SEC Company Response from SPEAR & JACKSON INC (CIK 0001107206) — Sep 10, 2004
SPEAR & JACKSON INC (CIK 0001107206)
Date: Sept. 10, 2004 · CIK: 0001107206 · Accession: 0001161697-04-000707
AI Filing Summary & Sentiment
File numbers found in text: 000-32013
Referenced dates: July 28, 2003
Letter
CORRES September 8, 2004 Ms. Jennifer Thompson Securities and Exchange Commission 450 Fifth Street, N.W. Washington, DC 20549
Re: Spear & Jackson, Inc. Form 8-K/A; Item 4 Filed August 25, 2004 File #000-32013
Dear Ms. Thompson:
In the event I do not reach you by telephone by the time this correspondence is forwarded to you, please understand that the delay in responding was attributable to the difficulty of communication between Great Britain and my offices as a result of the recent hurricane. In response to comment one in your letter of September 2, 2003, the undertaking you have requested in this correspondence, as well as by Staff in previous correspondence, has caused me, as well as our SEC administrative law counsel, a good deal of concern, which was previously communicated to your office in my correspondence of September 18, 2003 (copy enclosed) and which was referred to in subsequent correspondence as well.
At this point, the Company would be comfortable with the full undertaking as it pertains to the SEC since Spear & Jackson has no intention to become involved with litigation with the SEC. However, there are a number of civil actions pending against the Company, and any waiver of any potential defenses as it relates to those actions places me in a difficult position to undertake on behalf of the Company any such waiver. Neither the Company nor I is attempting to be unduly recalcitrant in this situation, but the Company would be remiss in not being in a position to preserve appropriate defenses relative to the various civil actions pending.
<PAGE>
Ms. Jennifer Thompson September 8, 2004 Page 2 of 2
Accordingly, Spear & Jackson confirms its prior acknowledgement that the Company is responsible for the accuracy and adequacy of disclosures made previously or in the course of replying to Staff comments, and further confirms and acknowledges that Staff comments or changes in response to Staff comments in the Company's disclosure filings do not foreclose the SEC from taking action with respect to any filings. The Company is further willing to undertake that any Staff comment will not be asserted in any proceedings initiated by the SEC as a defense under claim brought under the federal securities laws. However, we would request clarification with regard to third parties, which was the subject of our expressed concern in our prior submissions and discussions with the Staff.
If the Staff wishes to discuss this further, it might be helpful to have a conference call with the undersigned as well as the Company's SEC administrative counsel, Allan Lerner, and we will be pleased to set that up if you believe this is appropriate.
Thank you for your attention in this matter.
Sincerely yours,
/s/ James M. Schneider
Show Raw Text
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SCHNEIDER WEINBERGER & BEILLY LLP
Attorneys-at-Law
2200 Corporate Boulevard, N.W., Suite 210
Boca Raton, Florida 33431-7307
Telephone
James M. Schneider, P.A. (561) 362-9595
Steven I. Weinberger, P.A. Facsimile
Roxanne K. Beilly, P.A. (561) 362-9612
CORRES
September 8, 2004
Ms. Jennifer Thompson
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Spear & Jackson, Inc.
Form 8-K/A; Item 4
Filed August 25, 2004
File #000-32013
Dear Ms. Thompson:
In the event I do not reach you by telephone by the time this
correspondence is forwarded to you, please understand that the delay in
responding was attributable to the difficulty of communication between Great
Britain and my offices as a result of the recent hurricane. In response to
comment one in your letter of September 2, 2003, the undertaking you have
requested in this correspondence, as well as by Staff in previous
correspondence, has caused me, as well as our SEC administrative law counsel, a
good deal of concern, which was previously communicated to your office in my
correspondence of September 18, 2003 (copy enclosed) and which was referred to
in subsequent correspondence as well.
At this point, the Company would be comfortable with the full
undertaking as it pertains to the SEC since Spear & Jackson has no intention to
become involved with litigation with the SEC. However, there are a number of
civil actions pending against the Company, and any waiver of any potential
defenses as it relates to those actions places me in a difficult position to
undertake on behalf of the Company any such waiver. Neither the Company nor I is
attempting to be unduly recalcitrant in this situation, but the Company would be
remiss in not being in a position to preserve appropriate defenses relative to
the various civil actions pending.
<PAGE>
Ms. Jennifer Thompson
September 8, 2004
Page 2 of 2
Accordingly, Spear & Jackson confirms its prior acknowledgement that
the Company is responsible for the accuracy and adequacy of disclosures made
previously or in the course of replying to Staff comments, and further confirms
and acknowledges that Staff comments or changes in response to Staff comments in
the Company's disclosure filings do not foreclose the SEC from taking action
with respect to any filings. The Company is further willing to undertake that
any Staff comment will not be asserted in any proceedings initiated by the SEC
as a defense under claim brought under the federal securities laws. However, we
would request clarification with regard to third parties, which was the subject
of our expressed concern in our prior submissions and discussions with the
Staff.
If the Staff wishes to discuss this further, it might be helpful to
have a conference call with the undersigned as well as the Company's SEC
administrative counsel, Allan Lerner, and we will be pleased to set that up if
you believe this is appropriate.
Thank you for your attention in this matter.
Sincerely yours,
/s/ James M. Schneider
James M. Schneider
JMS:sjm
Enclosure
Cc: Allan Lerner, Esq.
William Fletcher
<PAGE>
SCHNEIDER WEINBERGER LLP
Attorneys-at-Law
Glades-St. Andrews Professional Center
2499 Glades Road, Suite 108
Boca Raton, Florida 33431-7260
Telephone
James M. Schneider, P.A. (561) 362-9595
Steven I. Weinberger, P.A. Facsimile
(561) 362-9612
September 18, 2003
VIA TELECOPIER (202) 942-9525
Mr. Alfred P. Pavot, Jr.
Senior Assistant Chief Accountant
Division of Corporate Finance
Securities and Exchange Commission
450 Fifth Street, N.W., Room 3115
Washington, D.C. 20549-0304
Re: Spear & Jackson, Inc.
File No. 0-32013
8/23/02 8-K/A Filed 3/14/03
Dear Mr. Parot:
Spear & Jackson is responding to the staff's comments in its
correspondence of March 25, 2003, and appreciates the opportunity to provide the
Staff with information, which is responsive to the inquiries included in your
correspondence. The information has been assembled by Spear & Jackson, its
auditors and other professional personnel in both the United Kingdom and the
United States including its actuaries. We understand the purpose of the staff's
review is to assist Spear & Jackson with its compliance responsibilities, and
the company is prepared to provide such further information or adjustments to
the responses as appropriate.
Spear & Jackson acknowledges that the company is responsible for the
accuracy and adequacy of disclosures made previously or in the course of
replying to staff comments, and that staff comments or changes in response to
staff comments in the company's disclosure filings do not foreclose the
Securities and Exchange Commission from taking action with respect to any
filing. We would request clarification as to the staff's further request that
staff comment may not be asserted in any preceding initiated by the Securities
and Exchange Commission or other persons under federal securities laws. As
previously discussed, we believe there has been previous recognition that the
company sought to treat the Spear & Jackson acquisition as a purchase, and after
various discussions with the staff, the transaction was treated as a reverse
acquisition to accommodate the staff's response. Inasmuch as in any preceding
under securities laws the element of scienter or negligence on the part of a
company may be at issue, given the range of discussions that were held between
Spear & Jackson's accounting representative and the staff, the company is
concerned that the failure to present the background and basis of any
presentation could represent an incomplete or inaccurate response by the
company. We would appreciate a clarification from the staff relevant to this
concern and Spear & Jackson's responsibilities in that regard.
<PAGE>
Mr. Al Pavot
September 18, 2003
Page 2 of 7
I have itemized below the Company's responses which correspond to the
items in the staff's previous letters.
1. Noted. As you will be aware the merger on September 6, 2002 of
Megapro Tools, Inc. and Spear & Jackson plc and Bowers plc has now been
accounted for as a reverse acquisition and an amended 9/30/2002 10-KSB
and an amended 12/31/2002 10-QSB have been filed on May 28, 2002
reflecting this revised accounting treatment.
2. Footnote 21 of the amended Form 10-KSB filed on May 28, 2003
includes the segment disclosures required by SFAS 131. Such detailed
data reconciles to the consolidated balances presented in the restated
September 30, 2002 financial statements.
3. The auditors' report will be revised to delete the term "pro forma".
4. The second paragraph of the audit report will be deleted and
replaced to effect an unrestricted audit report in accordance with US
GAAS.
5. The audit report will be completely revised with only the three
standard paragraphs included. The second paragraph will now
definitively state that the audit was conducted in accordance with US
GAAS.
6. The first reference on the balance sheet to "amounts falling due
after one year" will be revised to read "amounts falling due within one
year".
7. The revaluation of land and buildings (note 1 to the financial
statements) concerns Spear & Jackson plc's principal manufacturing site
in Sheffield, England. The background to the Company's occupancy of
these premises is as follows:
Prior to December 1997, the Company's principal UK subsidiary
occupied leased premises in Sheffield, England adjacent to one of the
major arterial road routes into the city. This site was identified as a
prime location for a new hypermarket by one of the UK's biggest
retailers and contact was made with both Spear & Jackson and the
lessors of the site to negotiate a possible sale. A land deal was
eventually agreed which involved the retailer buying the lease of the
site from the landlord and acquiring the freehold rights to the
property, thereby securing full title to the land and buildings.
In order to persuade Spear & Jackson to relinquish its rights,
at short notice, to occupy the premises, an exchange transaction was
concluded. This consisted of Spear & Jackson vacating the property
prior to the termination of the lease in exchange for the option to buy
a purpose built office and factory complex for a nominal sum. The price
paid was (pound)1 but the actual cost of construction was (pound)4.5
million. In the financial statements, the new site is recorded at its
original build cost plus the cost of various subsequent improvements
and extensions. In order to incorporate this original build cost into
the financial statements a credit entry of (pound)4.5 million was made
to a revaluation reserve.
This transaction could have been effected in a number of ways.
Indeed, the initial proposal was that a (pound)4.5 million payment was
to have been received from the retailer and these
<PAGE>
Mr. Al Pavot
September 18, 2003
Page 3 of 7
funds would then have been used by Spear & Jackson to pay direct the
building contractors responsible for the construction of the new
premises. This approach would have resulted in a (pound)4.5 million
credit to earnings in the year and no revaluation reserve being
required. In the event, the structure of the deal was amended so that
the construction costs were met by the retailer.
We are not therefore of the view that the property has been
written up to reflect appraisal, market or current values which are
above cost to the entity. Rather, the accounting entities under UK GAAP
have been used merely to incorporate the true historical cost of the
land and buildings into the financial statements and that no US GAAP
reconciling entry is therefore required.
8. Capitalized leased assets are not depreciated using an asset life
that exceeds the lease term. We will revise the wording of the
accounting policy disclosures regarding "Leasing and hire purchase
commitments" "Depreciation" (note 1 of the financial statements) to
make this clear.
9. With regard to the treatment of the disposal of the Industrial Saws
Division, this matter is also referred to in comment 4 of your query
letter dated July 28, 2003. Spear & Jackson plc's principal trading
activity is the manufacture and sale of a wide range of hand and garden
tools, measuring instruments and magnetic products. One of the
Company's product ranges is saws. The saws product range originally
comprised hand saws and industrial circular saws. Following a strategic
review, the Company decided that it would remain in the saw business
but that it would exit that element relating to its manufacture and
sale of circular saws. This decision arose from the significant losses
arising from increased competition and uncompetitive manufacturing
processes. A sale of the business was concluded in March 2001. Because
the industrial saws business is part of a larger component of the
business and not a component on its own, we feel that the condition for
reporting the related losses as part of a discontinued operation for
the period is not fully met.
In respect of True Temper Ireland, the company has not been
consolidated since:-
(a) Control was temporary;
(b) Effective control did not rest with the direct
majority owner (Spear & Jackson plc) but rather with the
ultimate parent, US Industries, Inc. Spear & Jackson had no
executive participation in the board and had no influence on
voting matters over the conduct of day to day business
activities.
No financial information was provided to Spear & Jackson in
respect of True Temper Ireland and decisions concerning the company's
strategic direction and its ultimate sale were all dealt with by
officers of US Industries, Inc.
For those reasons the company was neither included in the
consolidation nor dealt with via equity accounting. Instead, the
investment in the company has been included in the balance sheet, since
acquisition, at cost (subject to any appraisal write-downs) and
dividend income has been credited to the profit and loss account when
received. No dividends were received in the years ended September 30,
2002 and September 30, 2001 and no other income or expenditure relating
to True Temper Ireland has been included in the Spear & Jackson profit
and loss accounts for those periods.
<PAGE>
Mr. Al Pavot
September 18, 2003
Page 4 of 7
Based on information now received from True Temper Ireland,
summarized key financials are as follows:
9/6/2002 9/30/2001
Euro '000 Euro `000
--------- ---------
Current and non-current assets 5,145 4,221
Current and non-current liabilities (3,282) (2,583)
Net sales 1,708 5,039
Gross profit 243 719
Loss from continuing operations (79) (408)
Exceptional items - (384)
10. We disagree that the equity method of accounting is the most
appropriate way of treating the two investments detailed in note 9. The
equity approach should be followed by an investor where its investment
in voting stock gives it the ability to exercise significant influence
over operating and financial policies of an investee even though the
investor holds 50% or less of the voting stock. Spear & Jackson owns
30% of the voting stock of the two companies and although significant
influence is presumed to exist for investments of 20% or more, specific
circumstances in respect of these investments counteract that
presumption particularly in that:
The majority ownership of the inv