SEC Comment Letter for DUCOMMUN (DCO) — Dec 1, 2011
DUCOMMUN INC /DE/
Date: Dec. 1, 2011 · CIK: 0000030305 · Accession: 0000000000-11-069208
AI Filing Summary & Sentiment
File numbers found in text: 001-08174, 333-177231
Referenced dates: October 31, 2011
Letter
December 1, 2011 Via E-mail James S. Heiser Vice President, General Counsel and Secretary Ducommun Incorporated 23301 Wilmington Avenue Carson, CA 90745-6209 Re: Ducommun Incorporated Amendment No. 1 to the Registration Statement on Form S-4 Filed November 18, 2011 File No. 333-177231 Form 10-K for the fiscal year ended December 31, 2010 Filed February 22, 2011 Form 10-Q for the quarter ended July 2, 2011 Filed August 9, 2011 Form 10-Q for the quarter ended October 1, 2011 Filed November 7, 2011 File No. 001-08174
Dear Mr. Heiser: We have reviewed your response to our letter dated October 31, 2011, and have the following additional comments.
S-4
Exhibit 5.2
1. We note your response to prior comment one; ho wever, we are unable to locate revisions responsive to our prior comment. Please have counsel revise the last sentence of the last paragraph on page 3 of the opinion. Alternativ ely, have counsel revise the last sentence of the second paragraph to consent to the reliance on the opinion by holders of the New Notes. Exhibit 5.3
2. We note your response to prior comment four and reissue. It is not appropriate for counsel to assume that the guarantor’s corpor ate powers have not been suspended. Please have counsel remove assumption 3.7.
James S. Heiser Ducommun Incorporated December 1, 2011 Page 2 Form 10-Q for the Quarterly Period Ended October 1, 2011
Non-GAAP Financial Measures, page 24
3. With regard to your calculation of EBIT DA, please remove amortization of non-cash stock compensation from your calculation as th e inclusion of such an item is not an appropriate reconciling item in determining EBITDA.
4. Refer to your calculation of Adjusted EBITDA on page 24. We believe the adjustment “inventory step-up” should be eliminated. Item 101(a)(1) of Regula tion G indicates that a non-GAAP financial measure should be a numerical measure of a registrant's historical or future financial performance. The elimin ation of the inventory valuation adjustment creates an inventory cost that is representativ e of LaBarge’s historic al inventory cost, not Ducommun’s, and is not representative of Ducommun’s inventory replacement cost going forward. Please revise your calculation accordingly.
Critical Accounting Policies Goodwill, page 9
5. We note that, as a result of th e decline in your stock price an d the decline in the Miltec reporting unit’s performance for the nine months ended October 1, 2011, you performed a discounted cash flow analysis for the Milt ec reporting unit during th e third quarter. We also note that you will perform your annual goodwill test by the end of the fourth quarter. Given these recent events and uncertainties, please consider expanding your disclosures to provide additional information for each reporting unit that is at risk of failing step one of the impairment test. As applicable, please disclose the amount of goodwill allocated to the reporting unit as well as the percentage by which fair value exceeded carrying value as of the date of your most recent test. In addition, please discuss the degree of uncertainty associated with the key assumptions in specific terms to the extent practicable. Describe the potential events and/or changes in circumstances that could reasonably be expected to negatively affect the key assumptions. Finally, if a significant difference exists between the aggr egate fair value of your reporting units and the market capitalization of the company, pl ease consider explaining the reasons for the difference.
James S. Heiser Ducommun Incorporated December 1, 2011 Page 3 Please contact Amy Geddes at (202) 551- 3304 or Margery Reich at (202) 551-3347 if you have any questions on the financial statements or related matters. Please contact J. Nolan McWilliams at (202) 551-3217 or me at (202) 551-3750 with any other questions.
Sincerely,
/s/ Max. A. Webb Max A. Webb
Assistant Director
cc: Dhiya El-Saden Gibson, Dunn & Crutcher LLP
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December 1, 2011 Via E-mail James S. Heiser Vice President, General Counsel and Secretary Ducommun Incorporated 23301 Wilmington Avenue Carson, CA 90745-6209 Re: Ducommun Incorporated Amendment No. 1 to the Registration Statement on Form S-4 Filed November 18, 2011 File No. 333-177231 Form 10-K for the fiscal year ended December 31, 2010 Filed February 22, 2011 Form 10-Q for the quarter ended July 2, 2011 Filed August 9, 2011 Form 10-Q for the quarter ended October 1, 2011 Filed November 7, 2011 File No. 001-08174 Dear Mr. Heiser: We have reviewed your response to our letter dated October 31, 2011, and have the following additional comments. S-4 Exhibit 5.2 1. We note your response to prior comment one; ho wever, we are unable to locate revisions responsive to our prior comment. Please have counsel revise the last sentence of the last paragraph on page 3 of the opinion. Alternativ ely, have counsel revise the last sentence of the second paragraph to consent to the reliance on the opinion by holders of the New Notes. Exhibit 5.3 2. We note your response to prior comment four and reissue. It is not appropriate for counsel to assume that the guarantor’s corpor ate powers have not been suspended. Please have counsel remove assumption 3.7. James S. Heiser Ducommun Incorporated December 1, 2011 Page 2 Form 10-Q for the Quarterly Period Ended October 1, 2011 Non-GAAP Financial Measures, page 24 3. With regard to your calculation of EBIT DA, please remove amortization of non-cash stock compensation from your calculation as th e inclusion of such an item is not an appropriate reconciling item in determining EBITDA. 4. Refer to your calculation of Adjusted EBITDA on page 24. We believe the adjustment “inventory step-up” should be eliminated. Item 101(a)(1) of Regula tion G indicates that a non-GAAP financial measure should be a numerical measure of a registrant's historical or future financial performance. The elimin ation of the inventory valuation adjustment creates an inventory cost that is representativ e of LaBarge’s historic al inventory cost, not Ducommun’s, and is not representative of Ducommun’s inventory replacement cost going forward. Please revise your calculation accordingly. Critical Accounting Policies Goodwill, page 9 5. We note that, as a result of th e decline in your stock price an d the decline in the Miltec reporting unit’s performance for the nine months ended October 1, 2011, you performed a discounted cash flow analysis for the Milt ec reporting unit during th e third quarter. We also note that you will perform your annual goodwill test by the end of the fourth quarter. Given these recent events and uncertainties, please consider expanding your disclosures to provide additional information for each reporting unit that is at risk of failing step one of the impairment test. As applicable, please disclose the amount of goodwill allocated to the reporting unit as well as the percentage by which fair value exceeded carrying value as of the date of your most recent test. In addition, please discuss the degree of uncertainty associated with the key assumptions in specific terms to the extent practicable. Describe the potential events and/or changes in circumstances that could reasonably be expected to negatively affect the key assumptions. Finally, if a significant difference exists between the aggr egate fair value of your reporting units and the market capitalization of the company, pl ease consider explaining the reasons for the difference. James S. Heiser Ducommun Incorporated December 1, 2011 Page 3 Please contact Amy Geddes at (202) 551- 3304 or Margery Reich at (202) 551-3347 if you have any questions on the financial statements or related matters. Please contact J. Nolan McWilliams at (202) 551-3217 or me at (202) 551-3750 with any other questions. Sincerely, /s/ Max. A. Webb Max A. Webb Assistant Director cc: Dhiya El-Saden Gibson, Dunn & Crutcher LLP