the third quarter of the prior year, reflecting the company's successful efforts to mitigate the impact of the COVID-19 pandemic. The company's financial results continued to improve into the fourth quarter.

Third-Quarter 2020 Results

* Net revenues declined 27 percent on a reported basis; the decrease was primarily due to the impacts of the COVID-19 pandemic, including reduced traffic and ongoing closures of company-operated and third-party retail locations for portions of the quarter and in certain markets. Company e-commerce revenue growth of 52 percent partially offset the decline, while the company's global digital revenues, which includes the company's e-commerce sites as well as the online business of its pure-play and traditional wholesale customers, grew approximately 50 percent compared to the same period in the prior year, and comprised approximately 24 percent of third-quarter 2020 revenues, double what it was a year prior. * Gross margin increased 130 basis points on a reported basis to 54.3 percent; Adjusted gross margin increased 60 basis points to 53.6 percent, primarily due to price increases and a higher proportion of sales in the higher-margin direct-to-consumer channel. * SG&A declined 19 percent to $484 million; the $112 million decline primarily reflected the company's cost-savings actions. * The company recorded net income for the quarter of $27 million and Adjusted net income of $31 million, as compared to $124 million and $128 million, respectively, in the third quarter of the prior year. The decline is primarily attributable to the adverse revenue impact of COVID-19, higher interest expense reflecting the company's actions to enhance its liquidity position, and a higher tax rate. * Adjusted EBIT was $84 million, and adjusted EBIT margin was eight percent, due to the company's cost-reduction initiatives and higher gross margin, despite the substantial adverse revenue impact of COVID-19. * Adjusted diluted EPS was eight cents. * The company returned to positive adjusted free cash flow generation in the third quarter, generating $183 million, reflecting the company's focus on financial discipline, cost controls, cash and working capital. * Total inventories, net of reserves, at quarter end increased one percent compared to a year prior, reflecting the company's inventory management efforts; inventory is healthy heading into the holiday season. * Total Available Liquidity of $2 Billion; Cash at Quarter End was $1.4 Billion.

"As we continue to navigate the COVID-19 pandemic and its impact, we are laser focused on the areas that will drive value and enable us to emerge stronger on the other side, including elevating our already iconic brand, investing in digitization, and accelerating our efforts to diversify across geographies, product categories and distribution channels, including doubling down on our fast-growing direct-to-consumer business," said Chip Bergh, president and chief executive officer of Levi Strauss & Co. "These investments are already paying off- we exceeded our expectations for the third quarter, our total digital business has doubled as a share of total net revenues, and Levi's remains the global leader in denim, where our women's business continues to take market share. And the brand has gotten even stronger during the pandemic."

"We bounced back this quarter, delivering profitability and generating strong cash flows," said Harmit Singh, executive vice president and chief financial officer of Levi Strauss & Co. "The strength of the Levi's brand is demonstrated in our gross margins, and revenues have been recovering from COVID-19 related disruptions faster than expected, driven by e-commerce, international and our women's business, particularly within Europe and in the United States. Inventory is healthy headed into holiday, we are making investments in our digital transformation, and our cost and working capital actions have put us on a clear and accelerated path to achieving our adjusted EBIT margin 'North Star' of at least 12% when revenues recover to pre-COVID levels."

COVID-19 Update

Currently:

* the substantial majority of third-party retail locations have reopened globally, as well as substantially all company-operated doors and franchisee doors, albeit many remain on reduced hours; and * while sales remain down compared to prior year, the company continues to mitigate ongoing traffic declines by driving meaningfully higher conversion. * As store locations have reopened, the company's e-commerce net revenues growth has remained strong, at 52 percent growth for the quarter as compared to the prior year. * The company's global digital business, which includes its e-commerce sites as well as the online business of its pure-play and traditional wholesale customers, comprised approximately 24 percent of third-quarter 2020 revenues, double what it was a year prior, as consumer spending continued to shift towards online shopping experiences due to the changing retail landscape resulting from the global pandemic. * Cash flow trends also continue to improve, and the company generated positive and strong net cash flows from operations and adjusted free cash flows in the quarter.

Although trends appear to be improving sequentially, and at a faster pace than previously expected, the ultimate impact of the COVID-19 pandemic remains highly uncertain. The company expects that its business and results of operations, including net revenues, earnings and cash flows, will continue to be significantly adversely impacted for at least the balance of 2020, and there remains the possibility of additional COVID-19 related inventory and other charges.

Third-Quarter Total Company Overview

Three Months Ended Nine Months Ended Increase Increase($ (Decrease) (Decrease)millions, August August As August 23, August Asexcept 23, 25, Reported 2020 25, Reportedper-share 2020 2019 2019amounts)

Net $ 1,063 $ 1,447 (27) % $ 3,067 $ 4,195 (27) %revenues

Netincome $ 27 $ 124 (78) % $ (184) $ 299 (161) %(loss)

Adjustednet $ 31 $ 128 (76) % $ 2 $ 348 (99) %income

Adjusted $ 84 $ 176 (52) % $ 68 $ 464 (85) %EBIT

Dilutedearnings $ 0.07 $ 0.30 (23) ? $ (0.46) $ 0.73 (119) ?pershare*

Adjusteddilutedearnings $ 0.08 $ 0.31 (23) ? $ 0.01 $ 0.85 (84) ?pershare*

*Note: per share increase (decrease) compared to prior year displayed in cents

* Net revenues declined 27 percent on a reported basis, and 26 percent on a constant-currency basis excluding $16 million in unfavorable currency effects. The decrease was primarily due to the impacts of the COVID-19 pandemic including reduced traffic and on-going closures of company-operated and third-party retail locations for portions of the quarter and in certain markets. Wholesale revenues declined 29 percent and direct-to-consumer revenues declined 22 percent; the direct-to-consumer decrease was partially offset by 52 percent growth in its company-operated e-commerce business, including the benefit of accelerating its omni-channel initiatives. Direct-to-consumer locations and e-commerce comprised 29 percent and 8 percent, respectively, of total company net revenues in the third quarter. * Gross profit was $577 million compared to $767 million in the same quarter in the prior year. Gross margin was 54.3 percent of net revenues, up from 53.0 percent in the same quarter of the prior year. The increase in gross margin was primarily due to price increases, a higher proportion of sales in the higher-margin direct-to-consumer channel, and a $7.9 million reduction in estimated COVID-19 related inventory charges largely for adverse fabric purchase commitments. * Adjusted gross margin, which excludes the COVID-19 related charges, was 53.6 percent, an increase of 60 basis points compared to prior year, primarily due to the price increases and higher proportion of sales in the higher-margin direct-to-consumer channel. * Selling, general and administrative (SG&A) expenses were $484 million, a 19 percent decline compared to $596 million in the same quarter in the prior year, reflecting the company's cost-savings actions. * Operating income of $92 million declined as compared to $171 million in the same quarter in the prior year, primarily due to the adverse impacts of COVID-19, including lower net revenues, partially offset by lower SG&A expenses reflecting the company's cost-reduction initiatives. * Adjusted EBIT was $84 million, and adjusted EBIT margin was eight percent, despite the adverse revenue impact of COVID-19, due to the company's cost-reduction initiatives and higher gross margin. * Adjusted net income was $31 million as compared to Adjusted net income of $128 million in the same quarter of the prior year, reflecting the adverse revenue impact of COVID-19, higher interest expense related to the company's actions to enhance its liquidity position, and a higher tax rate. * Adjusted diluted earnings per share declined to $0.08 compared to $0.31 for the same prior-year period in-line with the Adjusted net income decline.

Additional information regarding Adjusted gross profit, Adjusted gross margin, Adjusted SG&A, Adjusted EBIT, Adjusted EBIT margin, Adjusted net income, Adjusted diluted earnings per share and Adjusted free cash flow, as well as amounts presented above on a constant-currency basis, all of which are non-GAAP financial measures, is provided at the end of this press release.

Third-Quarter Regional Overview

Reported regional net revenues and operating income (loss) for the quarter are set forth in the table below:

Net Revenues Operating Income (Loss) *

Three Months Ended Three Months Ended % Increase % Increase($ August August (Decrease) August August (Decrease)millions) 23, 25, 23, 25, 2020 2019 2020 2019

Americas $ 550 $ 771 (29) % $ 92 $ 152 (39) %

Europe $ 390 $ 463 (16) % $ 88 $ 103 (15) %

Asia $ 123 $ 213 (42) % $ (23) $ 17 (234) %

* Note: Regional operating income is equal to regional Adjusted EBIT.

* In the Americas, net revenues declined 29 percent on a reported basis. Net revenues decreased due to lower revenues across our wholesale and company-operated stores as a result of the continued adverse impact of COVID-19. The decrease was partially offset by growth in the company's e-commerce business and broader digital footprint due to increased traffic and higher conversion as consumer spending continued to shift towards online shopping experiences, as well as growth in the Signature by Levi Strauss & Co.(tm) brand. Operating income for the Americas declined primarily due to the adverse revenue impacts of COVID-19, partially offset by declines in SG&A expenses driven by the company's cost reduction initiatives in response to COVID-19.

* In Europe, net revenues declined 16 percent on a reported basis. Net revenues decreased across markets, channels, brands and categories, due to the continued adverse impact of COVID-19, with the exception of the company's e-commerce business and broader digital footprint, which experienced strong growth during the quarter due to increased traffic and higher conversion. Europe's operating income declined primarily due to the adverse revenue impacts of COVID-19, partially offset by declines in SG&A expenses driven by the company's cost reduction initiatives in response to COVID-19.

* In Asia, net revenues decreased 42 percent on a reported basis. The decrease in net revenues was across channels and markets due to the impacts of COVID-19. The most significant impact was a $51 million decline in India where several states remained in government mandated lockdown throughout the third quarter. Excluding India, net revenues in the region declined 24 percent. E-commerce in the region grew during the quarter due to increased traffic and higher conversion. Asia's operating loss was primarily due to the adverse impacts of COVID-19, as lower net revenues were only partially offset by declines in SG&A expenses driven by the company's cost reduction initiatives in response to COVID-19, and reflecting related support the company provided to franchisees in India as stores were closed in that market.

Year-to-date 2020 Results are included in the company's Quarterly Report on Form 10-Q for the quarter ended August 23, 2020.

Cash Flow and Balance Sheet

* Cash and cash equivalents at the end of the third quarter of 2020 of $1,353 million and short-term investments of $72 million were complemented by $608 million available under the company's revolving credit facility, resulting in a total liquidity position of approximately $2 billion. * Net debt at the end of the third quarter of 2020 was $142 million. The company's leverage ratio was 4.5 at the end of the third quarter of 2020, an increase as compared to 1.4 at the end of the third quarter of 2019, due to the increase in gross debt and adverse impact of COVID-19 on the company's Adjusted EBIT. * Cash from operations for the first nine months of 2020 increased to $241 million compared to $206 million for the first nine months of 2019. The adverse impact on cash from operations related to the widespread temporary store closures and other significant adverse impacts of the COVID-19 pandemic was more than offset by the company's cost reduction initiatives and focus on working capital management, in particular managing inventories, including reducing and canceling inventory commitments and redeploying basic inventory items to subsequent seasons, as well as negotiating extended payment terms with suppliers, vendors and landlords, and vigorously pursuing collection of receivables. In the third quarter of 2020, cash from operations increased $156 million compared to the same period of the prior year, reflecting the company's ongoing recovery from the impacts of COVID-19 and its focus on financial discipline, cost controls, cash and working capital. * Adjusted free cash flow for the first nine months of 2020 was $(31) million, a decline of $59 million compared to the first nine months of 2019, primarily reflecting higher share repurchases. The company returned to positive adjusted free cash flow generation in the third quarter, which increased $195 million as compared to the same period of the prior year, driven by the increase in cash from operations and a decrease in capital expenditures, reflecting the company's disciplined spending in response to the COVID-19 pandemic. * Total inventories were up one percent compared to the end of the corresponding prior-year period, despite the sales decline of 27 percent, reflecting the company's aggressive inventory actions in response to the COVID-19 business disruption and flexibility resulting from the high percentage of sales derived from core products. * The company declared and paid dividends of $0.08 per share in each of the first and second quarters collectively totaling approximately $64 million, a 16 percent increase compared to the $55 million paid in the first half of 2019. The company determined not to declare dividends for the third or fourth quarter and will reassess dividend payments for future quarters as circumstances evolve.

Additional information regarding net debt, leverage ratio and Adjusted free cash flow, non-GAAP financial measures, is provided at the end of this press release.

Annual Guidance

Despite the ongoing substantial uncertainty and low visibility resulting from the COVID-19 pandemic and related economic impact, the company plans to share its outlook on the fourth quarter of 2020 as well as share high-level thoughts on 2021 and beyond during its investor conference call, which assume no significant worsening of the COVID-19 pandemic or dramatic re-closure of the global economies.

Investor Conference Call

The company's third-quarter 2020 investor conference call will be available through a live audio webcast at https://engage.vevent.com/rt/levistraussco/index.jsp?seid=90 on October 6, 2020, at 2 p.m. Pacific / 5 p.m. Eastern or via the following phone numbers: 800-884-6765 in the United States and Canada or +1-973-200-3064 internationally; I.D. No. 7768738. A replay is available the same day on http://www.levistrauss.com/investors/earnings-webcast and will be archived for one quarter. A telephone replay is also available through October 13, 2020, via the following phone numbers: 855-859-2056 in the United States and Canada or +1-404-537-3406 internationally; I.D. No. 7768738.

About Levi Strauss & Co.

Levi Strauss & Co. is one of the world's largest brand-name apparel companies and a global leader in jeanswear. The company designs and markets jeans, casual wear and related accessories for men, women and children under the Levi's(r), Dockers(r), Signature by Levi Strauss & Co.(tm), and Denizen(r) brands. Its products are sold in more than 110 countries worldwide through a combination of chain retailers, department stores, online sites, and a global footprint of approximately 3,100 retail stores and shop-in-shops. Levi Strauss & Co.'s reported 2019 net revenues were $5.8 billion. For more information, go to http://levistrauss.com, and for company news and announcements go to http://investors.levistrauss.com.

Forward Looking Statements

This press release and related conference call contain, in addition to historical information, forward-looking statements, including statements related to the company's ability to manage its business and liquidity during and after the COVID-19 pandemic; the impact of the COVID-19 pandemic on the company's results of operations; the company's prospects for financial performance and growth, including adjusted EBIT and adjusted gross margin, following the COVID-19 pandemic; future financial results, including revenues, adjusted gross margin, adjusted EPS, adjusted SG&A, and capital expenditures; new store openings; future dividends and share repurchases; future inventory positions; the impact of continued geographic, product and channel diversification on the company's financial results; and the impact of digitization initiatives on the company's financial results. The company has based these forward-looking statements on its current assumptions, expectations and projections about future events. Words such as, but not limited to, "believe," "will," "so we can," "when," "anticipate," "intend," "estimate," "expect," "project," "confident" and similar expressions are used to identify forward-looking statements, although not all forward-looking statements contain these words. These forward-looking statements are necessarily estimates reflecting the best judgment of senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Investors should consider the information contained in the company's filings with the U.S. Securities and Exchange Commission (SEC), including its Annual Report on Form 10-K for 2019, and its Quarterly Report on Form 10-Q for the quarter ended August 23, 2020, especially in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections. Other unknown or unpredictable factors also could have material adverse effects on future results, performance or achievements. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this press release and related conference call may not occur. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated or, if no date is stated, as of the date of this press release and related conference call. The company is not under any obligation and does not intend to update or revise any of the forward-looking statements contained in this press release and related conference call to reflect circumstances existing after the date of this press release and related conference call or to reflect the occurrence of future events, even if such circumstances or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized.

Non-GAAP Financial Measures

The company reports its financial results in accordance with generally accepted accounting principles in the United States (GAAP) and the rules of the SEC. To supplement its financial statements prepared and presented in accordance with GAAP, the company uses certain non-GAAP financial measures, such as Adjusted gross profit, Adjusted gross margin, Adjusted SG&A, Adjusted EBIT (both reported and on a constant-currency basis), Adjusted EBIT margin (both reported and on a constant-currency basis), Adjusted net income (loss) (both reported and on a constant-currency basis), Adjusted diluted earnings (loss) per share (both reported and on a constant-currency basis), constant-currency net revenues, net debt, leverage ratio, and Adjusted free cash flow, to provide investors with additional useful information about its financial performance, to enhance the overall understanding of its past performance and future prospects and to allow for greater transparency with respect to important metrics used by management for financial and operating decision-making. The company presents these non-GAAP financial measures to assist investors in seeing its financial performance from management's view and because it believes they provide an additional tool for investors to use in computing the company's core financial performance over multiple periods with other companies in its industry. The tables found below present Adjusted gross profit, Adjusted gross margin, Adjusted SG&A, Adjusted EBIT (both reported and on a constant-currency basis), Adjusted EBIT margin (both reported and on a constant-currency basis), Adjusted net income (loss) (both reported and on a constant-currency basis), Adjusted net income (loss) margin (both reported and on a constant-currency basis), Adjusted diluted earnings (loss) per share (both reported and on a constant-currency basis), constant-currency net revenues, net debt, leverage ratio, and Adjusted free cash flow, and corresponding reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP. 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. Certain items that may be excluded or included in non-GAAP financial measures may be significant items that could impact the company's financial position, results of operations and cash flows and should therefore be considered in assessing the company's actual financial condition and performance. Non-GAAP financial measures are subject to inherent limitations as they reflect the exercise of judgment by management in determining how they are formulated. Some specific limitations include but are not limited to, the fact that such non-GAAP financial measures: (a) do not reflect cash outlays for capital expenditures, contractual commitments or liabilities including pension obligations, post-retirement health benefit obligations and income tax liabilities; (b) do not reflect changes in, or cash requirements for, working capital requirements; and (c) do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on indebtedness. 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, the company's financial results prepared in accordance with GAAP. The company urges investors to review the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures included in this press release, and not to rely on any single financial measure to evaluate its business. See "RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES" below for reconciliation to the most comparable GAAP financial measures.

Constant-currency

The company reports certain operating results on a constant-currency basis in order to facilitate period-to-period comparisons of its results without regard to the impact of fluctuating foreign currency exchange rates. The term foreign currency exchange rates refers to the exchange rates used to translate the company's operating results for all countries where the functional currency is not the U.S. Dollar into U.S. Dollars. Because the company is a global company, foreign currency exchange rates used for translation may have a significant effect on its reported results. In general, the company's 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 it conducts its business. References to operating results on a constant-currency basis mean operating results without the impact of foreign currency exchange rate fluctuations.

The company believes disclosure of constant-currency results is helpful to investors because it facilitates period-to-period comparisons of its results by increasing the transparency of the 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 as an alternative or 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 the company's 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.

The company calculates constant-currency amounts by translating local currency amounts in the prior-year period at actual foreign exchange rates for the current period. 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 is impacted by gains and losses related to the procurement of inventory, primarily products sourced in EUR and USD, by our global sourcing organization on behalf of our foreign subsidiaries.

Source: Levi Strauss & Co. Investor Relations

LEVI STRAUSS & CO. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

August 23, November 24, 2020 2019



(Dollars in thousands)

ASSETS

Current Assets:

Cash and cash equivalents $ 1,353,042 $ 934,237

Short-term investments in marketable securities 72,279 80,741

Trade receivables, net of allowance for doubtful 543,257 782,846 accounts of $17,437 and $6,172

Inventories:

Raw materials 3,932 4,929

Work-in-process 4,091 3,319

Finished goods 936,311 875,944

Total inventories 944,334 884,192

Other current assets 169,004 188,170

Total current assets 3,081,916 2,870,186

Property, plant and equipment, net of accumulated 447,869 529,558 depreciation of $1,071,260 and $1,054,267

Goodwill 263,692 235,788

Other intangible assets, net 48,624 42,782

Deferred tax assets, net 500,701 407,905

Operating lease right-of-use assets, net (Note 1) 985,497 -

Other non-current assets 218,970 146,199

Total assets $ 5,547,269 $ 4,232,418



LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Short-term debt $ 23,941 $ 7,621

Accounts payable 461,501 360,324

Accrued salaries, wages and employee benefits 162,866 223,374

Restructuring liabilities (Note 6) 58,009 -

Accrued interest payable 23,832 5,350

Accrued income taxes 29,510 24,050

Accrued sales returns and allowances (Note 1) 172,149 171,113

Short-term operating lease liability (Note 1) 218,098 -

Other accrued liabilities (Note 1) 424,272 375,372

Total current liabilities 1,574,178 1,167,204

Long-term debt 1,543,302 1,006,745

Postretirement medical benefits 59,294 64,006

Pension liability 174,183 193,214

Long-term employee related benefits 93,783 84,957

Long-term income tax liabilities 7,049 10,486

Long-term operating lease liability (Note 1) 852,366 -

Other long-term liabilities 51,843 134,249

Total liabilities 4,355,998 2,660,861

Commitments and contingencies

Stockholders' Equity:

Levi Strauss & Co. stockholders' equity

Common stock - $0.001 par value; 1,200,000,000Class A shares authorized, 65,810,175 shares and53,079,235 shares issued and outstanding as ofAugust 23, 2020 and November 24, 2019, 397 394 respectively; and 422,000,000 Class B sharesauthorized, 331,312,315 shares and 340,674,741shares issued and outstanding, as of August 23,2020 and November 24, 2019, respectively

Additional paid-in capital 621,432 657,659

Accumulated other comprehensive loss (487,923) (404,986)

Retained earnings 1,057,365 1,310,464

Total Levi Strauss & Co. stockholders' equity 1,191,271 1,563,531

Noncontrolling interest - 8,026

Total stockholders' equity 1,191,271 1,571,557

Total liabilities and stockholders' equity $ 5,547,269 $ 4,232,418

The notes accompanying our consolidated financial statements in our Form 10-Q are an integral part of these consolidated financial statements.

LEVI STRAUSS & CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended Nine Months Ended

August 23, August 25, August 23, August 25, 2020 2019 2020 2019



(Dollars in thousands, except per share amounts) (Unaudited)

Net revenues $ 1,063,085 $ 1,447,081 $ 3,066,753 $ 4,194,479

Cost of goods 485,687 680,335 1,480,376 1,944,502 sold

Gross profit 577,398 766,746 1,586,377 2,249,977

Selling, generaland 484,002 595,528 1,695,072 1,814,949 administrativeexpenses

Restructuring 1,071 - 68,442 - charges, net

Operating income 92,325 171,218 (177,137) 435,028 (loss)

Interest expense (28,437) (15,292) (56,337) (47,962)

Underwritercommission paidon behalf of - - - (24,860) sellingstockholders

Other expense, (12,274) (4,369) (8,269) (2,849) net

Income (loss)before income 51,614 151,557 (241,743) 359,357 taxes

Income tax 24,565 27,340 (57,932) 60,182 (benefit) expense

Net income (loss) 27,049 124,217 (183,811) 299,175

Net lossattributable to - 292 - 141 noncontrollinginterest

Net income (loss)attributable to $ 27,049 $ 124,509 $ (183,811) $ 299,316 Levi Strauss & Co

Earnings (loss)per common shareattributable to commonstockholders:

Basic $ 0.07 $ 0.32 $ (0.46) $ 0.77

Diluted $ 0.07 $ 0.30 $ (0.46) $ 0.73

Weighted-averagecommon shares outstanding:

Basic 397,711,322 394,169,688 397,010,522 387,289,913

Diluted 407,677,385 413,639,749 397,010,522 407,844,136

The notes accompanying our consolidated financial statements in our Form 10-Q are an integral part of these consolidated financial statements.

LEVI STRAUSS & CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended Nine Months Ended

August 23, August 25, August 23, August 25, 2020 2019 2020 2019



(Dollars in thousands) (Unaudited)

Net income (loss) $ 27,049 $ 124,217 $ (183,811) $ 299,175

Other comprehensiveincome (loss), before related income taxes:

Pension and 3,640 3,431 13,844 10,317 postretirement benefits

Derivative instruments (63,271) 9,215 (50,068) 23,619

Foreign currencytranslation gains 36,915 (6,523) (1,974) (11,280) (losses)

Unrealized gains on 6,104 475 5,313 1,694 marketable securities

Total othercomprehensive income (16,612) 6,598 (32,885) 24,350 (loss), before relatedincome taxes

Income taxes benefit(expense) related toitems of other 6,385 (1,568) 4,392 (5,741) comprehensive income(loss)

Comprehensive income(loss), net of income 16,822 129,247 (212,304) 317,784 taxes

Comprehensive loss(income) attributable to - 68 - (334) noncontrolling interest

Comprehensive income(loss) attributable to $ 16,822 $ 129,315 $ (212,304) $ 317,450 Levi Strauss & Co

The notes accompanying our consolidated financial statements in our Form 10-Q are an integral part of these consolidated financial statements.

LEVI STRAUSS & CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Three Months Ended August 23, 2020

Levi Strauss & Co. Stockholders

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



(Dollars in thousands) (Unaudited)

Balance at $ 396 $ 611,993 $ 1,030,513 $ (477,696) $ - $ 1,165,206 May 24, 2020

Net income - - 27,049 - - 27,049

Othercomprehensive - - - (10,227) - (10,227) loss, net oftax

Stock-basedcompensationand 1 11,840 (197) - - 11,644 dividends,net

Employeestock - 1,889 - - - 1,889 purchase plan

Sharessurrenderedfor tax - (4,290) - - - (4,290) withholdingson equityawards

Balance atAugust 23, $ 397 $ 621,432 $ 1,057,365 $ (487,923) $ - $ 1,191,271 2020

Nine Months Ended August 23, 2020

Levi Strauss & Co. Stockholders

Class A & Class B Common Stock

Additional Paid-In Capital

Retained Earnings

Accumulated Other Comprehensive Loss

Noncontrolling Interest

Total Stockholders' Equity

(Dollars in thousands)(Unaudited)

Balance at November 24, 2019

$

394

$

657,659

$

1,310,464

$

(404,986)

$

8,026

$

1,571,557

Net loss

-

-

(183,811)

-

-

(183,811)

Other comprehensive loss, net of tax

-

-

-

(28,493)

-

(28,493)

Stock-based compensation and dividends, net

6

37,460

(224)

-

-

37,242

Employee stock purchase plan

-

6,171

-

-

-

6,171

Repurchase of common stock

(3)

-

(56,240)

-

-

(56,243)

Shares surrendered for tax withholdings on equity awards

-

(79,858)

-

-

-

(79,858)

Changes in ownership of noncontrolling interest

-

-

(8,809)

-

(8,026)

(16,835)

Cumulative effect of adoption of new accounting standards

-

-

59,624

(54,444)

-

5,180

Cash dividends declared ($0.16 per share)

-

-

(63,639)

-

-

(63,639)

Balance at August 23, 2020

$

397

$

621,432

$

1,057,365

$

(487,923)

$

-

$

1,191,271

The notes accompanying our consolidated financial statements in our Form 10-Q are an integral part of these consolidated financial statements.

LEVI STRAUSS & CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Continued)

Nine Months Ended August 23, 2020

Levi Strauss & Co. Stockholders

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



(Dollars in thousands) (Unaudited)

Balance atNovember 24, $ 394 $ 657,659 $ 1,310,464 $ (404,986) $ 8,026 $ 1,571,557 2019

Net loss - - (183,811) - - (183,811)

Othercomprehensive - - - (28,493) - (28,493) loss, net oftax

Stock-basedcompensation 6 37,460 (224) - - 37,242 and dividends,net

Employee stock - 6,171 - - - 6,171 purchase plan

Repurchase of (3) - (56,240) - - (56,243) common stock

Sharessurrenderedfor tax - (79,858) - - - (79,858) withholdingson equityawards

Changes inownership of - - (8,809) - (8,026) (16,835) noncontrollinginterest

Cumulativeeffect ofadoption of - - 59,624 (54,444) - 5,180 new accountingstandards

Cash dividendsdeclared - - (63,639) - - (63,639) ($0.16 pershare)

Balance atAugust 23, $ 397 $ 621,432 $ 1,057,365 $ (487,923) $ - $ 1,191,271 2020

The notes accompanying our consolidated financial statements in our Form 10-Q are an integral part of these consolidated financial statements.

LEVI STRAUSS & CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Continued)

Three Months Ended August 25, 2019

Levi Strauss & Co. Stockholders

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



(Dollars in thousands) (Unaudited)

Balance at $ 392 $ 629,703 $ 1,094,666 $ (411,256) $ 7,748 $ 1,321,253 May 26, 2019

Net income - - 124,509 - (292) 124,217

Othercomprehensive - - - 4,806 224 5,030 income, netof tax

Stock-basedcompensationand 1 17,930 (86) - - 17,845 dividends,net

Balance atAugust 25, $ 393 $ 647,633 $ 1,219,089 $ (406,450) $ 7,680 $ 1,468,345 2019

Nine Months Ended August 25, 2019

Levi Strauss & Co. Stockholders

Class A & Class B Common Stock

Additional Paid-In Capital

Retained Earnings

Accumulated Other Comprehensive Loss

Noncontrolling Interest

Total Stockholders' Equity

(Dollars in thousands)(Unaudited)

Balance at November 25, 2018

$

376

$

-

$

1,084,321

$

(424,584)

$

7,346

$

667,459

Net income

-

-

299,316

-

(141)

299,175

Other comprehensive income, net of tax

-

-

-

18,134

475

18,609

Stock-based compensation and dividends, net

3

31,942

(86)

-

-

31,859

Reclassification to temporary equity

-

(506)

(23,339)

-

-

(23,845)

Repurchase of common stock

-

(165)

(2,923)

-

-

(3,088)

Shares surrendered for tax withholdings on equity awards

-

(25,522)

-

-

-

(25,522)

Reclassification from temporary equity in connection with initial public offering

-

351,185

(28,200)

-

-

322,985

Issuance of Class A common stock in connection with initial public offering

14

234,569

-

-

-

234,583

Cancel liability-settled awards and replace with equity-settled awards in connection with initial public offering

-

56,130

-

-

-

56,130

Cash dividends declared ($0.29 per share)

-

-

(110,000)

-

-

(110,000)

Balance at August 25, 2019

$

393

$

647,633

$

1,219,089

$

(406,450)

$

7,680

$

1,468,345

The notes accompanying our consolidated financial statements in our Form 10-Q are an integral part of these consolidated financial statements.

LEVI STRAUSS & CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended August 25, 2019

Levi Strauss & Co. Stockholders

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



(Dollars in thousands) (Unaudited)

Balance at $ 376 $ - $ 1,084,321 $ (424,584) $ 7,346 $ 667,459 November 25, 2018

Net income - - 299,316 - (141) 299,175

Othercomprehensive - - - 18,134 475 18,609 income, net oftax

Stock-basedcompensation and 3 31,942 (86) - - 31,859 dividends, net

Reclassificationto temporary - (506) (23,339) - - (23,845) equity

Repurchase of - (165) (2,923) - - (3,088) common stock

Sharessurrendered for - (25,522) - - - (25,522) tax withholdingson equity awards

Reclassificationfrom temporaryequity in - 351,185 (28,200) - - 322,985 connection withinitial publicoffering

Issuance of ClassA common stock inconnection with 14 234,569 - - - 234,583 initial publicoffering

Cancelliability-settledawards andreplace withequity-settled - 56,130 - - - 56,130 awards inconnection withinitial publicoffering

Cash dividendsdeclared ($0.29 - - (110,000) - - (110,000) per share)

Balance at August $ 393 $ 647,633 $ 1,219,089 $ (406,450) $ 7,680 $ 1,468,345 25, 2019

The notes accompanying our consolidated financial statements in our Form 10-Q are an integral part of these consolidated financial statements.

LEVI STRAUSS & CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

August 23, August 25, 2020 2019



(Dollars in thousands) (Unaudited)

Cash Flows from Operating Activities:

Net income (loss) $ (183,811) $ 299,175

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization 104,997 90,305

Property, plant, equipment, and right-of-use asset 60,968 939 impairments

Unrealized foreign exchange losses 5,706 19,625

Realized gains on settlement of forward foreignexchange contracts not designated for hedge (17,636) (9,309) accounting

Employee benefit plans' amortization fromaccumulated other comprehensive loss and 13,845 10,317 curtailment loss

Stock-based compensation 37,242 31,859

Allowance for doubtful accounts 10,697 544

Other, net 6,120 1,897

Benefit from deferred income taxes (87,871) (20,352)

Change in operating assets and liabilities, net of effect of acquisition:

Trade receivables 219,779 (21,387)

Inventories (47,289) (79,355)

Accounts payable, accrued liabilities, and 199,393 (26,541) operating leases, net of right-of-use assets

Restructuring liabilities 57,762 -

Income tax liabilities (9,466) 34,918

Accrued salaries, wages and employee benefits and (82,497) (88,817) long-term employee related benefits

Other operating assets and liabilities, net (47,074) (38,281)

Net cash provided by operating activities 240,865 205,537

Cash Flows from Investing Activities:

Purchases of property, plant and equipment (89,487) (128,041)

Payments for business acquisition (54,282) -

Proceeds on settlement of forward foreign exchange 17,636 9,309 contracts not designated for hedge accounting

Payments to acquire short-term investments (67,458) (94,702)

Proceeds from sale, maturity and collection of 75,863 15,057 short-term investments

Net cash used for investing activities (117,728) (198,377)

Cash Flows from Financing Activities:

Proceeds from issuance of long-term debt 502,500 -

Proceeds from senior revolving credit facility 300,000 -

Repayments of senior revolving credit facility (300,000) -

Proceeds from short-term credit facilities 8,936 25,259

Repayments of short-term credit facilities (5,245) (38,280)

Other short-term borrowings, net 12,980 9,486

Payment of debt issuance costs (6,459) -

Proceeds from issuance of Class A common stock - 254,329

Payments for underwriter commission and other - (19,746) offering costs

Proceeds from employee stock purchase plan 6,173 -

Repurchase of common stock (56,243) (3,088)

Repurchase of shares surrendered for tax (79,857) (25,522) withholdings on equity awards

Payments to noncontrolling interests (16,090) -

Dividend to stockholders (63,639) (55,000)

Other financing, net (535) (643)

Net cash provided by financing activities 302,521 146,795

Effect of exchange rate changes on cash and cash (6,914) (3,357) equivalents and restricted cash

Net increase in cash and cash equivalents and 418,744 150,598 restricted cash

Beginning cash and cash equivalents, and restricted 934,753 713,698 cash

Ending cash and cash equivalents, and restricted 1,353,497 864,296 cash

Less: Ending restricted cash (455) (523)

Ending cash and cash equivalents $ 1,353,042 $ 863,773



Noncash Investing and Financing Activity:

Property, plant and equipment acquired and not yet $ 33,255 $ 21,573 paid at end of period

Property, plant and equipment additions due to - 10,861 build-to-suit lease transactions

Supplemental disclosure of cash flow information:

Cash paid for interest during the period $ 38,036 $ 29,621

Cash paid for income taxes during the period, net 34,657 80,159 of refunds

The notes accompanying our consolidated financial statements in our Form 10-Q are an integral part of these consolidated financial statements.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

FOR THE THIRD QUARTER OF 2020

The following information relates to non-GAAP financial measures and should be read in conjunction with the investor call held on October 6, 2020, discussing the company's financial condition and results of operations as of and for the quarter ended August 23, 2020. Adjusted gross profit, Adjusted gross margin, Adjusted SG&A, Adjusted EBIT, Adjusted EBIT margin, Adjusted net income, Adjusted diluted earnings per share, net debt, Adjusted free cash flow, constant-currency net revenues, constant-currency Adjusted EBIT and leverage ratio are not financial measures prepared in accordance with GAAP. As used in this press release: (1) Adjusted gross profit, represents gross profit excluding COVID-19 related inventory costs and Adjusted gross margin, represents Adjusted gross profit as a percentage of net revenues; (2) Adjusted SG&A represents SG&A less charges related to changes in fair value on cash-settled stock-based compensation, COVID-19 related charges, and restructuring related charges, severance and other, net; (3) Adjusted EBIT represents net income (loss) excluding income tax (benefit) expense, interest expense, other (income) expense, net, underwriter commission paid on behalf of selling stockholders, impact of changes in fair value on cash-settled stock-based compensation, COVID-19 related inventory costs and other charges, and restructuring and restructuring related charges, severance and other, net, and Adjusted EBIT margin as Adjusted EBIT as a percentage of net revenues; (4) Adjusted EBITDA represents Adjusted EBIT excluding depreciation and amortization expense; (5) Adjusted net income (loss) represents net income (loss) excluding underwriter commission paid on behalf of selling stockholders, charges related to the impact of changes in fair value on cash-settled stock-based compensation, COVID-19 related inventory costs and other charges, and restructuring and restructuring related charges, severance and other, net, and tax impact of adjustments and Adjusted net income margin as Adjusted net income (loss) as a percentage of net revenues; (6) Adjusted diluted earnings per share represents Adjusted net income (loss) per weighted-average number of diluted common shares; (7) net debt represents total debt, excluding capital leases, less cash and cash equivalents and short-term investments in marketable securities; (8) leverage ratio represents total debt, excluding capital leases, divided by the last twelve months of Adjusted EBITDA; (9) Adjusted free cash flow represents cash from operating activities less underwriter commission paid on behalf of selling stockholders, purchases of property, plant and equipment, plus proceeds on settlement of forward foreign exchange contracts not designated for hedge accounting, less repurchase of common stock including shares surrendered for tax withholdings on equity award exercises, and cash dividends to stockholders; (10) constant-currency net revenues represents net revenues without the impact of foreign currency exchange rate fluctuations; (11) constant-currency Adjusted EBIT represents Adjusted EBIT without the impact of foreign currency exchange rate fluctuations; (12) constant-currency Adjusted net income (loss) represents Adjusted net income (loss) without the impact of foreign currency exchange rate fluctuations; and (13) constant-currency Adjusted diluted earnings (loss) per share represents Adjusted diluted earnings per share without the impact of foreign currency exchange rate fluctuations.

Adjusted Gross Profit:

Three Months Ended Nine Months Ended

August August August 23, August 25, 23, 25, 2020 2019 2020 2019



(Dollars in millions)

(Unaudited)

Most comparable GAAP measure:

Gross profit $ 577.4 $ 766.8 $ 1,586.4 $ 2,250.0



Non-GAAP measure:

Gross profit $ 577.4 $ 766.8 $ 1,586.4 $ 2,250.0

COVID-19 related inventory (7.9) - 78.7 - costs ^(1)

Adjusted gross profit $ 569.5 $ 766.8 $ 1,665.1 $ 2,250.0

Adjusted gross margin 53.6 % 53.0 % 54.3 % 53.6 %

_____________

(1) Represents costs incurred in connection with COVID-19, including $7.9 million in reductions in COVID-19 related inventory charges recognized during the three-month period ended August 23, 2020, primarily due to reductions in our estimate of adverse fabric purchase commitments, initially recorded in the second quarter of 2020. During the nine-month period ended August 23, 2020, the charges include $48.1 million of incremental inventory reserves and $29.8 million of adverse fabric purchase commitments.

Adjusted SG&A:

_____________

(1) Represents costs incurred in connection with COVID-19, including $7.9million in reductions in COVID-19 related inventory charges recognized duringthe three-month period ended August 23, 2020, primarily due to reductions inour estimate of adverse fabric purchase commitments, initially recorded in thesecond quarter of 2020. During the nine-month period ended August 23, 2020, thecharges include $48.1 million of incremental inventory reserves and $29.8million of adverse fabric purchase commitments.

Adjusted SG&A:

Three Months Ended Nine Months Ended

August August August 23, August 25, 23, 25, 2020 2019 2020 2019



(Dollars in millions)

(Unaudited)

Most comparable GAAP measure:

Selling, general and $ 484.0 $ 595.5 $ 1,695.1 $ 1,814.9 administrative expenses



Non-GAAP measure:

Selling, general and $ 484.0 $ 595.5 $ 1,695.1 $ 1,814.9 administrative expenses

Impact of changes in fairvalue on cash-settled (1.8) (5.1) (6.0) (25.4) stock-based compensation^(1)

COVID-19 related charges^(2) 4.1 - (83.9) -

Restructuring relatedcharges, severance and other, (1.1) - (7.8) (3.8) net^(3)

Adjusted SG&A $ 485.2 $ 590.4 $ 1,597.4 $ 1,785.7

_____________

(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 period ended August 23, 2020, the net reduction of $4.1 million in COVID-19 related charges recognized mainly represents the recoveries of receivables previously estimated to be not collectible, offset by incremental costs incurred in response to the global pandemic. The charges incurred in connection with COVID-19 during the nine-month period ended August 23, 2020 primarily consist of $43.0 million in impairment of certain operating lease right-of-use assets and $17.4 million in impairment of property and equipment related to certain retail locations and other corporate assets, and $21.0 million of charges related to customer receivables.

(3) Restructuring related charges, severance and other, net include transaction and deal related costs, including IPO-related, initial acquisition and integration costs and amortization of acquired intangible assets.

Adjusted EBIT and Adjusted EBITDA:

_____________

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

(2) For the three-month period ended August 23, 2020, the net reduction of $4.1million in COVID-19 related charges recognized mainly represents the recoveriesof receivables previously estimated to be not collectible, offset byincremental costs incurred in response to the global pandemic. The chargesincurred in connection with COVID-19 during the nine-month period ended August23, 2020 primarily consist of $43.0 million in impairment of certain operatinglease right-of-use assets and $17.4 million in impairment of property andequipment related to certain retail locations and other corporate assets, and$21.0 million of charges related to customer receivables.

(3) Restructuring related charges, severance and other, net include transactionand deal related costs, including IPO-related, initial acquisition andintegration costs and amortization of acquired intangible assets.

Adjusted EBIT and Adjusted EBITDA:

Three Months Ended Nine Months Ended Twelve Months Ended

August August August 23, August August 23, August 23, 25, 2020 25, 2020 25, 2020 2019 2019 2019



(Dollars in millions)

(Unaudited)

Mostcomparable GAAP measure:

Net income $ 27.0 $ 124.2 $ (183.8) $ 299.2 $ (88.0) $ 396.5 (loss)



Non-GAAP measure:

Net income $ 27.0 $ 124.2 $ (183.8) $ 299.2 $ (88.0) $ 396.5 (loss)

Income tax(benefit) 24.6 27.4 (57.9) 60.2 (35.5) 98.4 expense

Interest 28.4 15.3 56.3 48.0 74.5 57.7 expense

Other(income) 12.3 4.4 8.3 2.8 3.5 (13.5) expense, net

Underwritercommissionpaid on - - - 24.9 - 24.9 behalf ofsellingstockholders

Impact ofchanges infair value oncash-settled 1.8 5.1 6.0 25.4 14.7 46.2 stock-basedcompensation^(1)

COVID-19relatedinventory (12.0) - 162.6 - 162.6 - costs andother charges^(2)

Restructuringandrestructuringrelated 2.1 - 76.2 3.8 82.2 5.0 charges,severance andother, net^(3)

Adjusted EBIT $ 84.2 $ 176.4 $ 67.7 $ 464.3 $ 214.0 $ 615.2

Adjusted EBIT 7.9 % 12.2 % 2.2 % 11.1 % margin



Depreciationand 32.6 31.6 101.0 90.3 134.6 118.4 amortization^(4)

Adjusted $ 116.8 $ 208.0 $ 168.7 $ 554.6 $ 348.6 $ 733.6 EBITDA

_____________

(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 period ended August 23, 2020, the net reduction of $12.0 million 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, offset by incremental costs incurred in response to the global pandemic. The inventory costs and other charges recognized during the nine-month period ended August 23, 2020 primarily consist of $48.1 million of incremental inventory reserves, $29.8 million of adverse fabric purchase commitments, $43.0 million and $17.4 million in impairment of operating lease right-of-use assets and property and equipment related to certain retail locations and other corporate assets, respectively, and $21.0 million of charges related to customer receivables.

(3) Other charges included in restructuring and restructuring related charges, severance and other, net include transaction and deal related costs, including IPO-related, initial acquisition and integration costs and amortization of acquired intangible assets.

(4) Depreciation and amortization amount net of amortization of acquired intangible assets included in Restructuring and related charges, severance and other, net.

Adjusted Net Income (Loss) and Adjusted Diluted Earnings (Loss) per Share:

_____________

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

(2) For the three-month period ended August 23, 2020, the net reduction of$12.0 million in COVID-19 related inventory costs and other charges recognizedmainly represents reductions in COVID-19 related inventory charges, as a resultof reductions in our estimate of adverse fabric purchase commitments, therecoveries of receivables previously estimated to be not collectible, offset byincremental costs incurred in response to the global pandemic. The inventorycosts and other charges recognized during the nine-month period ended August23, 2020 primarily consist of $48.1 million of incremental inventory reserves,$29.8 million of adverse fabric purchase commitments, $43.0 million and $17.4million in impairment of operating lease right-of-use assets and property andequipment related to certain retail locations and other corporate assets,respectively, and $21.0 million of charges related to customer receivables.

(3) Other charges included in restructuring and restructuring related charges,severance and other, net include transaction and deal related costs, includingIPO-related, initial acquisition and integration costs and amortization ofacquired intangible assets.

(4) Depreciation and amortization amount net of amortization of acquiredintangible assets included in Restructuring and related charges, severance andother, net.

Adjusted Net Income (Loss) and Adjusted Diluted Earnings (Loss) per Share:

Three Months Ended Nine Months Ended

August August August 23, August 23, 25, 2020 25, 2020 2019 2019



(Dollars in millions, except per share amounts)

(Unaudited)

Most comparable GAAP measure:

Net income (loss) $ 27.0 $ 124.2 $ (183.8) $ 299.2



Non-GAAP measure:

Net income (loss) $ 27.0 $ 124.2 $ (183.8) $ 299.2

Underwriter commission paid on - - - 24.9 behalf of selling stockholders

Impact of changes in fair valueon cash-settled stock-based 1.8 5.1 6.0 25.4 compensation^(1)

COVID-19 related inventory costs (12.0) - 162.6 - and other charges^(2)

Restructuring and restructuringrelated charges, severance and 2.1 - 76.2 3.8 other, net^(3)

Tax impact of adjustments^(4) 12.4 (1.1) (58.7) (4.9)

Adjusted net income $ 31.3 $ 128.2 $ 2.3 $ 348.4



Adjusted net income margin 2.9 % 8.9 % 0.1 % 8.3 %

Adjusted diluted earnings per $ 0.08 $ 0.31 $ 0.01 $ 0.85 share

_____________

(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 period ended August 23, 2020, the net reduction of $12.0 million 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, offset by incremental costs incurred in response to the global pandemic. The inventory costs and other charges recognized during the nine-month period ended August 23, 2020 primarily consist of $48.1 million of incremental inventory reserves, $29.8 million of adverse fabric purchase commitments, $43.0 million and $17.4 million in impairment of operating lease right-of-use assets and property and equipment related to certain retail locations and other corporate assets, respectively, and $21.0 million of charges related to customer receivables.

(3) Other charges included in restructuring and restructuring related charges, severance and other, net include transaction and deal related costs, including IPO-related, initial acquisition and integration costs and amortization of acquired intangible assets.

(4) Tax impact for the three-month period ended August 23, 2020 includes the impact of the decrease in annual effective tax rate. Please refer to Note 13 for more information on the effective tax rate.

Net Debt and Leverage Ratio:

_____________

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

(2) For the three-month period ended August 23, 2020, the net reduction of$12.0 million in COVID-19 related inventory costs and other charges recognizedmainly represents reductions in COVID-19 related inventory charges, as a resultof reductions in our estimate of adverse fabric purchase commitments, therecoveries of receivables previously estimated to be not collectible, offset byincremental costs incurred in response to the global pandemic. The inventorycosts and other charges recognized during the nine-month period ended August23, 2020 primarily consist of $48.1 million of incremental inventory reserves,$29.8 million of adverse fabric purchase commitments, $43.0 million and $17.4million in impairment of operating lease right-of-use assets and property andequipment related to certain retail locations and other corporate assets,respectively, and $21.0 million of charges related to customer receivables.

(3) Other charges included in restructuring and restructuring related charges,severance and other, net include transaction and deal related costs, includingIPO-related, initial acquisition and integration costs and amortization ofacquired intangible assets.

(4) Tax impact for the three-month period ended August 23, 2020 includes theimpact of the decrease in annual effective tax rate. Please refer to Note 13for more information on the effective tax rate.

Net Debt and Leverage Ratio:

August 23, November 24, 2020 2019



(Dollars in millions)

(Unaudited)

Most comparable GAAP measure:

Total debt, excluding capital leases $ 1,567.2 $ 1,014.4



Non-GAAP measure:

Total debt, excluding capital leases $ 1,567.2 $ 1,014.4

Cash and cash equivalents (1,353.0) (934.2)

Short-term investments in marketable securities (72.3) (80.7)

Net debt $ 141.9 $ (0.5)

August 23,2020

August 25,2019

(Dollars in millions)

(Unaudited)

Total debt, excluding capital leases

$

1,567.2

$

1,034.6

Last Twelve Months Adjusted EBITDA(1)

$

348.6

$

733.6

Leverage ratio

4.5

1.4

August 23, August 25, 2020 2019



(Dollars in millions)

(Unaudited)

Total debt, excluding capital leases $ 1,567.2 $ 1,034.6

Last Twelve Months Adjusted EBITDA^(1) $ 348.6 $ 733.6

Leverage ratio 4.5 1.4

_____________

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

Adjusted Free Cash Flow:

_____________

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

Adjusted Free Cash Flow:

Three Months Ended Nine Months Ended

August August 25, August 23, August 23, 2019 2020 25, 2020 2019



(Dollars in millions) (Dollars in millions)

(Unaudited) (Unaudited)

Most comparable GAAP measure:

Net cash provided by operating $ 199.5 $ 43.7 $ 240.9 $ 205.5 activities

Net cash used for investing (10.1) (55.2) (117.7) (198.4) activities

Net cash (used for) provided by (287.1) 15.8 302.5 146.8 financing activities



Non-GAAP measure:

Net cash provided by operating $ 199.5 $ 43.7 $ 240.9 $ 205.5 activities

Underwriter commission paid on - - - 24.9 behalf of selling stockholders

Purchases of property, plant (14.3) (51.0) (89.5) (128.0) and equipment

Proceeds on settlement offorward foreign exchange 2.5 (3.8) 17.6 9.3 contracts not designated forhedge accounting

Repurchase of common stock - - (56.2) (3.1)

Repurchase of sharessurrendered for tax (4.3) - (79.9) (25.5) withholdings on equity awards

Dividend to stockholders - - (63.6) (55.0)

Adjusted free cash flow $ 183.4 $ (11.1) $ (30.7) $ 28.1

Constant-Currency Net Revenues:

Three Months Ended Nine Months Ended

August 23, August 25, % August 23, August 25, % 2020 2019 Increase 2020 2019 Increase (Decrease) (Decrease)



(Dollars in millions)

(Unaudited)

Total revenues

As reported $ 1,063.1 $ 1,447.1 (26.5) % $ 3,066.8 $ 4,194.5 (26.9) %

Impact of foreigncurrency exchange - (16.2) * - (67.7) *rates

Constant-currency $ 1,063.1 $ 1,430.9 (25.7) % $ 3,066.8 $ 4,126.8 (25.7) %net revenues



Americas

As reported $ 549.8 $ 770.8 (28.7) % $ 1,578.1 $ 2,180.8 (27.6) %

Impact of foreigncurrency exchange - (16.0) * - (32.8) *rates

Constant-currencynet revenues - $ 549.8 $ 754.8 (27.2) % $ 1,578.1 $ 2,148.0 (26.5) %Americas



Europe

As reported $ 390.4 $ 463.3 (15.7) % $ 1,032.4 $ 1,326.3 (22.2) %

Impact of foreigncurrency exchange - 4.7 * - (19.6) *rates

Constant-currencynet revenues - $ 390.4 $ 468.0 (16.6) % $ 1,032.4 $ 1,306.7 (21.0) %Europe



Asia

As reported $ 122.9 $ 213.0 (42.3) % $ 456.3 $ 687.4 (33.6) %

Impact of foreigncurrency exchange - (4.9) * - (15.3) *rates

Constant-currencynet revenues - $ 122.9 $ 208.1 (40.9) % $ 456.3 $ 672.1 (32.1) %Asia

___________

* Not meaningful

Constant-Currency Adjusted EBIT:

___________

* Not meaningful

Constant-Currency Adjusted EBIT:

Three Months Ended Nine Months Ended

August August % August August % 23, 25, Increase 23, 25, Increase 2020 2019 (Decrease) 2020 2019 (Decrease)



(Dollars in millions)

(Unaudited)

Adjusted EBIT^(1) $ 84.2 $ 176.4 (52.3) % $ 67.7 $ 464.3 (85.4) %

Impact of foreigncurrency exchange - (1.7) * - (10.5) *rates

Constant-currency $ 84.2 $ 174.7 (51.8) % $ 67.7 $ 453.8 (85.1) %Adjusted EBIT

Constant-currencyAdjusted EBIT 7.9 % 12.2 % 2.2 % 11.0 % margin^(2)

_____________

(1) Adjusted EBIT is reconciled from net income (loss) 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 (Loss) and Adjusted Diluted Earnings (Loss) per Share:

_____________

(1) Adjusted EBIT is reconciled from net income (loss) which is the mostcomparable GAAP measure. Refer to Adjusted EBIT and Adjusted EBITDA table formore information.

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

* Not meaningful

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

Three Months Ended Nine Months Ended

August August % August August % 23, 25, Increase 23, 25, Increase 2020 2019 (Decrease) 2020 2019 (Decrease)



(Dollars in millions, except per share amounts) (Unaudited)

Adjusted net income $ 31.3 $ 128.2 (75.6) % $ 2.3 $ 348.4 (99.3) %(loss) ^(1)

Impact of foreigncurrency exchange - (0.3) * - (7.3) *rates

Constant-currencyAdjusted net income $ 31.3 $ 127.9 (75.5) % $ 2.3 $ 341.1 (99.3) %(loss)

Constant-currencyAdjusted net income 2.9 % 8.9 % 0.1 % 8.3 % (loss) margin^(2)



Adjusted dilutedearnings (loss) per $ 0.08 $ 0.31 (74.2) % $ 0.01 $ 0.85 (98.8) %share

Impact of foreigncurrency exchange - - * - (0.02) *rates

Constant-currencyAdjusted diluted $ 0.08 $ 0.31 (74.2) % $ 0.01 $ 0.83 (98.8) %earnings (loss) pershare

_____________

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

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

* Not meaningful

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