Citigroup Inc.
399 Park Avenue
New York, NY 10022

Todd S. Thomson
EVP Finance
Chief Financial Officer

December 12, 2002

Jonathan G. Katz
Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549-0609

Re: Conditions for Use of Non-GAAP Measures - File No. S7-43-02

Dear Mr. Katz:

Citigroup Inc. appreciates the opportunity to comment on the Securities and Exchange Commission's proposed rule on the conditions for use of non-GAAP measures. Citigroup is committed to achieving the highest quality disclosures in its public filings, and we fully support the Commission's goals of addressing concerns about pro forma results that are prepared on a basis other than GAAP while improving the transparency of such non-GAAP financial measures. However, as discussed below, we respectfully believe that the provisions of the rule prohibiting the use of non-GAAP per-share measures and the prohibition against the adjustment of non-GAAP performance measures for recurring items do not improve financial reporting and will limit the ability of financial statement users to appropriately analyze a company's results of operations.

We believe that the presentation of financial information should always begin with GAAP financial measures and provide a clear reconciliation to non-GAAP or pro forma financial measures. Non-GAAP financial measures provide a level of supplemental analysis of the operations of a company that is both useful to and demanded by the investor community and industry analysts. As the Staff's cautionary guidance contained in Release 33-8039 acknowledged, pro forma financial information can serve a useful purpose, provided that the registrant is mindful not to mislead investors.

Use of Non-GAAP Per-Share Measures

We do not support the proposal to prohibit the use of non-GAAP per-share measures. Pro forma measures serve a useful purpose, so can pro forma measures presented on a per-share basis. In fact, the display of pro forma measures without related per-share amounts may result in a confusing or misleading presentation. Importantly, a clear reconciliation to GAAP earnings per-share should be provided. We believe that analysts and investors who are specifically interested in pro forma income measures find related per-share information helpful for supplemental analysis of a company's results of operations.

The Staff has not clearly explained why non-GAAP per-share measures are not acceptable while other non-GAAP financial measures are. While we understand that inappropriate presentation of pro forma income on a per-share basis could imply that it is more meaningful than comparable net income information, this is not the case when the information is presented in the correct context with GAAP-based per-share information. Non-GAAP per-share measures can meaningfully supplement other non-GAAP financial measures by providing valuable insight into trends in operating results. When pro forma per-share information is properly disclosed as supplemental to net income per-share in either a tabular or narrative presentation, there is no implication that such information is more meaningful than the comparable net income information. To the contrary, clear disclosures enhance, rather than mislead, financial statement users' understanding of a registrant's operating results.

Rather than prohibit the use of non-GAAP per-share measures, we believe the rule should focus on ensuring that non-GAAP per-share measures are appropriately explained to users of the financial statements and reconciled with the GAAP basis presentation, similar to the proposed requirement for non-GAAP net income.

Prohibition Against Adjusting A Non-GAAP Performance Measure To Eliminate Certain Recurring Items

We have difficulty understanding the rationale underlying the proposal to prohibit the adjustment of a non-GAAP performance measure solely on the basis of whether the underlying adjustment is reasonably likely to recur. Non-GAAP performance measures are considered useful because they allow investors and analysts to analyze trends in a business that may be indicative of past performance and future results. In many cases the type of non-GAAP performance measures presented by management are developed based upon the consensus view of management, investors and analysts that a certain performance measure would provide valuable insight into the results of a company's operations.

It is too broad a restriction to prohibit the adjustment of items solely on the basis of whether they are viewed as recurring or not. We believe that in certain situations it would be useful to investors to view a measure of a company's results which excludes items which are likely to recur, but are not indicative of overall operating trends. One example is the presentation of managed basis results for businesses where the securitization of receivables is a significant source of financing (e.g., credit card businesses). The presentation of financial information on a managed basis is generally accepted industry practice for consumer banks with significant securitization activities. Managed basis reporting adjusts the revenues and expenses of the business as if the receivables had neither been held for securitization nor sold. This non-GAAP presentation is widely accepted in the industry because it provides a useful representation of volumes in the credit card business. In our case, we have presented this information at the request of analysts and investors to provide a more meaningful discussion of our financial position, results of operations, and credit card securitization activities.

We believe that the exclusion of all recurring items from consideration as adjustments to non-GAAP performance is inconsistent with the underlying premise that non-GAAP performance measures can provide valuable insight into a company's results of operations. As long as a non-GAAP performance measure is fully explained and reconciled to GAAP-based measures, financial statement users will understand the purpose of these disclosures and benefit from their presentation. In addition, if the GAAP basis net income and earnings per-share are the primary disclosures and non-GAAP measures are supplementally disclosed there should be no confusion.

If the final rule includes a prohibition against the adjustment of a non-GAAP performance measure solely on the basis of whether the underlying adjustment is reasonably likely to recur, the Staff should provide additional guidance to clarify what would be considered a recurring item. In certain circumstances a company could experience charges related to transactions which by themselves would be considered nonrecurring but could be repeated by a company over time. For example, a particular merger or acquisition would certainly be considered a nonrecurring transaction. However, a company such as ours might experience any number of acquisitions in various industries and geographies over a given period. We believe that charges associated with integrating the operations of acquired companies ("restructuring charges") are not indicative of the ongoing results of operations; therefore, we choose to exclude such charges in a non-GAAP presentation of the results of operations. Under the proposed rule, would the Staff consider a transaction to be recurring regardless of its nature if similar transactions occurred more than once a quarter, once a year or once a decade? In the absence of more explicit guidance in the rule, the prohibition against adjustment for recurring items could lead to the inconsistent application of the rule to registrants.

Furthermore, it is unclear whether the rule would permit the adjustment of GAAP basis financial measures for items reported as discontinued operations in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS No. 144). Items reported as discontinued operations may appear in multiple periods, particularly if the items relate to a disposal group classified as held for sale but not yet disposed of. Clearly, the intent of the discontinued operations presentation prescribed by SFAS No. 144 is to separate these results from those of continuing operations so that financial statement users have a clearer view of a company's continuing operating performance. Consistent with this treatment, we believe that it should be acceptable to adjust GAAP basis financial measures for items reported as discontinued operations either as a result of disposal or their classification as held for sale. We suggest that the Staff clarify whether the rule would prohibit the adjustment of GAAP basis financial measures for items reported as discontinued operations.

Rather than prohibit the adjustment of a non-GAAP performance measure solely on the basis of whether the underlying adjustment is reasonably likely to recur, we believe the rule should focus on ensuring that management clearly state the nature of the adjustment, and the reasons why it provides useful information to users of the financial statements.


Todd S. Thomson
Executive Vice President Finance
Chief Financial Officer