mhyland@shearman.com 415-616-1181 |
April 21, 2009 |
Re: | Levi Strauss & Co. Form 10-K for the Fiscal Year Ended November 30, 2008 Filed February 10, 2009 File No. 2-90139 |
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1. | You have not provided a quantitative discussion of all of the terms of the necessary targets, that is, EBIT, days in working capital, and net revenues, to be achieved for your named executive officers to receive their cash bonuses under the annual incentive plan. Please disclose the specific performance targets used to determine incentive amounts in future filings or provide a supplemental analysis as to why it is appropriate to omit these targets pursuant to Instruction 4 to Item 402(b) of Regulation S-K. To the extent that you agree to disclose the performance targets in future filings, please provide us with your proposed disclosure. To the extent that it is appropriate to omit specific targets, please provide the disclosure pursuant to Instruction 4 to Item 402(b). General statements regarding the level of difficulty, or ease, associated with achieving performance goals either corporately or individually are not sufficient. In discussing how likely it will be for the company to achieve the target levels or other factors, provide as much detail as necessary without providing information that poses a reasonable risk of competitive harm. |
There are multiple AIP pools reflecting the multiplicity of our businesses and geographic segments. For most employees, the AIP funding is based on a mix of their respective business unit’s performance and the performance of the next higher organizational level. Therefore, the final AIP funding for a business unit is the resulting weighted sum of this mix. For example, the funding for our business in one European country is based on a mixture of the performance of our business in that country and the overall European region’s business performance. Likewise, the funding for our overall business in the Europe region is based on the mixture of total regional performance and total Company performance. The intention is to tie individual rewards to the local business unit that the |
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employee most directly impacts and to reinforce the message that the same efforts and results have an impact on the larger organization. For corporate staff positions, such as Finance, Human Resources and Legal positions, that provide support to the entire Company, the funding is based entirely on total Company performance. | ||
The AIP funding for our named executive officers is based on the following: For our CEO, CFO, and Senior Vice President, Global Sourcing, the AIP funding is based 100% on total Company performance. For our three regional presidents who are named executive officers, the AIP funding is based 50% on total Company and 50% on their respective region’s performance. | ||
The table below shows the goals for each of our three performance measures and the actual 2008 AIP funding levels reflecting the total Company or blended 50/50 total Company/region performance, as appropriate for each named executive officer: |
Days in | ||||||||||||||||
Working | Net | Actual AIP | ||||||||||||||
EBIT | Capital | Revenue | Funding | |||||||||||||
Goal* | Goal | Goal* | level | |||||||||||||
Total Company |
$ | 570 | 89 | $ | 4,500 | 67 | % | |||||||||
Americas |
394 | 89 | 2,578 | 61 | % | |||||||||||
Europe |
265 | 99 | 1,201 | 62 | % | |||||||||||
Asia Pacific |
104 | 72 | 724 | 94.5 | % |
* | In $ millions, without regard to the impact of foreign currency exchange rates |
Although the AIP participation rates of the named executive officers are targeted at the median (50th percentile) of that established by the peer group, an executive’s actual |
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award is not formulaic. Like all employees, the actual AIP award is based on the assessment of the executive’s performance against his or her annual objectives and performance relative to his or her peers, in addition to the AIP funding. Both business and individual annual objectives are taken into account in determining the actual award payments to our named executive officers. Individual annual objectives include non-financial goals which are not stated in quantitative terms, and a particular weighting is not assigned to any one of these individual goals. The non-financial objectives are not established in terms of how difficult or easy they are to attain; rather, they are taken into account in assessing the overall quality of the individual’s performance. Accordingly, the actual AIP awards paid to certain of the named executive officers in 2008 were below their target amounts due to actual business and individual performance. | ||
The target AIP participation rates, target amounts, actual award payments and actual award payment as a percentage of each named executive officer’s target payment were as follows: |
2008 AIP | ||||||||||||||||
Participation | 2008 Target | 2008 AIP Actual | Payment as % of | |||||||||||||
Name | Rate | Amount | Award Payment | Target | ||||||||||||
John Anderson |
110 | % | $ | 1,402,500 | $ | 561,000 | 40 | % | ||||||||
Heidi Manes(1) |
50 | % | 155,625 | 171,188 | 110 | % | ||||||||||
Armin Broger(2) |
65 | % | 618,044 | 216,315 | 35 | % | ||||||||||
Robert Hanson |
70 | % | 499,800 | 249,900 | 50 | % | ||||||||||
David Love |
65 | % | 296,010 | 248,648 | 84 | % | ||||||||||
Hans Ploos van
Amstel(3) |
65 | % | 390,000 | — | — | |||||||||||
Alan Hed(4) |
65 | % | 263,900 | 250,705 | 95 | % |
(1) | For the purposes of calculating Ms. Manes’ AIP target amount, her base salary includes the monthly cash bonuses paid to her in recognition for her serving as the interim CFO for the duration of the interim assignment. | |
(2) | Mr. Broger is paid in Euros. For purposes of the table, this amount was converted into U.S. dollars using an exchange rate of 1.2733, which is the average exchange rate for the last month of the fiscal year. |
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(3) | Mr. Ploos van Amstel stepped down from the CFO position effective August 27, 2008 and did not receive an AIP payment for 2008, which was instead replaced by his total separation payment. | |
(4) | Mr. Hed separated from the Company effective November 1, 2008 but received the AIP payment shown in connection with his separation. |
2. | We note management’s assessment of internal control over financial reporting at Item 9A(T). However, your certifications at Exhibits 31.1 and 31.2 do not reflect the introductory language of paragraph 4 as required by Item 601(b)(31) of Regulation S-K. Please amend your Form 10-K to conform your certifications to that in Item 601(b)(31) of Regulation S-K. Rather than file a full amendment, you may file an abbreviated amendment to your Form 10-K consisting of a cover page, explanatory note, signature page, and paragraphs 1, 2, 4 and 5 of these certifications. |
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Yours sincerely, |
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/s/ Mark K. Hyland | ||||
Mark K. Hyland | ||||
cc: | Susann Reilly, Securities and Exchange Commission T. Gary Rogers, Chairman, Levi Strauss & Co. R. John Anderson, President and Chief Executive Officer, Levi Strauss & Co. Hilary K. Krane, Senior Vice President and General Counsel, Levi Strauss & Co. Jennifer Chaloemtiarana, Global Finance and Governance Counsel, Levi Strauss & Co. John D. Wilson, Shearman & Sterling LLP |