SEC Comment Letter for ITC Holdings Corp. (CIK 0001317630) — Jun 3, 2005
ITC Holdings Corp. (CIK 0001317630)
Date: June 3, 2005 · CIK: 0001317630 · Accession: 0000000000-05-027496
AI Filing Summary & Sentiment
File numbers found in text: 333-123657
Referenced dates: April 28, 2005, April 28, 2005
Letter
Mail Stop 0308 June 2, 2005 Daniel J. Oginsky, Esq. Vice President, General Counsel and Secretary 39500 Orchard Hill Place Suite 200 Novi, Michigan 48375
Re: ITC Holdings Corporation Amendment No. 1 to Registration Statement on Form S-1 Filed May 10, 2005 File No. 333-123657
Dear Mr. Oginsky:
We have reviewed your filing and have the following comments. Where indicated, we think you should revise your document in response to these comments. If you disagree, we will consider your explanation as to why our comment is inapplicable or a revision is unnecessary. Please be as detailed as necessary in your explanation. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. After reviewing this information, we may raise additional comments.
We look forward to working with you in these respects. We welcome any questions you may have about our comments or any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Summary, page 1 1. We reissue prior comment 3 in our letter dated April 28, 2005. We note your response and believe your summary remains too long and should be revised further to comply with Item 503(a) of Regulation S- K. For example, please reduce the detailed disclosure provided under the caption "The Electricity Transmission Sector," as most of the information is too general and does not directly relate to you. As another example, please reduce the disclosure under the caption "Business Strengths" to include only the italicized sentences corresponding to the bullets.
2. Also, please balance your disclosure on expected growth with the associated risks. For example, discuss the substantial indebtedness of your operating subsidiary and the fact that you are a "controlled" company under the New York Stock Exchange rules.
Summary Historical Financial Data, page 8 3. Please refer to comment nine in our letter dated April 28, 2005. By excluding additional items from EBITDA, such as loss on extinguishment of debt, you have in effect presented something other than EBITDA as defined by the acronym. As such, please provide cautionary disclosure that the non-GAAP measure presented may not be comparable to EBITDA-related measures disclosed by other entities. Further, as you consider EBITDA to be a performance measure, please refer to Question 15 of the Staff`s "Frequently Asked Questions Regarding the Use of Non-GAAP Financial Measures," which states, "Because EBIT and EBITDA exclude recurring charges, companies should consider the answer to Question 8 if they intend to use EBIT or EBITDA as a performance measure." Please note that pursuant to Question 8, you must justify the usefulness of any performance measure that excludes recurring items. In addition to interest, taxes and depreciation, the staff considers AFUDC equity a recurring item. Furthermore, we may consider "certain other items..." recurring since events like debt restructurings can be assumed to be reasonably likely to recur. Therefore, we believe you should include discussion that comprehensively addresses each of the five bullet points in Question 8 in crafting a revised disclosure. With respect to the first bullet point regarding the manner in which you use the non-GAAP measure to conduct or evaluate your business, please be advised that the lack of a segment performance measure that corresponds to your non-GAAP measure suggests you do not allocate resources based on your measure. Management` Discussion and Analysis of Financial Condition and Results of Operations, page 31
Point-to-point Revenues, page 36
4. Please refer to comment 15 in our letter dated April 28, 2005. We note that you do not believe "revenue credits" meet the definition of a liability under GAAP or a regulatory liability based on paragraphs 11.a through 11.c of SFAS 71. Paragraph 11.a of SFAS 71 states that a liability can be imposed when a regulator requires refunds to customers. Further, footnote seven to that paragraph states that "Refunds can be paid to the customers who paid the amounts being refunded; however, they are usually provided to current customers by reducing current charges." As you appear to be reducing rates in order to return $4.2 million of point-to-point revenues to customers, please explain in detail why you do not believe the "revenue credits" meet the definition of a regulatory liability under paragraph 11.a of SFAS 71.
Liquidity and Capital Resources, page 45 5. Please refer to comment 16 in our letter dated April 28, 2005. We note your response indicating that the amount of dividends to be paid to shareholders in 2005 will be determined at a board meeting scheduled for May 10, 2005. We may have further comment in the future.
Reconciliation of PP&E Activity, page 50 6. Please refer to comment 20 in our letter dated April 28, 2005. Please explain in further detail why you do not believe the identified assets represent a pre-acquisition contingency as defined by SFAS 141 and explain specifically when you recorded the adjustment. Further, you state that you view the return of the assets to DTE Energy as additional consideration rather than a purchase price allocation adjustment. We are unaware of any practice or promulgated GAAP relating to accounting for additional consideration subsequent to the acquisition date. Therefore, please tell us your basis under GAAP for adjusting goodwill upon issuing this "additional consideration" subsequent to the acquisition date. In doing so, please tell us whether you believe this consideration represents "contingent consideration" as discussed in paragraphs 25- 36 of SFAS 141. If so, please explain why.
Exhibit 5.1, Legality Opinion 7. We note you have filed the draft form of your legality opinion. Please re-file the legality opinion in its completed form. See Instruction 1 to Item 601 of Regulation S-K.
* * * *
As appropriate, please amend your registration statement in response to these comments. You may wish to provide us with marked copies of the amendment to expedite our review. Please furnish a cover letter with your amendment that keys your responses to our comments and provides any requested information. Detailed cover letters greatly facilitate our review. Please understand that we may have additional comments after reviewing your amendment and responses to our comments.
You may contact Sarah Goldberg, Staff Accountant, at (202) 551- 3214 or James Allegretto, Senior Assistant Chief Accountant, at (202) 551-3849 if you have questions regarding comments on the financial statements and related matters. Please contact Matthew Benson, Staff Attorney, at (202) 551-3335 or David Mittelman, Legal Branch Chief, at (202) 551-3214 with any other questions you may have.
Sincerely,
H. Christopher Owings
Assistant Director
Show Raw Text
<DOCUMENT>
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<FILENAME>filename1.txt
<TEXT>
Mail Stop 0308
June 2, 2005
Daniel J. Oginsky, Esq.
Vice President, General Counsel and Secretary
39500 Orchard Hill Place
Suite 200
Novi, Michigan 48375
Re: ITC Holdings Corporation
Amendment No. 1 to Registration Statement on Form S-1
Filed May 10, 2005
File No. 333-123657
Dear Mr. Oginsky:
We have reviewed your filing and have the following comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
We look forward to working with you in these respects. We
welcome any questions you may have about our comments or any other
aspect of our review. Feel free to call us at the telephone
numbers
listed at the end of this letter.
Summary, page 1
1. We reissue prior comment 3 in our letter dated April 28, 2005.
We note your response and believe your summary remains too long
and
should be revised further to comply with Item 503(a) of Regulation
S-
K. For example, please reduce the detailed disclosure provided
under
the caption "The Electricity Transmission Sector," as most of the
information is too general and does not directly relate to you.
As
another example, please reduce the disclosure under the caption
"Business Strengths" to include only the italicized sentences
corresponding to the bullets.
2. Also, please balance your disclosure on expected growth with
the
associated risks. For example, discuss the substantial
indebtedness
of your operating subsidiary and the fact that you are a
"controlled"
company under the New York Stock Exchange rules.
Summary Historical Financial Data, page 8
3. Please refer to comment nine in our letter dated April 28,
2005.
By excluding additional items from EBITDA, such as loss on
extinguishment of debt, you have in effect presented something
other
than EBITDA as defined by the acronym. As such, please provide
cautionary disclosure that the non-GAAP measure presented may not
be
comparable to EBITDA-related measures disclosed by other entities.
Further, as you consider EBITDA to be a performance measure,
please
refer to Question 15 of the Staff`s "Frequently Asked Questions
Regarding the Use of Non-GAAP Financial Measures," which states,
"Because EBIT and EBITDA exclude recurring charges, companies
should
consider the answer to Question 8 if they intend to use EBIT or
EBITDA as a performance measure." Please note that pursuant to
Question 8, you must justify the usefulness of any performance
measure that excludes recurring items. In addition to interest,
taxes and depreciation, the staff considers AFUDC equity a
recurring
item. Furthermore, we may consider "certain other items..."
recurring since events like debt restructurings can be assumed to
be
reasonably likely to recur. Therefore, we believe you should
include
discussion that comprehensively addresses each of the five bullet
points in Question 8 in crafting a revised disclosure. With
respect
to the first bullet point regarding the manner in which you use
the
non-GAAP measure to conduct or evaluate your business, please be
advised that the lack of a segment performance measure that
corresponds to your non-GAAP measure suggests you do not allocate
resources based on your measure.
Management` Discussion and Analysis of Financial Condition and
Results of Operations, page 31
Point-to-point Revenues, page 36
4. Please refer to comment 15 in our letter dated April 28, 2005.
We
note that you do not believe "revenue credits" meet the definition
of
a liability under GAAP or a regulatory liability based on
paragraphs
11.a through 11.c of SFAS 71. Paragraph 11.a of SFAS 71 states
that
a liability can be imposed when a regulator requires refunds to
customers. Further, footnote seven to that paragraph states that
"Refunds can be paid to the customers who paid the amounts being
refunded; however, they are usually provided to current customers
by
reducing current charges." As you appear to be reducing rates in
order to return $4.2 million of point-to-point revenues to
customers,
please explain in detail why you do not believe the "revenue
credits"
meet the definition of a regulatory liability under paragraph 11.a
of
SFAS 71.
Liquidity and Capital Resources, page 45
5. Please refer to comment 16 in our letter dated April 28, 2005.
We
note your response indicating that the amount of dividends to be
paid
to shareholders in 2005 will be determined at a board meeting
scheduled for May 10, 2005. We may have further comment in the
future.
Reconciliation of PP&E Activity, page 50
6. Please refer to comment 20 in our letter dated April 28, 2005.
Please explain in further detail why you do not believe the
identified assets represent a pre-acquisition contingency as
defined
by SFAS 141 and explain specifically when you recorded the
adjustment. Further, you state that you view the return of the
assets to DTE Energy as additional consideration rather than a
purchase price allocation adjustment. We are unaware of any
practice
or promulgated GAAP relating to accounting for additional
consideration subsequent to the acquisition date. Therefore,
please
tell us your basis under GAAP for adjusting goodwill upon issuing
this "additional consideration" subsequent to the acquisition
date.
In doing so, please tell us whether you believe this consideration
represents "contingent consideration" as discussed in paragraphs
25-
36 of SFAS 141. If so, please explain why.
Exhibit 5.1, Legality Opinion
7. We note you have filed the draft form of your legality opinion.
Please re-file the legality opinion in its completed form. See
Instruction 1 to Item 601 of Regulation S-K.
* * * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
You may contact Sarah Goldberg, Staff Accountant, at (202)
551-
3214 or James Allegretto, Senior Assistant Chief Accountant, at
(202)
551-3849 if you have questions regarding comments on the financial
statements and related matters. Please contact Matthew Benson,
Staff
Attorney, at (202) 551-3335 or David Mittelman, Legal Branch
Chief,
at (202) 551-3214 with any other questions you may have.
Sincerely,
H. Christopher Owings
Assistant Director
cc: Rise B. Norman, Esq.
Simpson Thatcher & Bartlett LLP
Via Fax - (212) 455-2502
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Daniel J. Oginsky, Esq.
ITC Holdings Corporation
June 2, 2005
Page 1
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