[Code of Federal Regulations]
[Title 16, Volume 1]
[Revised as of January 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 16CFR801.11]

[Page 588-589]
 
                     TITLE 16--COMMERCIAL PRACTICES
 
                   CHAPTER I--FEDERAL TRADE COMMISSION
 
PART 801_COVERAGE RULES--Table of Contents
 
Sec. 801.11  Annual net sales and total assets.

    (a) The annual net sales and total assets of a person shall include 
all net sales and all assets held, whether foreign or domestic, except 
as provided in paragraphs (d) and (e) of this section.
    (b) Except for the total assets of a joint venture or other 
corporation at the time of its formation which shall be determined 
pursuant to Sec. 801.40(d) the annual net sales and total assets of a 
person shall be as stated on the financial statements specified in 
paragraph (c) of this section: Provided:
    (1) That the annual net sales and total assets of each entity 
included within such person are consolidated therein. If the annual net 
sales and total assets of any entity included within the person are not 
consolidated in such statements, the annual net sales and total assets 
of the person filing notification shall be recomputed to include the 
nonduplicative annual net sales and nonduplicative total assets of each 
such entity; and
    (2) That such statements, and any restatements pursuant to paragraph 
(b)(1) of this section (insofar as possible), have been prepared in 
accordance with the accounting principles normally used by such person, 
and are of a date not more than 15 months prior to the date of filing of 
the notification required by the act, or the date of consummation of the 
acquisition.

    Example: Person ``A'' is composed of entity A, subsidiaries B1 and 
B2 which A controls, subsidiaries C1 and C2 which B1 controls, and 
subsidiary C3 which B2 controls. Suppose that A's most recent financial 
statement consolidates the annual net sales and total assets of B1, C1, 
and C2, but not B2 or C3. In order to determine whether person ``A'' 
meets the criteria of Section 7A(a)(2)(B), as either an acquiring or an 
acquired person, A must recompute its annual net sales and total assets 
to reflect consolidation of the nonduplicative annual net sales and 
nonduplicative total assets of B2 and C3.

    (c) Subject to the provisions of paragraph (b) of this section:
    (1) The annual net sales of a person shall be as stated on the last 
regularly prepared annual statement of income and expense of that 
person; and

[[Page 589]]

    (2) The total assets of a person shall be as stated on the last 
regularly prepared balance sheet of that person.

    Example: Suppose ``A'' sells assets to ``B'' on January 1. ``A's'' 
next regularly prepared balance sheet, dated February 1, reflects that 
sale. On March 1, ``A'' proposes to sell more assets to ``B.'' ``A's'' 
total assets on March 1 are ``A's'' total assets as stated on its 
February 1 balance sheet.

    (d) No assets of any natural person or of any estate of a deceased 
natural person, other than investment assets, voting securities and 
other income-producing property, shall be included in determining the 
total assets of a person.
    (e) Subject to the limitations of paragraph (d) of this section, the 
total assets of:
    (1) An acquiring person that does not have the regularly prepared 
balance sheet described in paragraph (c)(2) of this section shall be, 
for acquisitions of each acquired person:
    (i) All assets held by the acquiring person at the time of the 
acquisition,
    (ii) Less all cash that will be used by the acquiring person as 
consideration in an acquisition of assets from, or in an acquisition of 
voting securities issued by, that acquired person (or an entity within 
that acquired person) and less all cash that will be used for expenses 
incidental to the acquisition, and less all securities of the acquired 
person (or an entity within that acquired person); and
    (2) An acquired person that does not have the regularly prepared 
balance sheet described in paragraph (c)(2) of this section shall be 
either
    (i) All assets held by the acquired person at the time of the 
acquisition, or
    (ii) Where applicable, its assets as determined in accordance with 
Sec. 801.40(d).

    Examples: For examples 1-4, assume that A is a newly-formed company 
which is not controlled by any other entity. Assume also that A has no 
sales and does not have the balance sheet described in paragraph (c)(2) 
of this section.
    1. A will borrow $105 million in cash and will purchase assets from 
B for $100 million. In order to establish whether A's acquisition of B's 
assets is reportable, A's total assets are determined by subtracting the 
$100 million that it will use to acquire B's assets from the $105 
million that A will have at the time of the acquisition. Therefore, A 
has total assets of $5 million and does not meet any size-of-person test 
of Section 7A(a)(2).
    2. Assume that A will acquire assets from B and that, at the time it 
acquires B's assets, A will have $85 million in cash and a factory 
valued at $60 million. A will exchange the factory and $80 million cash 
for B's assets. To determine A's total assets, A should subtract from 
the $85 million cash the $80 million that will be used to acquire assets 
from B and add the remainder to the value of the factory. Thus, A has 
total assets of $65 million. Even though A will use the factory as part 
of the consideration for the acquisition, the value of the factory must 
still be included in A's total assets. Note that A and B may also have 
to report the acquisition by B of A's non-cash assets (i.e., the 
factory). For that acquisition, the value of the cash A will use to buy 
B's assets is not excluded from A's total assets. Thus, in the 
acquisition by B, A's total assets are $145 million.
    3. Assume that company A will make a $150 million acquisition and 
that it must pay a loan origination fee of $5 million. A borrows $161 
million. A does not meet the size-of-person test in Section 7A(a)(2) 
because its total assets are less than $10 million. $150 million is 
excluded because it will be consideration for the acquisition and $5 
million is excluded because it is an expense incidental to the 
acquisition. Therefore, A is only a $6 million person. Note that if A 
were making an acquisition valued at over $200 million, the acquisition 
would be reportable without regard to the sizes of the persons involved.
    4. Assume that ``A'' borrows $165 million to acquire $100 million of 
assets from ``B'' and $60 million of voting securities of ``C.'' To 
determine its size for purposes of its acquisition from ``B,'' ``A'' 
subtracts the $100 million that it will use for that acquisition. 
Therefore, A has total assets of $65 million for purposes of its 
acquisition from ``B.'' To determine its size with respect to its 
acquisition from ``C,'' ``A'' subtracts the $60 million that will be 
paid for ``C's'' voting securities. Thus, for purposes of its 
acquisition from ``C'', ``A'' has total assets of $105 million. In the 
first acquisition ``A'' meets the $10 million size-of-person test and in 
the second acquisition ``A'' meets the $100 million size-of-person test 
of Section 7A(a)(2).

[43 FR 33537, July 31, 1978, as amended at 48 FR 34429, July 29, 1983; 
52 FR 7080, Mar. 6, 1987; 66 FR 8688, Feb. 1, 2001]