SEC Company Response from PROLIANCE INTERNATIONAL, INC. (CIK 0000948844) — Sep 16, 2004
PROLIANCE INTERNATIONAL, INC. (CIK 0000948844)
Date: Sept. 16, 2004 · CIK: 0000948844 · Accession: 0000950136-04-003000
AI Filing Summary & Sentiment
Referenced dates: September 9, 2004
Letter
September 16, 2004 VIA EDGAR Securities and Exchange Commission 450 Fifth Street N.W. Washington, DC 20549 Attention: Beverly A. Singleton
Re: Transpro, Inc. Item 4.01 Form 8-K, filed August 26, 2004 File No. 1-13894
Dear Ms. Singleton:
I am attaching the response of Transpro, Inc. (the "Company") to the comments of the staff (the "Staff") of the Securities and Exchange Commission (the "Commission") contained in the Staff's letter dated September 9, 2004 relating to the above-referenced filings.
We have recited the comment of the Staff in bold type below, and have followed each comment with the response of the Company. We intend to revise our 10-Q/A Amendment No. 1 for the quarter ended March 31, 2004 as promptly as practicable following the Staff's review of this response letter.
As requested in your letter, Transpro, Inc. acknowledges that:
- the Company is responsible for the adequacy and accuracy of the disclosure in these 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.
Please contact Kenneth T. Flynn, Jr., Controller at (203) 859-3557, or the undersigned at (203) 859-3552, should you have any questions regarding this response.
Very truly yours,
/s/ Richard A. Wisot
--------------------
Richard A. Wisot
Vice President and Chief Financial Officer
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CORRESP
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file001.htm
CORRESPONDENCE LETTER
TRANSPRO, INC.
100 GANDO DRIVE
NEW HAVEN, CT 06513
September 16, 2004
VIA EDGAR
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, DC 20549
Attention: Beverly A. Singleton
Re: Transpro, Inc.
Item 4.01 Form 8-K, filed August 26, 2004
File No. 1-13894
Dear Ms. Singleton:
I am attaching the response of Transpro, Inc. (the "Company") to the
comments of the staff (the "Staff") of the Securities and Exchange Commission
(the "Commission") contained in the Staff's letter dated September 9, 2004
relating to the above-referenced filings.
We have recited the comment of the Staff in bold type below, and have
followed each comment with the response of the Company. We intend to revise our
10-Q/A Amendment No. 1 for the quarter ended March 31, 2004 as promptly as
practicable following the Staff's review of this response letter.
As requested in your letter, Transpro, Inc. acknowledges that:
- the Company is responsible for the adequacy and accuracy of the disclosure in
these 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.
Please contact Kenneth T. Flynn, Jr., Controller at (203) 859-3557, or
the undersigned at (203) 859-3552, should you have any questions regarding this
response.
Very truly yours,
/s/ Richard A. Wisot
--------------------
Richard A. Wisot
Vice President and Chief Financial Officer
ITEM 4.01 OF FORM 8-K
REPORTABLE CONDITION: INTERNAL CONTROL WEAKNESS
1. WE NOTE THE DISCLOSURE REGARDING A MATERIAL WEAKNESS RELATED TO CERTAIN
INTERNAL CONTROLS THAT IS CONSIDERED TO BE A REPORTABLE CONDITION. PLEASE
PROVIDE US SUPPLEMENTALLY, WITH A COPY OF ALL WRITTEN REPORTS, LETTERS OR
COMMUNICATIONS FROM PRICEWATERHOUSECOOPERS, LLP TO MANAGEMENT, THE BOARD OF
DIRECTORS OR THE AUDIT COMMITTEE REGARDING THE MATERIAL WEAKNESS IN
INTERNAL CONTROLS.
Response: We have attached a written presentation from
PricewaterhouseCoopers LLP ("PwC") to the Company's Audit Committee which
was presented at the meeting of the Audit Committee held on August 12,
2004. We have also provided miscellaneous email correspondence from PwC to
Company management. There were no further written reports, letters or
communications from PwC to management, the Board of Directors or the Audit
Committee regarding the material weakness in internal controls.
2. REFER TO THE MATERIAL WEAKNESS RELATED TO CERTAIN INTERNAL CONTROLS
SURROUNDING THE PROPER REPORTING PERIOD IN WHICH TO RECOGNIZE REVENUES FOR
SALES WITH FOB DESTINATION SHIPPING TERMS. TELL US THE NATURE AND TERMS OF
THE SHIPPING ARRANGEMENTS AND WHY THE RESTATED FINANCIAL STATEMENTS NOW
COMPLY WITH GAAP AND SAB 101.
Response: Traditionally, with isolated exceptions, the Company's customer
agreements contained the shipping terms "FOB Shipping Point." These terms
resulted in revenue being recognized at the time products were shipped from
Company facilities to the customer. The Company's accounting systems were
configured on this basis. During recent years, certain new customers
negotiated the shipping terms "FOB Destination", which result in the
recognition of revenue upon receipt by the customer. At the end of the
fourth quarter of 2003, management reviewed the issue of revenue
recognition and determined that two of its larger retail customers had
written agreements which included shipping terms of FOB Destination. As a
result, an adjustment was recorded to reverse the impact of shipments which
were not received by the customers before the end of 2003 in accordance
with GAAP.
During the review of the results for the second quarter of 2004, management
determined that a more extensive review was required to determine which of
its customers had agreements with shipping terms of FOB Destination. As a
result, reported results for the first quarter of 2004 were restated, with
sales being reduced by $1.3 million and pretax profit lowered by $0.2
million. The impact on other periods was evaluated and determined not to be
material.
In addition to the review of customer contracts, the Company has revised
its procedures to properly determine at the end of each quarterly reporting
period the
amount of shipments which have not been received by customers with FOB
Destination terms, and ensure that these sales are reversed and properly
accounted for in accordance with GAAP. The Company is also attempting to
change all customer shipping terms to FOB Shipping Point.
MARCH 31, 2004 QUARTERLY REPORT ON FORM 10-Q, AS AMENDED
3. REFERENCE IS MADE TO THE ITEM 4.01 FORM 8-K AND THE MATERIAL WEAKNESS
COMMUNICATED TO YOU BY PRICEWATERHOUSECOOPERS, LLP. ALSO REFER TO THE ITEM
4 DISCLOSURES IN YOUR MARCH 31, 2004 QUARTERLY REPORT ON FORM 10-Q, AS
AMENDED. WE NOTE YOU DO NOT DISCLOSE THE CONCLUSIONS ABOUT THE
EFFECTIVENESS OF YOUR DISCLOSURE CONTROLS AND PROCEDURES, AS REQUIRED UNDER
ITEM 307(A) OF REGULATION S-K. THE MATERIAL CONTROL WEAKNESS DISCLOSED IN
YOUR ITEM 4.01 FORM 8-K AND AS DUPLICATED HERE, APPEAR TO INDICATE YOU MAY
LACK THE NECESSARY DISCLOSURE CONTROLS AND PROCEDURES, AS WELL AS INTERNAL
CONTROLS NECESSARY TO PROVIDE TRUE AND ACCURATE ITEM 4 DISCLOSURES IN THE
FORM 10-Q. ALSO, PLEASE NOTE THAT MANAGEMENT MAY NOT STATE THAT ITS
CONTROLS ARE EFFECTIVE "EXCEPT" TO THE EXTENT THAT CERTAIN PROBLEMS HAVE
BEEN IDENTIFIED OR EXPRESS SIMILAR QUALIFIED CONCLUSIONS. RATHER,
MANAGEMENT MUST TAKE THOSE PROBLEMS INTO ACCOUNT WHEN CONCLUDING WHETHER
THE CONTROLS ARE EFFECTIVE. IF THE CONTROLS ARE INEFFECTIVE, MANAGEMENT
SHOULD STATE THE SPECIFIC REASONS WHY THEY ARE INEFFECTIVE. PLEASE REVISE
YOUR ITEM 4 DISCLOSURES IN THE FORM 10-Q TO COMPLY WITH ITEM 307 OF
REGULATION S-K.
Response: In response to this comment, the Company proposes to replace Part
I, Item 4 in its entirety with the following:
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the
Company's Exchange Act reports is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms,
and that such information is accumulated and communicated to the Company's
management, including its Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure based on the definition of "disclosure controls and procedures"
in Rule 13a-15(e). In designing and evaluating the disclosure controls and
procedures, management recognizes that any controls and procedures, no
matter how well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives, and management
necessarily is required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.
The Company carried out an evaluation, under the supervision and with
the participation of the Company's management, including the Company's
Chief Executive Officer and the Company's Chief Financial Officer, of the
effectiveness of
the design and operation of the Company's disclosure controls and
procedures as of March 31, 2004. In conjunction with the evaluation carried
out as of June 30, 2004, the Company detected a material internal control
weakness associated with determining the revenue recognition impact of
shipping terms to certain customers near quarters' end. It was determined
that $1.3 million of net sales and $0.2 million of net income associated
with shipments having terms of FOB Destination had been recorded in the
quarter ended March 31, 2004 instead of in the quarter ended June 30, 2004.
As a result, the Company is restating its results for the quarter ended
March 31, 2004 and filing this amended Form 10-Q. The Company has
determined that the impact of this issue on other prior periods was not
material. Based upon the foregoing facts, management has concluded that its
disclosure controls and procedures contained a material weakness as of
March 31, 2004 and were therefore not effective as of that date.
Subsequent to the end of the second quarter of 2004 in conjunction with
the preparation of the financial statements for that period, the Company
has implemented process and control improvements to insure that revenue is
recognized in the proper periods. Specifically, these procedures include a
review of all customer contracts in place and the implementation of a
policy requiring sign-off by a senior financial officer if any new customer
contract is entered into or existing customer contract is revised to
contain shipping terms other than "FOB Shipping Point." There have been no
other changes in the Company's internal control over financial reporting
during the quarter ended March 31, 2004 that have materially affected, or
are reasonably likely to materially affect the Company's internal control
over financial reporting.
4. ALSO, DISCLOSE ANY SIGNIFICANT CHANGES IN INTERNAL CONTROLS TO COMPLY
WITH ITEM 307(B) OF REGULATION S-K. WE NOTE FROM THE 8-K DISCLOSURE THAT
YOU HAVE IMPLEMENTED PROCESS AND CONTROL IMPROVEMENTS.
Response: We have provided additional disclosure regarding changes in
internal controls in response to the Staff's comment. We refer you to the
proposed revised language in Part I, Item 4 provided above in response to
comment 3.
SUPPLEMENTAL DOCUMENTS:
Materials Provided to Audit Committee
Transpro, Inc.
Report to the Audit Committee
August 12, 2004
*connectedthinking [PRICEWATERHOUSECOOPERS LOGO OMITTED]
Chronology of Sales Cutoff Issue
o Q4 2003 o Transpro reversed $660 thousand of sales and
$250 thousand of margin for shipments made to
Advance in the last two days of the period
o Q1 2004 o During the Q1 review, PwC inquired whether any
cutoff issues exist at 3/31/04 and was
informed that none existed
o Q2 2004 o During the Q2 review, PwC inquired whether any
cutoff issues exist and was provided with an
analysis indicating an issue at Q1 and Q2
Page 2
PricewaterhouseCoopers August 12, 2004
Company Approach and Analysis
o Data Accumulation o Sales for last four days of each period were
analyzed
o Proofs of delivery were obtained for shipments
made in Q4 2003, Q1 2004 and Q2 2004
o Analysis of Data o The analysis indicates that three days
reasonably approximate the period from
shipment to customer receipt. The quarterly
and annual impact for 2002 and 2003 were
determined by applying the three day estimate
o Legal Interpretations o Wiggin & Dana to provide written opinions:
Required
- supporting title and risk of loss passage
when goods are placed on AutoZone-owned
trucks
- concluding that the Advance terms and
company invoicing practices result in FOB
shipping point and not FOB destination
Page 3
PricewaterhouseCoopers August 12, 2004
Assessment of Financial Reporting Impact
o Company's o Materiality evaluated from a quantitative and
Assessment qualitative perspective
o Conclusion to amend Q1 2004 Form 10-Q reducing
revenues by $1.3 million and income by $249
thousand
o Legal Counsel's o Wiggin & Dana was consulted and concurs with
View the Company's conclusion
o PwC's View o PwC agrees with the Company's conclusion
o Internal Control o Disclosure of a material weakness in Item 4 of
Form 10-Q.
Page 4
PricewaterhouseCoopers August 12, 2004
Communications from PwC to Management
[GRAPHIC OMITTED]
Diana To "Rich Giannino" *rgiannino@transpro.com** @INTL
Montauti/US/ABAS/PwC
cc
07/20/2004 01:13 PM
860-241-7159 bcc
Hartford, CT
US Subject Re: FW: Delivery Status Notification (Failure)
[GRAPHIC OMITTED]
Also Rich, does your excel file give visibility to the book value of the sales
(meaning, the related inventory value)? If yes, can you include this in the
print out as well. Thanks,
Diana Montauti
PricewaterhouseCoopers LLP
100 Pearl Street
Hartford, CT 06103
P:(860) 241-7159
F:(813) 207-3718
"Rich Giannino" *rgiannino@transpro.com**
[GRAPHIC OMITTED]
"Rich Giannino"
*rgiannino@transpro.com** To Diana Montauti/US/ABAS/PwC@Americas-US
07/20/2004 11:44 AM cc
Subject FW: Delivery Status Notification (Failure)
Diana
Received the email back for a second time with the same message. The file may be
too large for what you have in your inbox.
let me know if a print out is good enough or if you have another address to send
it to.
Rich
-----Original Message-----
From: System Administrator
Sent: Tuesday, July 20, 2004 11:42 AM
To: 'diana.montauti@us.pwc.com'
Subject: Undeliverable: Delivery Status Notification (Failure)
Your message did not reach some or all of the intended recipients.
Subject: FW: Last 2 Sales Day for Ql & Q2 2004.xls
The following recipient(s) could not be reached:
'diana.montauti@us.pwc.com' on 7/20/2004 11:42 AM
This message is larger than the current system limit or the
recipient's mailbox is full. Create a shorter message body or remove
attachments and try sending it again.
*tprnhmail.domain.com #5.2.3 smtp;552 5.2.3 Message exceeds
maximum fixed size (14680064)**
[GRAPHIC OMITTED]
Diana To CDelucia@transpro.com
Montauti/US/ABAS/PwC
KFlynn@transpro.com, Neil G. Mitchill
07/23/2004 03:08 PM cc Jr./US/ABAS/PwC@Americas-US
860-241-7159
Hartford, CT bcc
US
Subject BOL and PO selections
Hi Chris,
As discussed with Ken, please pull the following selectio