Levi Strauss & Co. (LEVI), an apparel manufacturer, cited the vaccine rollout as a reason it raised its sales forecast on its most recent earnings call. It’s what Levi Strauss did not say that prompted us to issue this note. In its latest 10-Q for the quarter ending February 28, 2021, Levi Strauss included a section titled “Reclassification” under which it put the following sentence:

“Certain insignificant amounts on the consolidated statements of cash flow have been conformed to the February 28, 2021 presentation.”

We note a $1.87 million loss in derivatives designed to hedge cash flows that has been reclassified from “Accumulated Other Comprehensive Loss” to net income. This is accounted for on the income statement rather than the statement of cash flows as the note indicates.

The company provided no more information in the quarterly filing. DuDil has contacted Levi Strauss for additional detail, to learn which cash flows have been reclassified, and the total cash being reclassified.

Separately, the company’s latest quarterly filing includes new language warning of potential disaster at its contract manufacturing partners:

“...industrial accidents, such as structural integrity failure or fire…”

The language above appears twice in the latest quarterly filing. It does not appear in any of Levi’s eight prior quarterly reports dating back to May 2018. Though the same language is included in the company’s latest 10-K, filed in January 2021, it doesn’t appear in the five previous annual reports dating back to 2016.

In the last decade, Levi has been associated with garment factory collapses and fires in Bangladesh that have killed more than a thousand people. If you believe, as we do, that there are no accidents in SEC filings, Levi’s new language is cause for concern. Not for investors, but those who work in places where “structural integrity failure” is possible or even likely.