1205007 Informal Interpretation

Michael Verne

– Agree.





Monday, May 14, 2012 3:10 PM


Verne, B. Michael




Liabilities clarification


Followingup on our conversation this morning, we have confirmed that there are twocategories of rebates treated as accrued liabilities by Seller for accountingpurposes.

Onecategory includes rebates (i.e., discounts based on percent of net sales)effectively earned upon the purchase of goods. These rebates are receivedmonthly or quarterly by the customers, generally in the form of credit memos or

checks.The credit memos are issued for the rebate amount, and can be used to offsetfuture payments. Based on our earlier conversation, we believe the FTC treatsthese rebates as discounts and not accrued liabilities for HSR purposes.

Thesecond category is comprised of rebates available to customers if certainvolume conditions are met. These rebates are paid out annually (although theymay be credited in, say, January or March instead of by close of December).Based on our earlier conversation, we believe the FTC treats these rebates asaccrued liabilities, the value of which needs to be included in the AcquisitionPrice calculation for HSR purposes.

Theabove rebates are also paid to customers who purchase through distribution,which we assume you will agree does not alter the above analysis. Many thanksin advance for your confirmation.


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