The use of non-GAAP financial measures by public companies continues to be an area of growing concern and focus of the Securities and Exchange Commission ("SEC"). On June 27, 2016, SEC Chair Mary Jo White, speaking at the International Corporate Governance Network's Annual Conference in San Francisco, lamented that "[i]n too many cases, the non-GAAP information, which is meant to supplement the GAAP information, has become the key message to investors, crowding out and effectively supplanting the GAAP presentation." That sentiment has been shared by senior SEC staff and articulated in recent speeches and pronouncements by James Schnurr, the SEC's Chief Accountant, Wesley R. Bricker, the SEC's Deputy Chief Accountant and Mark Kronforst, the Chief Accountant in the SEC's Division of Corporation Finance.

More importantly, on May 17, 2016, the staff of the SEC's Division of Corporation Finance (the "Staff') issued updated Compliance and Disclosure Interpretations (the "Updated C&DIs") on the use of non-GAAP financial measures. The Updated C&DIs build on previous C&DIs issued by the Staff in 2011, 2010 and 2003 and provide further SEC guidance on Regulation G ("Regulation G") under the Securities Act of 1933, as amended (the "Securities Act"), and Item 10(e) of Regulation S-K under the Securities Act ("Regulation S-K"), the two principal rules enacted by the SEC in 2003 to address the use of non-GAAP financial measures.

Over the past few months, we have noticed an increase in the number of SEC comments to public companies relating to their non-GAAP financial measures disclosures. With the recent SEC focus on this topic and the release of the Updated C&DIs, registrants must be extra careful in their public disclosures and filings to ensure they are complying with Regulation G, Item 10(e) of Regulation S-K and the Updated C&DIs.

In our latest "Practice Pointers on Non-GAAP Financial Measures," we discuss the nature of non-GAAP financial measures, the disclosure rules governing them, and the Updated C&DIs. We also look at some recent SEC comment letters addressing non-GAAP financial measures and offer some practical guidance for public companies to comply with the updated SEC guidance.

For more information, see our "Practice Pointers on Non-GAAP Financial Measures" available at: https://media2.mofo.com/documents/160816-practice-pointers-on-non-gaap-financial-measures.pdf

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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