SEC Comments – Non-GAAP Disclosures & May 2016 CD&I

Date of Comment Letter – 10/25/16

Please present the three major categories of the statement of cash flows with equal or greater prominence each time you present free cash flow. See Item 10(e)(1)(i)(a) of Regulation S-K and Questions 102.06 and 102.10 of the updated Non-GAAP Compliance and Disclosure Interpretations issued on May 17, 2016.

Date of Comment Letter – 9/29/16

We note your discussion of the non-GAAP measure adjusted segment income beginning on page 2 of your earnings release. Please consider the guidance in Item 10(e)(1)(i)(A) of Regulation S-K and Question 102.10 of the updated Compliance and Disclosure Interpretations on Non-GAAP Financial Measures issued on May 17, 2016 when preparing future filings to ensure that you do not give greater prominence to non-GAAP measures than to the most directly comparable GAAP measures.

Date of Comment Letter – 9/27/16

You disclose net income, excluding the impact of the additional tax provision for the expected partial repatriation of overseas profits, on a dollar and per share basis. It appears tax provisions for repatriation of overseas profits may be normal, recurring, cash operating expenses necessary to operate your business; therefore, your disclosures may be inconsistent with Question 100.01 of the updated Compliance and Disclosure Interpretations on Non-GAAP Financial Measures issued on May 17, 2016 (“Non-GAAP C&DI”). Please review this guidance when preparing your next earnings release. If you continue to present this non-GAAP measure, please clearly label the measure as non-GAAP, provide a reconciliation to the most directly comparable GAAP financial measure and disclose why management believes the non-GAAP measure provides useful information to investors regarding your financing condition and results of operations. Refer to Instruction 2 to Item 2.02 of Form 8-K and Item 10(e) of Regulation S-K.

Date of Comment Letter – 9/23/16

Your characterization of certain adjustments related to restructuring expenses and store acquisition expenses in your disclosures related to Adjusted Net Income, Adjusted Net Income Per Share and Adjusted EBITDA as non-recurring in nature may not be consistent with Question 102.03 of the updated Compliance and Disclosure Interpretations on Non-GAAP Financial Measures issued on May 17, 2016. We note similar disclosure of “non-recurring” items in your subsequent Forms 10-Q and earnings releases. Please consider the above-mentioned Interpretations in their entirety when preparing the disclosures to be included in future filings.

Date of Comment Letter – 9/20/16

We note you present a non-GAAP financial measure titled Adjusted EBITDA excluding inventory revaluation, “in order to facilitate the comparability of results from period to period by adjusting cost of sales to reflect the cost of raw material during the period, which is often referred to as the replacement cost method of inventory valuation.” Please more fully explain to us what this non-GAAP financial measure is meant to represent, why you believe it is useful, and how you calculate it. We note you believe this measure minimizes the impact of raw material purchase price volatility in evaluating your performance; however, please explain to us when and how raw material purchase price volatility is reflected in your selling prices. We also note your calculation of this adjustment could differ from the replacement cost method under certain circumstances; please more fully explain to us how and why those circumstances could or have occurred. In addition, please tell us why you believe the presentation of this non-GAAP financial measure is appropriate under Item 10(e) of Regulation S-K and the updated Compliance and Disclosure Interpretations on Non-GAAP Financial Measures issued on May 17, 2016.

Date of Comment Letter – 9/20/16

We note that you disclose the Non-GAAP Measures “Adjusted earnings” and “Adjusted earnings per share – diluted” and that these measures exclude pension settlement charges, merger and restructuring charges and abandonment and impairment charges. Considering you have not provided any adjustments to exclude net gains on asset sales, your disclosures may be inconsistent with Question 100.03 of the updated Compliance and Disclosure Interpretations on Non-GAAP Financial Measures issued on May 17, 2016 (“Non-GAAP CD&I”). We also note that you have presented adjustments to arrive at your non-GAAP measures on an after-tax basis, which may be inconsistent with Question 102.11 of the Non-GAAP CD&I. This new guidance requires that income tax adjustments should be shown separately and clearly explained. Please review this guidance when preparing your next periodic report and future earnings releases.

Date of Comment Letter – 9/19/16

We note that your earnings release appears to focus on key non-GAAP financial measures and not GAAP financial measures. Please tell us how you considered the updated Compliance and Disclosure Interpretations issued on May 17, 2016, specifically Question 102.10, when you prepared your release.

Date of Comment Letter – 9/14/16

We note your business outlook for the third quarter of fiscal 2016 includes non-GAAP net loss before deducting the share of non-GAAP net income pertaining to the non-controlling interest, non-GAAP net loss attributable to Sohu.com Inc., and non-GAAP net loss per fully diluted share attributable to Sohu.com Inc. It appears that you have excluded a quantitative reconciliation for the forward-looking non-GAAP measure in reliance on the “unreasonable efforts” exception in Item 10(e)(1)(i)(B) of Regulation S-K without disclosing that fact and identifying the information that is unavailable. Your disclosure is inconsistent with the updated Compliance and Disclosure Interpretations on Non-GAAP Financial Measures issued on May 17, 2016. Please review this guidance when preparing your next earnings release.

Date of Comment Letter – 9/1/16

We note that you present non-GAAP adjusted EBITDA before the most directly comparable GAAP measures. Your presentation appears to give greater prominence to the non-GAAP measures than to the comparable GAAP measures which is inconsistent with the updated Compliance and Disclosure Interpretations issued on May 17, 2016. Please review that guidance when preparing future earnings releases.

Date of Comment Letter – 8/23/16

You disclosed a non-GAAP financial measure, “operating net income,” which excludes acquisition and non-operating compensation charges from net income and described the non-operating compensation charges as “certain salary and employee benefit costs incurred that are not related to current operating services provided by employees of the Company.” Please explain, in greater detail, the nature of the excluded salary and employee benefit costs in the calculation of the non-GAAP financial measure and tell us whether these costs are recurring and/or cash expenses or otherwise require cash settlement. In addition, please tell us how you expect the Division´s latest guidance on non-GAAP financial measures in the updated Compliance and Disclosure Interpretations issued on May 17, 2016 will impact your approach to such exclusions in future filings.

Date of Comment Letter – 8/18/16

We note that you present reconciliations of GAAP to Non-GAAP condensed consolidated statements of operations. These presentations are inconsistent with Question 102.10 of the updated Compliance and Disclosure Interpretations issued on May 17, 2016. Please review this guidance when preparing your next earnings release.

Date of Comment Letter – 8/16/16

In addition, in the graphics accompanying the discussion of each global product franchise beginning on page 16 (e.g., Knee implants, Hip implants, etc.) you present only the underlying change in revenue, a non-GAAP measure, without also presenting the comparable GAAP change. Your presentation appears to give greater prominence to the non-GAAP measures than to the comparable GAAP measures which is inconsistent with the updated Compliance and Disclosure Interpretations issued on May 17, 2016. Please review this guidance when preparing your next filing.

Date of Comment Letter – 8/11/16

You disclose several Non-GAAP adjustments to remove acquisition-related expenses from your Operating Earnings. In this regard, we note that you have completed three bank acquisitions since 2010 and six acquisitions in the past two years. It appears that acquisition of businesses has, and will continue to be, a key strategy to achieve growth and the removal of these Non-GAAP adjustments may be inconsistent with the updated Compliance and Disclosure Interpretations issued on May 17, 2016. Please review this guidance when preparing your next earnings release.

Date of Comment Letter – 8/4/16

You disclose a non-GAAP measure in the headlines to your earnings release without also showing the comparable GAAP measures and you present a non-GAAP measure using a style of presentation that emphasizes the non-GAAP measure over the comparable GAAP measure. In addition, in your earnings release for the period ended December 31, 2015, a non-GAAP measure precedes the most directly comparable GAAP measure. These presentations are inconsistent with the updated Compliance and Disclosure Interpretations the Division issued on May 17, 2016. Please review this guidance when preparing your next earnings release.

Date of Comment Letter – 8/1/16

It appears that your non-GAAP measures may be liquidity measures in substance as you disclose that your non-GAAP financial measures provide investors with information that offers greater insight into reconciling your earnings with the cash flows from your business. As such, your disclosure of non-GAAP diluted EPS may be inconsistent with question 102.05 of the updated Compliance and Disclosure Interpretations issued on May 17, 2016. In addition, your non-GAAP measures precede the most directly comparable GAAP measures in your earnings release headlines, which is inconsistent with question 102.10 of the updated C&DI. Please review this guidance when preparing your next earnings release.

Date of Comment Letter – 8/1/16

We note that each individual adjustment included in non-GAAP net income is presented net of tax rather than showing the income tax impact as a separate line, and it is unclear how the tax effect was calculated. Therefore, your disclosures may be inconsistent with Question 102.11 of the updated Compliance and Disclosure Interpretations issued on May 17, 2016. Please review this guidance when preparing your next filing that includes such non-GAAP disclosures.

Date of Comment Letter – 8/1/16

We note the following disclosures, which may not be consistent with Question 102.10 of the updated Compliance and Disclosure Interpretations issued on May 17, 2016: A discussion in the First Quarter 2016 Highlights of adjusted EBITDA and non-GAAP net income per diluted share without a discussion of the most directly comparable GAAP measure preceding such disclosure; A discussion in the First Quarter Results of adjusted EBITDA before the most directly comparable GAAP measure, Net Income; and A discussion of adjusted EBITDA projections without a quantitative reconciliation or a discussion of reliance on the unreasonable efforts exception in Item 10(e)(1)(i)(B) that identifies the information that is unavailable.

Date of Comment Letter – 7/29/16

We note your reconciliation, which is prepared on a full consolidated income statement basis, of U.S. GAAP Basis to Non-GAAP Basis for the three months ended June 30, 2016 and 2015, the three months ended March 31, 2016, and for the six months ended June 30, 2016 and 2015 on pages 9, 10, 11, 12 and 13 of your earnings release, respectively. Please revise future earnings releases to no longer present a full non-GAAP income statement when reconciling your non-GAAP financial metrics to your GAAP results. Instead, just separately reconcile the non-GAAP metrics on an individual basis which are used in your earnings release. Please refer to Question 102.10 in the updated Compliance and Disclosure Interpretations issued on May 17, 2016.

Date of Comment Letter – 7/20/16

You adjust for non-cash taxes in your non-GAAP presentation. This is inconsistent with the updated Compliance and Disclosure Interpretations issued on May 17, 2016, in particular 102.11. Please review this guidance when preparing your next earnings release.

Date of Comment Letter – 7/18/16

We note your reconciliation, which is prepared on a full condensed income statement basis, of GAAP to Adjusted Financial Information for both the twelve months ended March 31, 2016 and 2015, and the three months ended March 31, 2016 and 2015 on pages 10 and 11 of your earnings release. Please revise future earnings releases to no longer present a full non-GAAP income statement when reconciling your non-GAAP financial metrics to your GAAP results. Instead, just separately reconcile the non-GAAP metrics on an individual basis which are used in your earnings release. Please refer to Question 102.10 in the updated Compliance and Disclosure Interpretations issued on May 17, 2016.

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