September 23, 2005
Mail Stop 4561
By U.S. Mail and facsimile to (212)969-2386
Robert H. Joseph, Jr.
Chief Financial Officer
Alliance Capital Management Holding L.P.
1345 Avenue of the Americas
New York, New York 10105
Re: Alliance Capital Management Holding L.P.
Form 10-K filed March 15, 2005
File No. 001-09818
Dear Mr. Joseph:
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
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 review 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 any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
To the extent the following comments are applicable to
Alliance
Capital Management L.P., File Number 000-29961, they should be
considered with respect to future revisions to their filings with
the
Commission.
Form 10-K for the period ended December 31, 2004
Business, General, page 1
1. We refer to the last paragraph on page 1 that states the
Company
changed its accounting for certain fixed income assets managed for
insurance company clients from the cost method to the equity
method,
resulting in an increase in fixed income assets under management
of
up to $3 billion at year. In this regard, please tell us and
provide
the following information in future filings:
* state the justification for the change in accounting principle,
including the specific circumstances which occurred during 2004
that
management determined were not present in prior periods which
resulted in the change from the cost method to the equity method.
Refer to paragraph 17 of APB 20;
* include the disclosure required by paragraph 19 of APB 20
regarding
the change in accounting principle or provide us with the SAB 99
materiality assessment that supports why this disclosure was not
included in the filing; and
* discuss in MD&A the effects of this change in accounting
principle
on current and future operations considering revenues are based on
a
percentage of the value of assets under management which have been
increased by $3 billion as a result of this change in valuation.
Cash Management Services, page 10
2. We refer to the statement that on October 28, 2004 Alliance
Capital and Federated Investors reached a definitive agreement to
acquire the Company`s cash management services unit, which is
expected to close in 2005 with payments aggregating $65 million
over
five years and resulting in a transfer of up to $24 billion in
assets
from money market funds to Federal Investors. Considering that
this
component of the Company was held for sale as of December 31, 2004
please tell us and provide in future filings the following
information:
* state the reasons why the operating unit that is being sold was
not
recorded as a discontinued operation as of December 31, 2004;
* explain why you have not provided the footnote disclosure
required
by paragraphs 47 and 48 of SFAS 144 in the notes to the financial
statements; and
* disclose in MD&A the expected effects of the sale of this
operating
unit on the Company`s future operations, cash flow and liquidity.
Financial Statements of Alliance Capital Management Holdings
Note 6, Commitments and Contingencies, Legal Proceedings, page 53
3. We note the Company has been named as a defendant in a number
of
significant litigation proceedings in which you believe the
allegations are without merit and are also unable to estimate the
impact, if any, that their outcome will have on your results of
operations or financial condition. In this regard, please tell us
and
disclose in future filings the following information:
* provide a probability assessment based on the ranges established
in
paragraph 3 of SFAS 5 as to the likelihood (probable, reasonably
possible or remote) of an unfavorable outcome with respect to the
pending litigation;
o if the assessment of the possibility of a negative outcome was
more
than remote or reasonably possible, please indicate an estimate of
the possible loss or range of loss or a statement as to why such
an
estimate cannot be made. Refer to paragraph 4 of SFAS 5 and
paragraph 3 of FIN 14.
o if the probability assessment is that a negative outcome is
probable, please record an estimated loss for the expected
outcome
of the litigation as required by paragraph 8 of SFAS 5 and
paragraphs
3 and 4 of FIN14.
* disclose your accounting policy with respect to the accrual of
legal costs related to these litigation contingencies.
4. We refer to the last paragraph of the "Market Timing-related
Matters" section on page 55 that states the Company recorded
charges
of $330 million during the second half of 2003 in connection with
the
establishment of a $250 million restitution fund and certain other
matters. In this regard, please tell us and provide in future
filings the following information:
* describe the reasons for establishing the $250 million
restitution
fund and the sources of cash that will be used for the fund.
Refer
to Section IV, Undertaking C. "Distribution of Disgorgement and
Penalty" and "Disgorgement and Civil Money Penalty" of the SEC
administrative order In the Matter of Alliance Capital Management,
L.P., at IA-2205A (Dec. 18, 2003), Administrative Proceeding File
No.
3-11359;
* disclose in the "Market-Timing Investigations" section on page
16
the Company`s plan of remedial action taken to obtain reasonable
assurance that the deficiencies in internal controls related to
market timing will not recur in future operations;
* state the nature and business reasons for the $80 million of
payments related to certain other matters and their relationship,
if
any, to any regulatory agreements;
* disclose the terms of the agreement with the New York State
Attorney General`s office which include:
o a 20% reduction in mutual fund fees that have resulted in a
reduction of approximately $70 million in 2004 advisory fees.
Refer
to the "Market Timing Investigations" section on page 16.
o an undertaking by the Company to continue the 20% mutual fund
fee
reduction for at least a five year period which, estimated at $70
million per year would result in additional fee reductions of $280
million over the next four years.
o disclose in MD&A the effects of this undertaking on future
operations, cash flow and liquidity of the Company. Refer to
press
release dated December 18, 2003 from the Office of the New York
State
Attorney General titled: "Alliance Agreement Includes New Form of
Relief for Shareholders, $600 Million Agreement Includes 20
Percent
Reduction in Mutual Fund Fees".
5. We refer to the second paragraph of the "Private Client
Services"
section on page 12 which states that effective January 1, 2005 you
eliminated transaction charges on U.S. Equity services which is
expected to reduce revenues in 2005 by $10 million. In this
regard,
please tell us and disclose in future filings:
* if this reduction is the result of the agreement with the New
York
State Attorney General`s office which requires a 20% reduction on
mutual fund fees for at least five years; and
* if so, please explain the assumptions you used to determine the
$10
million reduction as compared to the statement by the New York
State
Attorney General that the reduction will be about $70 million per
year for five years. Refer to paragraph I.C.1, "Reduction of
Management Fee Rates for Five Years" in the Agreement section of
the
Assurance of Discontinuance dated September 1, 2004 of the
Attorney
General of the State of New York.
Financial Statements of Alliance Capital Management L.P. and
Subsidiaries
Summary of Significant Accounting Policies
Principles of Consolidation, page 65
6. We note you use the equity method of accounting for
unconsolidated
joint ventures and certain investment vehicles where Alliance
Capital
ownership is less than 50%. In this regard, please tell us and
describe in future filings:
* the nature and origin of these investment vehicles;
* why these investment vehicles qualify for using the equity
method
of accounting; and
* where the net assets and results of operations of these
investment
vehicles are disclosed in the financial statements.
Fees Receivable, Net, page 65
7. We refer to the statement that the allowance for doubtful
accounts
is determined through an analysis of the aging of receivables,
assessment of collectibility and other quantitative and
qualitative
factors. In this regard, please tell us and provide the following
information in MD&A in future filings:
* include an analysis, preferably in tabular form, to show how the
yearly amount of the allowance for the last three fiscal years was
determined. Refer to Schedule E, "Valuation and Qualifying
Account -
Allowance for Doubtful Accounts" on page 119;
* discuss in greater detail the quantitative and qualitative
factors
that you considered in your analysis of the aging of receivables;
and
* discuss the reasons for the significant increase in the
allowance
of $1.987 million and $1.839 million during 2002 and 2003,
respectively, and for the decrease of $1.215 million in the
allowance
in 2004.
Goodwill, net, page 66
8. We refer to the $2.9 billion of goodwill, equal to 33% of total
assets as of December 31, 2004, and to the "Goodwill" section in
MD&A
on page 42 that states management believes goodwill was not
impaired
as of December 31, 2004. Considering the materiality of the
goodwill
recorded, please tell us and provide the following disclosure in
future filings:
* state when the goodwill was recorded and the terms of the
specific
acquisitions that resulted in goodwill recognition;
* disclose the amount of original goodwill recorded with respect
to
these acquisitions and the factors that contributed to the
purchase
price that resulted in the recognition of goodwill;
* discuss the effects of any contingent consideration agreements
on
the amount and timing of goodwill recognition;
* state how you will account for the elimination of goodwill
related
to the cash management services unit for which the Company entered
into a definitive agreement to sell in 2005. Refer to the "Cash
Management Services" section on page 10;
* discuss how you determined that goodwill had not been impaired
as
of December 31, 2004 considering the following situations that,
according to paragraph 28 of SFAS 142 would appear to more likely
than not reduce the fair value of the reporting unit below its
carrying amount:
o the material litigation in which the Company is currently a
defendant related to market timing, revenue sharing and Enron
related
matters. See Note 11, "Commitments and Contingencies, Legal
Proceedings" on page 73 and the first risk factor on page 20.
o the adverse settlement with the Commission and the New York
State
Attorney General in December 2003 which resulted in establishing a
restitution fund for $250 million and a 20% reduction on advisory
fees on U.S long-term open end mutual funds totaling $70 million
which reduced the net income for 2003 by 50%. The Company may
also
be required to contribute additional monies to the restitution
fund.
See "Market Timing Investigations" on page 16 and Note 11, "Legal
Proceedings, Market Timing-related Matters" on page 75.
o the effect on future operations of the 20% reduction of mutual
fund
fees for at least a five year period in addition to the $70
million
reduction in 2003, resulting in a total value of the settlement
with
the Commission and the Attorney General of New York State for
approximately $600 million. Refer to paragraph I.C.1,
"Restitution
of Management Fee Rates for Five Years" of the Assurance of
Discontinuance Agreement with the Office of the Attorney General
of
the State of New York dated September 1, 2004.
o the first risk factor on page 20 that states the Company`s
reputation has suffered and could continue to suffer as a result
of
the issues related to the market timing of mutual funds. This
could
result in increased redemptions of mutual funds or reductions in
assets managed for institutions and private clients and therefore
reduce management fees earned.
Intangible Assets, Net, page 66
9. With respect to the investment management contracts of
businesses
acquired totaling $414 million at December 31, 2004, please tell
us
and provide in future filings the following information:
* describe the specific business acquisitions which resulted in
the
costs assigned to management investment contracts of businesses
acquired and how these costs were allocated to this intangible
asset;
and
* state the basis for estimating the 20 year amortization period.
Cash Distributions, page 68
10. Tell us and disclose in future filings how Available Cash
Flows
is defined for purposes of determining the availability of cash
for
distributions to ACMC and its unitholders.
Form 10-Q for the period ended June 30, 2005
Financial Statements of Allied Capital Management Holding
Note 6, Commitments and Contingencies, Regulatory Matters, page 8
11. We refer to the Wells Notice the Company received on July 26,
2005 from the New York Stock Exchange for failing to properly
identify certain short sales transactions as short sale in the
Electronic Blue Sheet transmissions. In this regard, please tell
us
and explain in future filings if you are currently in violation of
NYSE violations considering you state that this issue was a result
of
a coding problem in the electronic reporting system that was
corrected in 2003, two years before you received the notice of
violation.
Financial Statements of Allied Capital Management
Note 8, Divestiture, page 16
12. We note that in June 2005 the cash management services were
sold
to Federated Investors. In this regard, please tell us and
disclose
in future filings the following information:
* disclose the total sales price for the operating unit sold;
* state the carrying value of the net assets that were sold;
* explain how the $25 million gain was determined, prior to
recognizing the offset of the gain contingency of $7.5 million;
* discuss in MD&A the expected effects of this sale on the
Company`s
current and future results of operations, cash flow and liquidity;
and
* explain why the financial statements including the Condensed
Consolidated Statements of Cash Flows does not show the impact of
this sale.
* * *
Closing Comments
As appropriate, please respond to these comments within 10
business days or tell us when you will provide us with a response.
Please furnish a cover letter with any amendment that keys your
responses to our comments and provides any requested supplemental
information. Detailed cover letters greatly facilitate our
review.
Please understand that we may have additional comments after
reviewing any amendment and responses to our comments.
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 the filings;
* staff comments or changes to disclosure in response to staff
comments in the filings reviewed by the staff do not foreclose the
Commission from taking any action with respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement has access to all information you provide to the staff
of
the Division of Corporation Finance in our review of your filing
or
in response to our comments on your filing.
You may contact Edwin Adames (Senior Staff Accountant) at
(202)
551-3447 or me at (202) 551-3492 if your have any questions
regarding these comments.
Sincerely,
John P. Nolan
Accounting Branch Chief
Alliance Capital Management Holding L.P.
Robert H. Joseph, Jr.
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