SEC Company Response from INTRICON CORP (CIK 0000088790) — Oct 18, 2005
INTRICON CORP (CIK 0000088790)
Date: Oct. 18, 2005 · CIK: 0000088790 · Accession: 0000897101-05-002173
AI Filing Summary & Sentiment
File numbers found in text: 001-05005
Referenced dates: October 7, 2005
Letter
RE: IntriCon Corporation Form 10-K for the Fiscal Year Ended December 31, 2004 Form 10-Q for the Quarterly Period Ended June 30, 2005 File No. 001-05005
Dear Mr. Webb:
The Company hereby submits the Company’s responses to comments raised in the Staff’s letter, dated October 7, 2005 (the “Comment Letter”). The responses set forth below are numbered and correspond to the comment numbers in the Comment Letter.
Form 10-K for the Year Ended December 31, 2004
Item 9-A – Controls and Procedures, page 19
1.
We note your response to prior comment 1, which indicates that “the Company’s disclosure controls and procedures were effective to provide a reasonable level of assurance that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the specified time periods in the Security and Exchange Commission’s rules and forms.” Please revise future filings to clarify, if true, that your officers concluded that your disclosure controls and procedures are also effective to ensure that information required to be disclosed in the reports that you file or submit under the Exchange Act is accumulated and communicated to your management, including your chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure. See Exchange Act Rule 13a-15(e).
U.S. Securities and Exchange Commission
October 18, 2005
Page 2
RESPONSE: The Company will revise future filings to clarify that applicable officers concluded that disclosure controls and procedures are also effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act are accumulated and communicated to management, including the chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure, all in accordance with Exchange Act Rule 13a-15(e).
Note 4 – Acquisition, page 37
2.
We note your response to prior comment 5. Please address the following additional information:
•
Provide us with a schedule that details the specific assets and liabilities you acquired and fair value for each (please also specifically indicate how the indicated fair values were determined),
•
Tell us the amount of the gain or loss you recognized in 2005 related to the SWT sale, and
•
Tell us the carrying value of the Selas name and technology prior to your 2003 write-off.
We may have further comments after reviewing your response.
•
Provide us with a schedule that details the specific assets and liabilities you acquired and fair value for each (please also specifically indicate how the indicated fair values were determined),
RESPONSE: At the time of the reacquisition in August 2004 the balance sheet of SWT appeared as provided below. The Company reviewed the value of the assets, determined the values were reasonable, and recorded the assets and liabilities at estimated fair market value which in the Company’s estimation was equivalent to the recorded book values. As the balance sheet indicates, cash and cash equivalents represented over half of the asset value. The Company paid the French courts $10,508, recording a gain of $683,630 as reported in Footnote 4 of the Company’s Notes to Consolidated Financial Statements in the 2004 Annual Report in accordance with paragraphs 44 and 45 of Financial Accounting Standards (“FAS”) 141 “Business Combinations.”
U.S. Securities and Exchange Commission
October 18, 2005
Page 3
Assets US$ Liabilities US$
Current assets
Current liabilities
Cash and cash equivalents $ 560,628
Trade accounts payable $ 101,206
Trade accounts receivable 181,399
Intercompany accounts payable 1,349
Intercompany receivables —
Accrued liabilities 40,903
Inventories 188,744
Customer advance payments 70,052
Vendor advances on contracts —
Other current liabilities 153,018
Other current assets 83,963
Total current liabilities 366,528
Total current assets 1,014,734
Shareholders’ equity
Net property, plant, equipment 45,932
Common or capital shares 956,994
Total assets 1,060,666
Retained earnings (deficit) 41,954
Translation adjustment (304,810 )
Total shareholders’ equity 694,138
Total liabilities and shareholders’ Equity 1,060,666
•
Tell us the amount of the gain or loss you recognized in 2005 related to the SWT sale, and
RESPONSE: As specified in the Asset Purchase Agreement between the Company and Selas Heat Technology Company LLC (Buyer), the Buyer purchased substantially all of the assets of the Company’s heat technology, including all of the outstanding stock of SWT. The aggregate purchase price paid to the Company for its heat technology assets included assets of SWT, among other heat technology assets located at multiple sites. As such, given the aggregate nature of the purchase price paid for the heat technology business assets, a gain or loss specifically identifiable to the SWT operation cannot be determined.
•
Tell us the carrying value of the Selas name and technology prior to your 2003 write-off.
RESPONSE: Footnote 3 of the Company’s Consolidated Financial Statements in the Form 10-Q for the third quarter of 2003 reflected a loss on the abandonment of the European assets which consisted of Selas SAS and its subsidiaries in the amount of $2,176,929. The assets and liabilities of SWT were embedded in the details of that loss. A summary of the SWT balance sheet that was written off the books of the Company at the time of the abandonment is as follows. Note that no specific values were indicated for the Selas name or technology.
U.S. Securities and Exchange Commission
October 18, 2005
Page 4
Assets US$ Liabilities US$
Current assets
Current liabilities
Cash and cash equivalents $ 349,905
Trade accounts payable $ 425,883
Trade accounts receivable 539,172
Intercompany accounts payable 301,413
Intercompany receivables 613,914
Accrued liabilities 41,439
Inventories 146,401
Income taxes 19,781
Vendor advances on contracts 306,766
Other current liabilities 79,356
Other current assets 9,798
Total current liabilities 867,872
Total current assets 1,965,956
Shareholders’ equity
Net property, plant, equipment 57,527
Common or capital shares 956,994
Total assets 2,023,483
Retained earnings (deficit) (113,624 )
Translation adjustment 312,241
Total shareholders’ equity 1,155,611
Total liabilities and shareholders’ Equity 2,023,483
Form 10-Q for the quarterly period ended June 30, 2005
Note 4 – Discontinued Operations, page 9
3.
We see that you recorded a purchase price adjustment of $352,000 related to the heat technology segment sale. Please tell us and revise future filings to describe the nature of this adjustment and explain how the adjustment was determined.
RESPONSE: As specified in Section 2.2 to the Asset Purchase Agreement between the Company and the Selas Heat Technology Company LLC (Buyer), “in the event that the Net Total Assets as of the Closing Date is less than the Target Net Total Assets of $2,430,000, the Purchase Price shall be reduced by the amount by which the Target Net Total Assets exceeds the Closing Net Total Assets which is the final calculation of the difference between the book value of the assets acquired and liabilities assumed. In the event that the Closing Net Total Assets is more than the Target Net Total Assets, the Purchase Price shall be increased by the amount by which the Closing Net Total Assets exceeds the Target Net Total Assets. The adjustment to the Purchase price affected by this Section is referred to as the Purchase Price Adjustment.”
U.S. Securities and Exchange Commission
October 18, 2005
Page 5
In July, 2005, the Company calculated a final purchase price adjustment related to the heat technology segment sale pursuant to the terms of the Asset Purchase Agreement indicated above. Such adjustment, which unfavorably impacted the gain on sale, was comprised of $225,000 for a tax liability discovered at the heat technology segment’s German subsidiary, and $127,255 in miscellaneous liabilities previously unrecorded on the heat technology segment’s balance sheet.
The previously unrecorded German tax liability, as well as the miscellaneous other liabilities, were discovered through an audit conducted by Buyer’s accountants on the closing balance sheet of the heat technology segment subsequent to the acquisition of such business by Buyer.
To the extent that any further adjustments are recorded, the Company will revise future filings to describe the nature of the adjustment and how such adjustment was determined. The Company does not believe that further adjustments will be material to the financial statements.
The Company acknowledges that:
• The Company is responsible for the adequacy and accuracy of the disclosure in the filing;
• Staff comments or changes to disclosure in response to Staff comments 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.
If any member of the Staff has questions, please do not hesitate to contact the undersigned at (651) 604-9638.
Sincerely,
/s/ William J. Kullback
Show Raw Text
CORRESP
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IntriCon Corporation Correspondence dated October 18, 2005
October 18, 2005
By EDGAR and Facsimile to (202) 772-9218
U.S. Securities and Exchange Commission
100 F Street, N.E.
Mail Stop 6010
Washington, D.C. 20549
Attn: Mr. Jay Webb, Reviewing Accountant
RE:
IntriCon Corporation
Form 10-K for the Fiscal Year Ended December 31, 2004
Form 10-Q for the Quarterly Period Ended June 30, 2005
File No. 001-05005
Dear Mr. Webb:
The Company hereby submits
the Company’s responses to comments raised in the Staff’s letter, dated October 7, 2005 (the “Comment
Letter”). The responses set forth below are numbered and correspond to the comment numbers in the Comment Letter.
Form 10-K for the Year Ended December 31, 2004
Item 9-A – Controls and Procedures, page 19
1.
We note your response to prior comment 1, which indicates that
“the Company’s disclosure controls and procedures were effective to provide a reasonable level of assurance that
information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is
recorded, processed, summarized and reported within the specified time periods in the Security and Exchange Commission’s
rules and forms.” Please revise future filings to clarify, if true, that your officers concluded that your disclosure
controls and procedures are also effective to ensure that information required to be disclosed in the reports that you file or
submit under the Exchange Act is accumulated and communicated to your management, including your chief executive officer and chief
financial officer, to allow timely decisions regarding required disclosure. See Exchange Act Rule 13a-15(e).
U.S. Securities and Exchange Commission
October 18, 2005
Page 2
RESPONSE: The Company will revise future
filings to clarify that applicable officers concluded that disclosure controls and procedures are also effective to ensure that
information required to be disclosed in the reports that the Company files or submits under the Exchange Act are accumulated and
communicated to management, including the chief executive officer and chief financial officer, to allow timely decisions regarding
required disclosure, all in accordance with Exchange Act Rule 13a-15(e).
Note 4 – Acquisition, page 37
2.
We note your response to prior comment 5. Please address the
following additional information:
•
Provide us with a schedule that details the specific
assets and liabilities you acquired and fair value for each (please also specifically indicate how the indicated fair values were
determined),
•
Tell us the amount of the gain or loss you
recognized in 2005 related to the SWT sale, and
•
Tell us the carrying value of the Selas name and
technology prior to your 2003 write-off.
We may have further comments after reviewing your
response.
•
Provide us with a schedule that details the specific
assets and liabilities you acquired and fair value for each (please also specifically indicate how the indicated fair values were
determined),
RESPONSE: At the time of the reacquisition
in August 2004 the balance sheet of SWT appeared as provided below. The Company reviewed the value of the assets, determined the
values were reasonable, and recorded the assets and liabilities at estimated fair market value which in the Company’s
estimation was equivalent to the recorded book values. As the balance sheet indicates, cash and cash equivalents represented over
half of the asset value. The Company paid the French courts $10,508, recording a gain of $683,630 as reported in Footnote 4 of the
Company’s Notes to Consolidated Financial Statements in the 2004 Annual Report in accordance with paragraphs 44 and 45 of
Financial Accounting Standards (“FAS”) 141 “Business Combinations.”
U.S. Securities and Exchange Commission
October 18, 2005
Page 3
Assets
US$
Liabilities
US$
Current assets
Current liabilities
Cash and cash equivalents
$ 560,628
Trade accounts payable
$ 101,206
Trade accounts receivable
181,399
Intercompany accounts payable
1,349
Intercompany receivables
—
Accrued liabilities
40,903
Inventories
188,744
Customer advance payments
70,052
Vendor advances on contracts
—
Other current liabilities
153,018
Other current assets
83,963
Total current liabilities
366,528
Total current assets
1,014,734
Shareholders’ equity
Net property, plant, equipment
45,932
Common or capital shares
956,994
Total assets
1,060,666
Retained earnings (deficit)
41,954
Translation adjustment
(304,810
)
Total shareholders’ equity
694,138
Total liabilities and shareholders’
Equity
1,060,666
•
Tell us the amount of the gain or loss you
recognized in 2005 related to the SWT sale, and
RESPONSE: As specified in the Asset
Purchase Agreement between the Company and Selas Heat Technology Company LLC (Buyer), the Buyer purchased substantially all of the
assets of the Company’s heat technology, including all of the outstanding stock of SWT. The aggregate purchase price paid to
the Company for its heat technology assets included assets of SWT, among other heat technology assets located at multiple sites.
As such, given the aggregate nature of the purchase price paid for the heat technology business assets, a gain or loss
specifically identifiable to the SWT operation cannot be determined.
•
Tell us the carrying value of the Selas name and
technology prior to your 2003 write-off.
RESPONSE: Footnote 3 of the Company’s
Consolidated Financial Statements in the Form 10-Q for the third quarter of 2003 reflected a loss on the abandonment of the
European assets which consisted of Selas SAS and its subsidiaries in the amount of $2,176,929. The assets and liabilities of SWT
were embedded in the details of that loss. A summary of the SWT balance sheet that was written off the books of the Company at the
time of the abandonment is as follows. Note that no specific values were indicated for the Selas name or technology.
U.S. Securities and Exchange Commission
October 18, 2005
Page 4
Assets
US$
Liabilities
US$
Current assets
Current liabilities
Cash and cash equivalents
$ 349,905
Trade accounts payable
$ 425,883
Trade accounts receivable
539,172
Intercompany accounts payable
301,413
Intercompany receivables
613,914
Accrued liabilities
41,439
Inventories
146,401
Income taxes
19,781
Vendor advances on contracts
306,766
Other current liabilities
79,356
Other current assets
9,798
Total current liabilities
867,872
Total current assets
1,965,956
Shareholders’ equity
Net property, plant, equipment
57,527
Common or capital shares
956,994
Total assets
2,023,483
Retained earnings (deficit)
(113,624
)
Translation adjustment
312,241
Total shareholders’ equity
1,155,611
Total liabilities and shareholders’
Equity
2,023,483
Form 10-Q for the quarterly period ended June 30, 2005
Note 4 – Discontinued Operations, page 9
3.
We see that you recorded a purchase price adjustment of $352,000
related to the heat technology segment sale. Please tell us and revise future filings to describe the nature of this adjustment
and explain how the adjustment was determined.
RESPONSE: As specified in Section 2.2 to
the Asset Purchase Agreement between the Company and the Selas Heat Technology Company LLC (Buyer), “in the event that the
Net Total Assets as of the Closing Date is less than the Target Net Total Assets of $2,430,000, the Purchase Price shall be
reduced by the amount by which the Target Net Total Assets exceeds the Closing Net Total Assets which is the final calculation of
the difference between the book value of the assets acquired and liabilities assumed. In the event that the Closing Net Total
Assets is more than the Target Net Total Assets, the Purchase Price shall be increased by the amount by which the Closing Net
Total Assets exceeds the Target Net Total Assets. The adjustment to the Purchase price affected by this Section is referred to as
the Purchase Price Adjustment.”
U.S. Securities and Exchange Commission
October 18, 2005
Page 5
In July, 2005, the Company calculated a final purchase price
adjustment related to the heat technology segment sale pursuant to the terms of the Asset Purchase Agreement indicated above. Such
adjustment, which unfavorably impacted the gain on sale, was comprised of $225,000 for a tax liability discovered at the heat
technology segment’s German subsidiary, and $127,255 in miscellaneous liabilities previously unrecorded on the heat
technology segment’s balance sheet.
The previously unrecorded German tax liability, as well as the
miscellaneous other liabilities, were discovered through an audit conducted by Buyer’s accountants on the closing balance
sheet of the heat technology segment subsequent to the acquisition of such business by Buyer.
To the extent that any further adjustments are recorded, the
Company will revise future filings to describe the nature of the adjustment and how such adjustment was determined. The Company
does not believe that further adjustments will be material to the financial statements.
The Company acknowledges that:
•
The Company is responsible for the adequacy and
accuracy of the disclosure in the filing;
•
Staff comments or changes to disclosure in response
to Staff comments 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.
If any member of the Staff has questions, please do not hesitate to contact
the undersigned at (651) 604-9638.
Sincerely,
/s/ William J. Kullback
William J. Kullback
Chief Financial Officer
CC:
Mark S. Gorder, CEO
Francis E. Dehel, Counsel
Christin R. Cerullo, Counsel
Nicholas A. Giordano, Audit Committee Chair