SEC Comment Letter for LPL Financial Holdings Inc. (LPLA) (CIK 0001397911) (LPLA) — Jul 16, 2007
LPL Financial Holdings Inc. (LPLA) (CIK 0001397911)
Date: July 16, 2007 · CIK: 0001397911 · Accession: 0000000000-07-034543
AI Filing Summary & Sentiment
Letter
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-0404 DIVISION OF CORPORATION FINANCE Mail Stop 7010 Via U.S. mail and facsimile Mr. Mark S. Casady Chairman and Chief Executive Officer LPL Investment Holdings, Inc. One Beacon Street, Floor 22 Boston, MA 02108
Re: LPL Investment Holdings, Inc. Amendment No. 1 to Registration Statement on Form 10 Filed on: July 10, 2007 File No.: 0-5260
Dear Mr. Casady:
We have reviewed your filing and have the following additional 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. Pl ease be as detailed as necessary in your explanation. In some of our comments, we may ask you to provide us with supplemental information so we may better understand your disclosure. After reviewing this information, we may or may not raise additional comments.
Please understand that the purpose of our re view process is to assist you in your compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filing. We look forward to working with you in these respects. We welcome any questions you may have about our comments or on any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Selected Financial and Other Data, page 33
1. We note your response to our prior comment 6. Please refer to the second paragraph of Instruction 2 to Item 301 of Regulation S-K, which contemplates that historical data may not be comparab le from period to period or may not be indicative of future results. As indica ted in this Instruc tion, such variability should be addressed by narrative explanation to put the hist orical data into context
Mr. Mark S. Casady LPL Investment Holdings, Inc. July 16, 2007 Page 2 for your readers, but the historical data should still be disclosed. Please revise to disclose dividends declared per sh are for all applicable periods.
Management’s Discussion and Analysis EBITDA, page 36
2. We note your response to our prior comment 9 and the related revisions to your filing. We have the following additional comments:
• We note that you have revised the it ems included in your calculation of “EBITDA.” However, the measure you refer to as EBITDA continues to exclude items in addition to what its acronym suggests. In this regard, as indicated in our response to Questio n 14 of our Non-GAAP FAQ, “earnings” is intended to mean net income as presented in the statement of operations under GAAP. Additionally, interest expens e should be total interest expense as presented in the statement of operations under GAAP. Measures that are calculated differently should not be characterized as EBITDA, and instead should use a different title to clearly identify the earnings measure being used and all adjustments. Please revise the title of your m easure accordingly. • We note your disclosure that management uses the measure you refer to as EBITDA to measure operating performance. Please revise to provide a more detailed description of the circumstances under which this measure is used, as we note that this is not your segmental measure of profit or loss. For example, if this measure is used to calculate management’s performance bonuses, you should disclose that. • We note your disclosure that the meas ure you refer to as EBITDA is also a component of one of your debt covenants. If you believe th at the related debt agreement is a material agreement, that the covenant is a material term of the debt agreement, and that information a bout this covenant is material to an investor’s understandin g of your company’s financial condition and/or liquidity, you should revise to provide all disclosures indicated by the response to Question 10 of our N on-GAAP FAQ, and you also should disclose the actual debt covenant measur e (i.e. consolidated leverage ratio) rather than merely one component of that measure. Alternatively, you should remove your discussion of debt covena nts from your disc losures about the measure you refer to as EBITDA.
Operating Results for the Year Ended December 31, 2006…, page 47
3. We note your response to our prior comment 11. Your disclosure at the bottom of page 47 states that the Transaction resulted in an additional $21 million in compensation expense in 2005. Your disclosure under Compensation and
Mr. Mark S. Casady LPL Investment Holdings, Inc. July 16, 2007 Page 3 benefits expense on page 49 also app ears to indicate that you incurred approximately $21 million in compensa tion expense in 2005 related to the Transaction, and the lack of a similar expense in 2006 accounts for the decrease in stock compensation expense from 2005 to 2006. However, your disclosure under Compensation and benefits expense at the top of page 52 indicates that 2005 stock compensation expense incurred in connec tion with the Transaction was only $6 million. Please help us to understand why the compensation expense incurred in 2005 related to the Transaction appears to vary in your disclosures, and revise your disclosures as necessary to clarify this matter.
Item 4. Security Ownership by Certain Be neficial Owners and Management, page 59 4. In connection with prio r comment 19, please identif y the individual(s) who exercise sole or shared voting and invest ment power over the sh ares listed in the table for Hellman & Friedman Investment Funds.
Other Arrangements, page 78 5. Clarify your statement that some or all the loans outstanding to employees may be forgiven based on the passage of time.
Item 10. Recent Sales of Unregistered Securities, page 80 6. Please tell us supplementally why you do not disclose any recent sales of bonus credits.
Financial Statements for the Year Ended December 31, 2006 Note 18 – Employee Benefit Plans, page F-34 7. We note your response to our prior co mment 41. Please revise either your accounting policy footnote or this footnot e to briefly disclose your accounting policy for the bonus credits.
Please respond to these comments with in 10 business days, or tell us when you will provide us with a response. Please provi de us with a response letter that keys your responses to our comments and provides a ny requested information. Detailed letters greatly facilitate our review . Please file your response on EDGAR as a correspondence file. Please understand that we may have additional comments after reviewing your responses to our comments.
We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filings reviewed by the staff to be certain that they have provided all information required under the Securities Exch ange of 1934 and that they have provided
Mr. Mark S. Casady LPL Investment Holdings, Inc. July 16, 2007 Page 4 all information investors require for an in formed decision. Since the company and its management are in possession of all facts re lating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please provide, in writing, a statement from the company acknowledging that:
• the company is responsible for the adequacy and accuracy of the disclosure in their filings;
• staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking a ny action with respect to the filing; and
• the company may not assert staff comme nts as a defense in any proceeding initiated by the Commission or any pers on under the federal s ecurities laws of the United States.
In addition, please be advise d that the Division of Enfo rcement has access to all information you provide to the staff of the Di vision of Corporation Finance in connection with our review of your filing or in response to our comments on your filing.
You may contact Jennife r Thompson, Accountant at (202) 551-3737 or John Cash, Accounting Branch Chief at (202) 551- 3768 if you have questions regarding the comments on the financial statements and related matters. Please contact Dorine H. Miller, Financial Analyst at (202) 551-3711 or, in her absenc e, contact me at (202) 551- 3766 with any other comments.
S i n c e r e l y ,
Pamela A. Long A s s i s t a n t D i r e c t o r
Show Raw Text
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-0404
DIVISION OF
CORPORATION FINANCE
July 16, 2007
Mail Stop 7010
Via U.S. mail and facsimile
Mr. Mark S. Casady
Chairman and Chief Executive Officer
LPL Investment Holdings, Inc.
One Beacon Street, Floor 22
Boston, MA 02108
Re: LPL Investment Holdings, Inc.
Amendment No. 1 to Registration Statement on Form 10
Filed on: July 10, 2007
File No.: 0-5260
Dear Mr. Casady:
We have reviewed your filing and have the following additional 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. Pl ease be as detailed as necessary in your
explanation. In some of our comments, we may ask you to provide us with supplemental
information so we may better understand your disclosure. After reviewing this
information, we may or may not raise additional comments.
Please understand that the purpose of our re view process is to assist you in your
compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filing. We look forward to working with you in these respects. We
welcome any questions you may have about our comments or on any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Selected Financial and Other Data, page 33
1. We note your response to our prior comment 6. Please refer to the second paragraph of Instruction 2 to Item 301 of Regulation S-K, which contemplates that historical data may not be comparab le from period to period or may not be
indicative of future results. As indica ted in this Instruc tion, such variability
should be addressed by narrative explanation to put the hist orical data into context
Mr. Mark S. Casady
LPL Investment Holdings, Inc.
July 16, 2007 Page 2
for your readers, but the historical data should still be disclosed. Please revise to disclose dividends declared per sh are for all applicable periods.
Management’s Discussion and Analysis
EBITDA, page 36
2. We note your response to our prior comment 9 and the related revisions to your filing. We have the following additional comments:
• We note that you have revised the it ems included in your calculation of
“EBITDA.” However, the measure you refer to as EBITDA continues to
exclude items in addition to what its acronym suggests. In this regard, as
indicated in our response to Questio n 14 of our Non-GAAP FAQ, “earnings”
is intended to mean net income as presented in the statement of operations under GAAP. Additionally, interest expens e should be total interest expense
as presented in the statement of operations under GAAP. Measures that are
calculated differently should not be characterized as EBITDA, and instead
should use a different title to clearly identify the earnings measure being used and all adjustments. Please revise the title of your m easure accordingly.
• We note your disclosure that management uses the measure you refer to as
EBITDA to measure operating performance. Please revise to provide a more
detailed description of the circumstances under which this measure is used, as
we note that this is not your segmental measure of profit or loss. For example,
if this measure is used to calculate management’s performance bonuses, you
should disclose that.
• We note your disclosure that the meas ure you refer to as EBITDA is also a
component of one of your debt covenants. If you believe th at the related debt
agreement is a material agreement, that the covenant is a material term of the
debt agreement, and that information a bout this covenant is material to an
investor’s understandin g of your company’s financial condition and/or
liquidity, you should revise to provide all disclosures indicated by the response to Question 10 of our N on-GAAP FAQ, and you also should
disclose the actual debt covenant measur e (i.e. consolidated leverage ratio)
rather than merely one component of that measure. Alternatively, you should
remove your discussion of debt covena nts from your disc losures about the
measure you refer to as EBITDA.
Operating Results for the Year Ended December 31, 2006…, page 47
3. We note your response to our prior comment 11. Your disclosure at the bottom of
page 47 states that the Transaction resulted in an additional $21 million in compensation expense in 2005. Your disclosure under Compensation and
Mr. Mark S. Casady
LPL Investment Holdings, Inc.
July 16, 2007 Page 3
benefits expense on page 49 also app ears to indicate that you incurred
approximately $21 million in compensa tion expense in 2005 related to the
Transaction, and the lack of a similar expense in 2006 accounts for the decrease in
stock compensation expense from 2005 to 2006. However, your disclosure under
Compensation and benefits expense at the top of page 52 indicates that 2005 stock
compensation expense incurred in connec tion with the Transaction was only $6
million. Please help us to understand why the compensation expense incurred in 2005 related to the Transaction appears to vary in your disclosures, and revise
your disclosures as necessary to clarify this matter.
Item 4. Security Ownership by Certain Be neficial Owners and Management, page 59
4. In connection with prio r comment 19, please identif y the individual(s) who
exercise sole or shared voting and invest ment power over the sh ares listed in the
table for Hellman & Friedman Investment Funds.
Other Arrangements, page 78
5. Clarify your statement that some or all the loans outstanding to employees may be
forgiven based on the passage of time.
Item 10. Recent Sales of Unregistered Securities, page 80
6. Please tell us supplementally why you do not disclose any recent sales of bonus
credits.
Financial Statements for the Year Ended December 31, 2006
Note 18 – Employee Benefit Plans, page F-34
7. We note your response to our prior co mment 41. Please revise either your
accounting policy footnote or this footnot e to briefly disclose your accounting
policy for the bonus credits.
Please respond to these comments with in 10 business days, or tell us when you
will provide us with a response. Please provi de us with a response letter that keys your
responses to our comments and provides a ny requested information. Detailed letters
greatly facilitate our review . Please file your response on EDGAR as a correspondence
file. Please understand that we may have additional comments after reviewing your
responses to our comments.
We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filings reviewed by the staff to be certain that they have provided all information required under the Securities Exch ange of 1934 and that they have provided
Mr. Mark S. Casady
LPL Investment Holdings, Inc.
July 16, 2007 Page 4
all information investors require for an in formed decision. Since the company and its
management are in possession of all facts re lating to a company’s disclosure, they are
responsible for the accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please provide, in writing, a
statement from the company acknowledging that:
• the company is responsible for the adequacy and accuracy of the disclosure in
their filings;
• staff comments or changes to disclosure in response to staff comments do not
foreclose the Commission from taking a ny action with respect to the filing;
and
• the company may not assert staff comme nts as a defense in any proceeding
initiated by the Commission or any pers on under the federal s ecurities laws of
the United States.
In addition, please be advise d that the Division of Enfo rcement has access to all
information you provide to the staff of the Di vision of Corporation Finance in connection
with our review of your filing or in response to our comments on your filing.
You may contact Jennife r Thompson, Accountant at (202) 551-3737 or John
Cash, Accounting Branch Chief at (202) 551- 3768 if you have questions regarding the
comments on the financial statements and related matters. Please contact Dorine H. Miller, Financial Analyst at (202) 551-3711 or, in her absenc e, contact me at (202) 551-
3766 with any other comments.
S i n c e r e l y ,
Pamela A. Long
A s s i s t a n t D i r e c t o r