Question
From: (redacted)
Sent: Thursday, May 11, 2006 3:30 PM
To: Verne, B.Michael
Subject:Informal Question Regarding the Meaning of "Sale"in Rule 802.51(d).
Dear Mike,
I amwriting with the hope of obtaining some informal guidance relating to the reportingobligations of a foreign company under the Hart-Scott-Rodino Act. My e-mailcontains several questions, and if it would be easier for you to answer thesequestions over the phone please feel free to give me a call at the number belowat your convenience.
Ihave a question concerning the application of Rule 802.51(d), the "foreignissuer" exemption to the HSR reporting requirements, to a contract enteredinto by a foreign issuer in the United States. The facts are as follows. Aforeign issuer ("X") is in the business of manufacturing heavy dutywidgets. A single widget costs many millions of dollars, and several years, tomanufacture. X entered into a contract with a United States entity for themanufacture and delivery of a widget. The contract price is over $56.7 million,with the United States entity to take possession in 2010. The contract price isto be paid to X in a series of installments. X is subcontracting some of thework on the widget contract.
Whatis the value of the widget contract when considered as a "sale into theUnited States ... in (X's) most recent fiscal year" for purposes ofdetermining whether the threshold of $56.7 in Rule 802.51(d) has been exceeded?Is it the gross revenues accruing to X over the lifetime of the contract? Interpretation174 of the Premerger Notification Practice Manual (3d ed. 2003) suggests that"speculative future sales in or into the United States are irrelevant to aSection 802.51 analysis." Are future revenues pursuant to a contract"speculative future sales" and thus irrelevant in the sense providedfor in Interpretation 174? If not, does the answer to the question depend uponX's internal accounting practices? Does the fact that X is subcontracting someof the work under the contract change the result?
Iwould also like to confirm that if X's future revenues under the widgetcontract are not "sales ... in (X's) most recent fiscal year" underRule 802.51(d), the widget contract can still be considered an asset of X underRule 802.51(d) (leaving aside the issue of whether this would be an asset inthe United States), and that the future revenues of X under the contract wouldbe considered in providing a valuation of the contract when treating thecontract as an asset.