On April 4, 2018, the staff of the SEC's Division of Corporation Finance (Staff) updated its Compliance & Disclosure Interpretations on the use of non-GAAP financial measures (C&DIs), by issuing two new C&DIs (C&DI 101.02 and C&DI 101.03). These new C&DIs provide that, under certain conditions, financial measures included in forecasts used in business combination transactions are excluded from the definition of non-GAAP financial measures.
To recall, in October 2017, the Staff clarified in C&DI 101.01 that financial measures provided to a financial advisor would be excluded from the definition of non-GAAP financial measures, and therefore not subject to Item 10(e) of Regulation S-K and Regulation G, if and to the extent: (1) the financial measures are included in forecasts provided to the financial advisor for the purpose of rendering an opinion that is materially related to the business combination transaction; and (2) the forecasts are being disclosed in order to comply with Item 1015 of Regulation M-A or requirements under state or foreign law, including case law, regarding disclosure of the financial advisor's analyses or substantive work.
New C&DI 101.02 now provides that a registrant can rely on the exemption provided by C&DI 101.01 if the same forecasts provided to its financial advisor are also provided to its board of directors or a board committee. In addition, new C&DI 101.03 clarifies that financial measures in forecasts provided by a registrant to bidders in business combinations would also be excluded from the definition of non-GAAP financial measures, if a registrant determines that such forecasts are material and that disclosure of such forecasts is required to comply with the anti-fraud and other liability provisions of the federal securities laws.
A copy of the updated C&DIs is available here.
Originally published May 7, 2018
Visit us at mayerbrown.com
Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.
© Copyright 2018. The Mayer Brown Practices. All rights reserved.
This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.