Expect the conflict in Ukraine to impact future quarters as sales in Russia accounted for approximately 2% of Levi Strauss & Co.’s (LEVI) sales in the current quarter. In March Levi halted business in Russia. Since the quarter ended February 27, 2022 the decision had no impact on the quarter.

However, it was a different country responsible for distorting the performance of the company in the current quarter. In its latest 10-Q, Levi revealed in a footnote it received a $12.5 million payment from the German government as reimbursement for COVID-19 losses incurred in prior years.

The payment accounted for 6.4% of Levi’s net income in the quarter. To its credit, the company removed the gain from Adjusted Net Income and disclosed the payment a second time in the filing.

Though the gain was included in Other income on Levi’s Income Statement, on the Cash Flow Statement it’s included in operating cash flows. The payment accounted for 14.5% of Levi’s operating cash flows in the quarter.

Separately, the company is also building a facility in Germany that will open in 2023. The $100-$110 million operating lease liability not yet commenced is not included on Levi’s balance sheet.