Willkie Farr & Gallagher

December 13, 2002

U.S. Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549-0609

Attn: Jonathan G. Katz,
Secretary of the Commission

Re: SEC Release No. 33-8145; 34-46788
File No. S7-43-02

Ladies and Gentlemen:

This letter reflects my views as well as those of certain of our NYSE-listed clients in the real estate, telecommunications infrastructure and insurance industries.

We applaud the intention of Congress to compel greater transparency in the use of "pro forma" financial information. We believe, however, that the Commission's proposal goes well beyond Congress' intent, as embodied in Section 401(b) of the Sarbanes-Oxley Act of 2002 (the "Act"), by potentially limiting and, indeed, eliminating the disclosure by companies of certain "non-GAAP financial measures" (as such term is defined in the Release) that are useful to investors.

We find nothing in the Act's legislative history to suggest that Congress was, as suggested by the Release, "specifically concerned with pro forma results that are prepared or derived on a basis other than GAAP" except to the extent necessary to ensure that such results were simultaneously presented and appropriately reconciled with the more universal GAAP presentation. Moreover, one could argue that Congress sought only to regulate attempts to use pro forma results as part of an effort to effectively restate historical GAAP results, but not to impede the disclosure by companies of alternative, clearly identified, non-GAAP analytical benchmarks. Thus, for example, one could argue that Congress was concerned with attempts to provide a "better measure" of historic GAAP income through the selective exclusion of certain "non-recurring" expense items, but was unconcerned with use of standalone, clearly identified and widely accepted analytical benchmarks, such as EBITDA, that are presented as supplemental disclosures to GAAP results in order to highlight certain aspects of these results.

The following elements of the proposed rule are likely have the effect of limiting or eliminating the use by companies of non-GAAP financial measures:

• The use by a company of any non-GAAP financial measure would trigger a full reconciliation requirement, possibly multiple reconciliation requirements, potentially requiring voluminous new disclosures. This would represent a potentially significant time and cost penalty for companies seeking to provide non-GAAP financial measures, regardless of whether or not they simultaneously provide GAAP financial presentations. For example, under the proposed rule, the company would have to disclose the purposes for which the company's management uses each non-GAAP financial measure and a statement why the non-GAAP financial measure provides useful information to investors regarding the company's financial condition and results of operations.

• The release does not adequately clarify what would or would not be deemed a non-GAAP financial measure in a variety of situations and contexts, such as in the context of segment information, or information relating to product performance within a segment, creating uncertainty with respect to disclosures that are likely to be significant to investors.

• Because companies would be prohibited from justifying their use of specific non-GAAP financial measures solely on the basis of the broad acceptance of these measures by the analyst community, these companies would have to include in their filings potentially elaborate academic explanations of the purposes, benefits and limitations of each non-GAAP financial measure.

• Commonly accepted, well-understood and fully supportable non-GAAP financial measures of performance such as EBITDA and, in the case of REITs, funds from operations ("FFO"), would be subject to regulation. Note that FFO is a benchmark produced by NAREIT, the REIT trade group, not an individually-tailored company benchmark.

• Absent a specific exemption, non-GAAP financial measures mandated by and reported to federal and state agencies, such as amounts required to be reported under statutory accounting principles in the case of the insurance industry, would be deemed "public disclosures" and, potentially, an "earnings release", and would thus be subject to regulation under the proposed rule.

• When coupled with the expanded scope of the proposed rule to all non-GAAP financial measures, and the expanded definition of "earnings release" in proposed Item 1.04 the regulation of oral pronouncements is excessive. Absent a curative mechanism for inadvertent pronouncements, akin to that embodied in Regulation FD, this will likely ensnare many inadvertent violators.

• The proposed prohibition on the use of non-GAAP per share measures in SEC filings (proposed Item 10(e) of Regulation S-K and Item 10(h) of Regulation S-B) would also effectively prohibit their use in corporate earnings releases, since such releases would have to be filed with the SEC under proposed Item 1.04 to Form 8-K. Indeed, any public disclosure of non-GAAP per-share measures would potentially qualify as an "earnings release" under proposed Item 1.04; accordingly, all public disclosure of these measures would be effectively prohibited. This would, for example, eliminate public presentations of FFO per share, a performance benchmark broadly employed in the REIT industry.

While we acknowledge the opportunities for abuse in this area, we believe that many non-GAAP financial measures in most instances represent valuable financial benchmarks for corporations and investors alike. Indeed, we believe that the use of such measures may enable companies to provide a fairer presentation of their particular financial performance than could be obtained solely from their GAAP results; the need for a "fair presentation" versus a slavish devotion to GAAP results was acknowledged and, indeed, encouraged by the Commission in its recent Release No. 33-8124 (August 28, 2002).

We concur that the abuse of non-GAAP financial measures should be prohibited by the Commission; respectfully, however, we would submit that their use, should not. In this regard, we would urge the Commission to consider that the disclosure of pro forma financial information is currently the subject of Commission disclosure and anti-fraud rules, including proposed rulemaking which would enhance the oversight of audit committees in this area. We appreciate and support the Commission's proposal not to allow Regulation G to become a new basis for private rights of action under Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Nonetheless, we fear that the Commission's proposed rules may pose a risk of chilling, rather than encouraging, valuable, appropriate and supportable disclosures.

Sincerely yours,

Yaacov M. Gross