SEC Company Response from Formsprag LLC (CIK 0001321805) — Aug 12, 2005
Formsprag LLC (CIK 0001321805)
Date: Aug. 12, 2005 · CIK: 0001321805 · Accession: 0001047469-05-021533
AI Filing Summary & Sentiment
File numbers found in text: 333-124944
Referenced dates: June 13, 2005
Letter
VIA EDGAR TRANSMISSION (CORRESP.) Securities and Exchange Commission Division of Corporation Finance Attention: Pamela Long, Assistant Director Re:Altra Industrial Motion, Inc. Amendment No. 1 to Registration Statement on Form S-4 File No. 333-124944
Dear Ms. Long:
Reference is made to the comments of the Staff of the Securities and Exchange Commission (the "SEC" or the "Staff") with respect to the above referenced registration statement on Form S-4 (the "Form S-4") of Altra Industrial Motion, Inc. (the "Company") in the letter dated June 13, 2005 (the "Comment Letter") addressed to the undersigned.
On behalf of the Company, we are writing to respond to the comments and to indicate the changes that have been made in Amendment No. 1 to the Form S-4 (the "Amendment") that is being filed today by the Company with the SEC. The numbered paragraphs below correspond to the headings and numbers set forth in the Comment Letter. The text of the Staff's comments is copied below in italics for your reference. All page numbers referenced by the Company in its responses refer to page numbers contained in the Amendment.
General
1. Please file all exhibits, including the legality opinion and the letter of transmittal, with your next amendment or as soon as possible. Understand that we will need adequate time to review these materials before accelerating effectiveness.
The Company has filed additional exhibits and will file the remaining exhibits as soon as possible.
2. We note that the Company is registering the Exchange Notes in reliance on the staff's position enunciated in Exxon Capital Holdings Corporation (available April 13, 1989), Morgan Stanley & Co. Incorporated (available June 5, 1991), and Shearman and Sterling (available July 2, 1993). Accordingly, with the next amendment please provide a supplemental letter to the staff (1) stating that the issuer is registering the exchange offer in reliance on the staff's position in such letters, and (2) including the statements and representations substantially in the form set forth in the Morgan Stanley & Co. Incorporated and Shearman and Sterling letters.
The Company has provided the requested supplemental letter herewith.
3. To the extent additional subsidiaries of the company come into existence and are made guarantors on the registered notes prior to the expiration of the offering period, we assume you will update the facing page, the signature pages, and financial statements to reflect the additional guarantors.
To the extent any additional subsidiaries come into existence and are made guarantors on the registered notes, the Company will update the facing page, the signature pages, and financial statements to reflect the additional guarantors.
4. Please confirm that the expiration date will be included in the final prospectus disseminated to security holders and filed pursuant to the applicable provisions of Rule 424.
The Company hereby confirms that the expiration date will be included in the final prospectus disseminated to security holders and filed pursuant to the applicable provisions of Rule 424.
5. In your amended filing, please include an updated consent of the independent public accountants.
The Company has included an updated consent from its independent public accountants in its amended filing.
6. Please update your filing to include interim financial statements as of and for the three months ended March 31, 2005. Refer to Rule 3-12 of Regulation S-X. Please similarly update your unaudited pro forma statement of income.
The Amendment includes interim financial statements of the Company as of and for the three months ended April 1, 2005 and related disclosure. See pages F-47 through F-65. Since the transactions given pro forma effect in the Company's pro forma financial statements occured prior to the beginning of the three months ended April 1, 2005, no pro forma statement of income is required.
Inside Front Cover Page of the Prospectus
7. Please provide the information required by Item 2 of Form S-4.
The Amendment has been revised to include the information required by Item 2 of Form S-4. See page ii and the back cover page.
Prospectus Summary, page 1
8. Please revise this section to delete the "Business Strengths" and "Business Strategy" sections of the summary, as it is unnecessary to include this information for an exchange offer where the offerees have already invested in your business.
The Amendment has been revised to delete the sections entitled "Business Strengths" and "Business Strategy" from the summary.
Summary of the Terms of the Exchange Offer. page 4
9. State the exemption relied upon, and the facts used to support the exemption, to issue the old notes. Revise "The Exchange Offer" section on page 27 accordingly.
The original notes were issued by the Company on November 30, 2004 to Jefferies & Company, Inc. (the "Initial Purchaser") pursuant to Section 4(2) of the Securities Act and resold by the Initial Purchaser to qualified institutional buyers ("QIBs") or persons reasonably believed to be QIBs pursuant to Rule 144A under the Securities Act, to Institutional Accredited Investors pursuant to rulings promulgated under the Securities Act and to non-U.S. persons in offshore transactions pursuant to Regulation S under the Securities Act.
Pages 4 & 27 of the Amendment have been revised accordingly.
Time of Expiration. page 6
10. As currently represented, the offer could be open for less than 20 full business clays due to the 5:00 p.m. expiration time instead of an expiration time of midnight on what ultimately be the twentieth business day following commencement. See Question and Answer Eight in Exchange Act Release No. 16623 (March 5, 1980). Please confirm that the offer will be open at least through midnight on the twentieth business day. See Rule 14d-1(g)(3).
The Company hereby confirms that the offer will be open at least through midnight on the twentieth business day following commencement of the offer and it has amended its filing to reflect this fact.
Security. page 10
11. Please provide the book value of the assets that are securing the new notes as of the date of the latest financial statements in the prospectus. Please also revise the risk factors section with similar disclosure.
The Company has provided the book value of the assets that are securing the new notes as of April 1, 2005 and has revised the risk factors section to include similar disclosure, as follows: "The book value of the assets securing the new notes as of April 1, 2005 is approximately $228.3 million. The new notes are subordinated by our senior revolving credit facility which had an outstanding balance of approximately $4.2 million as of April 1, 2005." See pages 10 and 15.
Risk Factors, page 12
12. Please delete the third and fourth sentences of the introductory paragraph. All material risks should be described. If risks are not deemed material, then you should not reference them.
Page 12 has been revised to delete the third and fourth sentences of the introductory paragraph.
13. Revise all risk factor headings to clearly state the risk involved.
The risk factor headings have been revised to state clearly the risk involved.
14. Throughout this section, you state that you "cannot assure" or "there can be no assurance [of]" various facts. The real risk, however, is not your inability to assure the reader Please revise so that the risk is clear.
The risk factors have been revised to state clearly the risk involved.
Our substantial level of indebtedness..., page 13
15. Please quantify your debt service costs.
The Company has quantified its debt service costs in the amended filing as follows: "As of April 1, 2005, we had approximately $170.4 million of indebtedness (including borrowings under our senior revolving credit facility and capital leases) with an estimated annual service cost of approximately $17.1 million." See page 13.
Our senior revolving credit facility and the indenture.... page 14
16. We note the statement that your financial covenants may become more restrictive over time. Please revise to explain under what circumstances the covenants may become more restrictive. In addition, provide a cross-reference to a more complete discussion of the financial covenants that the company is required to meet.
The Company has revised page 14 to provide a cross-reference to a more complete discussion of the financial covenants that the company is required to meet. Other than time, there are no additional circumstances which cause the cited financial covenants to become more restrictive.
We may be subject to work stoppages at our facilities. page 23
17. We note that one of your bargaining agreements expired June 6, 2005. Please update your risk factor, as well as the information relating to your relationship with your employees elsewhere in the prospectus, to state whether this agreement has been renegotiated, an employee strike occurred, or otherwise.
The Company renegotiated the bargaining agreement that was scheduled to expire on June 6, 2005. The new bargaining agreement expires on June 2, 2008 and the Company has updated its amended filing to reflect the new agreement. See page 23.
Terms of the Exchange Offer. page 28
18. We note the disclosure indicating that you will return any old notes not accepted for exchange "as promptly as practicable" after the expiration date of the exchange offer. Rule 14e- 1(c) requires that you exchange the notes or return the old notes "promptly" upon expiration or termination of the offer, as applicable. Please revise here and throughout the document, as necessary.
The Company has revised page 28 & 29 accordingly.
Expiration: Amendments. page 28
19. On page 29, we note your reservation of the right to amend the terms of the offer. Please revise to indicate that, in the event of a material change in the offer, including the waiver of a material condition, you will extend the offer period if necessary so that at least five business days remain in the offer following notice of the material change.
Page 29 has been revised to indicate that, in the event of a material change in the offer, including the waiver of a material condition, the Company will extend the offer period if necessary so that at least five business days remain in the offer following notice of the material change.
20. You reserve the right to "delay accepting any old notes". Clarify in what circumstances you will delay acceptance. For example, if you are referring to the right to delay acceptance only due to an extension of the exchange offer, so state.
Page 29 has been revised to clarify that the Company reserves the right to delay acceptance of any old notes due to an extension of the exchange offer.
Conditions, page 33
21. As you note in your disclosure all conditions to the offer must be satisfied or waived prior to expiration of the offer, not merely before acceptance of the old notes. Please revise the introductory paragraph accordingly.
Page 33 has been revised to clarify that all conditions to the offer must be satisfied or waived prior to expiration of the offer.
Unaudited Pro Forma Financial Statements. page 37
22. Please disclose the expected useful lives of the property, plant and equipment acquired.
The Company has disclosed the expected useful lives of the property, plant and equipment acquired in pro forma adjustment number 1, as follows: "based on expected useful lives of 15 to 45 years for buildings and improvements and 2 to 15 years for machinery and equipment." See page 38.
23. Please explain in detail why you have not included the $600 of expenses related to services previously provided by PTH's parent to PTH in your historical Predecessor financial statements. Similarly, please tell us why you have not included $980 of general and administrative services previously performed by PTWs parent for PTH in your historical Predecessor financial statements. See SAB Topic 1-B.
All costs attributable to PTH that were incurred by the parent have been allocated to PTH and are included in the Predecessor financial statements presented within the Company's filing. Please see additional information included in the Company's response to your comment #52. Both the $600K and $980K adjustments represent the Company's estimates of additional costs required to manage the entire Company and the Company's China operations due to its new stand alone status. These costs include additional employees already hired as well as anticipated additional new hires. The Company's estimates also include other stand alone costs that it anticipates incurring as a new stand alone public entity versus a division of a private company, such as increased compliance, audit and legal costs. The Company has revised the text of the related pro-forma adjustments as follows: "Additional expense required to manage China operations, including salaries, rent and other new costs associated with being a stand alone entity" and "Additional expense required to include the full year costs of general and
administrative services associated with being a stand alone public organization, including additional salary, compliance, audit and legal costs." See page 38.
24. Where you are reversing interest expense in your unaudited pro forma statement of income, please amend your filing to disclose the amount of the debt repaid, the interest rate, the period it was outstanding and then arrive at the pro forma amount of interest expense reversed. Please then show the amount of new debt issued, the interest rate and the period that you are reflecting it in your pro formas.
The Company has amended its descriptions in pro-forma adjustment #3 to provide additional information related to the interest expense reversed and the new interest expense, as follows: "Elimination of interest expense recorded at Kilian (consists of $.1 million of interest on $13 million of debt at 8.8% for the period from October 23 through November 30, 2004 and the write-off of $.5 million of debt issuance costs) and PTH (consists of interest expense recorded during 2004 on varying debt balances at 5.83% interest)" and "Additional expense required to present a full year of expense associated with the notes (consists of interest on $165 million of notes at 9% interest for eleven months)." See page 28.
25. Based on your discussion of your management's discussion and analysis, we note you wrote off deferred loan costs in 2004. Please tell us why you have not adjusted your unaudited pro forma statements of income to eliminate such costs.
The Company's initial discussion addressed the gain on the sale of assets, which it will move into the operating section (see the response to comment #47), as being off-set by other costs associated with the write-off of deferred loan costs in 2003. During 2003, the Predecessor refinanced its debt and wrote-off the deferred loan costs associated with its previous debt facility. There were no deferred loan costs written-off in 2004. Therefore, no adjustment is required in the unaudited pro-forma statements. The Company has revised its discussion in management's discussion and analysis as follows: "Other non-operating (income) expense
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Weil, Gotshal & Manges LLP Letterhead
August
12, 2005
VIA EDGAR TRANSMISSION (CORRESP.)
Securities
and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W. Mail Stop 05-10
Washington, D.C. 20549-0510
Attention: Pamela Long, Assistant Director
Re:Altra
Industrial Motion, Inc.
Amendment No. 1 to Registration Statement on Form S-4
File No. 333-124944
Dear
Ms. Long:
Reference
is made to the comments of the Staff of the Securities and Exchange Commission (the "SEC" or the
"Staff") with respect to the above referenced registration statement on Form S-4 (the
"Form S-4") of Altra Industrial Motion, Inc. (the "Company") in the letter
dated June 13, 2005 (the "Comment Letter") addressed to the undersigned.
On
behalf of the Company, we are writing to respond to the comments and to indicate the changes that have been made in Amendment No. 1 to the Form S-4 (the
"Amendment") that is being filed today by the Company with the SEC. The numbered paragraphs below correspond to the
headings and numbers set forth in the Comment Letter. The text of the Staff's comments is copied below in italics for your reference. All page numbers referenced by the Company in its responses refer
to page numbers contained in the Amendment.
General
1. Please file all exhibits, including the legality opinion and the letter of transmittal, with your
next amendment or as soon as possible. Understand that we will need adequate time to review these materials before accelerating effectiveness.
The
Company has filed additional exhibits and will file the remaining exhibits as soon as possible.
2. We note that the Company is registering the Exchange Notes in reliance on the staff's position
enunciated in Exxon Capital Holdings Corporation (available April 13, 1989), Morgan Stanley & Co. Incorporated (available
June 5, 1991), and Shearman and Sterling (available July 2, 1993). Accordingly, with the next amendment please provide a supplemental letter to the staff
(1) stating that the issuer is registering the exchange offer in reliance on the staff's position in such letters, and (2) including the statements and representations substantially in
the form set forth in the Morgan Stanley & Co. Incorporated and Shearman and Sterling letters.
The
Company has provided the requested supplemental letter herewith.
3. To the extent additional subsidiaries of the company come into existence and are made guarantors
on the registered notes prior to the expiration of the offering period, we assume you will update the facing page, the signature pages, and financial statements to reflect the additional
guarantors.
To
the extent any additional subsidiaries come into existence and are made guarantors on the registered notes, the Company will update the facing page, the signature pages, and financial
statements to reflect the additional guarantors.
4. Please confirm that the expiration date will be included in the final prospectus disseminated to
security holders and filed pursuant to the applicable provisions of Rule 424.
The
Company hereby confirms that the expiration date will be included in the final prospectus disseminated to security holders and filed pursuant to the applicable provisions of
Rule 424.
5. In your amended filing, please include an updated consent of the independent public
accountants.
The
Company has included an updated consent from its independent public accountants in its amended filing.
6. Please update your filing to include interim financial statements as of and for the three months
ended March 31, 2005. Refer to Rule 3-12 of Regulation S-X. Please similarly update your unaudited pro forma statement of income.
The
Amendment includes interim financial statements of the Company as of and for the three months ended April 1, 2005 and related disclosure. See pages F-47
through F-65. Since the transactions given pro forma effect in the Company's pro forma financial statements occured prior to the beginning of the three months ended April 1,
2005, no pro forma statement of income is required.
Inside Front Cover Page of the Prospectus
7. Please provide the information required by Item 2 of
Form S-4.
The
Amendment has been revised to include the information required by Item 2 of Form S-4. See page ii and the back cover page.
Prospectus Summary, page 1
8. Please revise this section to delete the "Business Strengths" and "Business Strategy" sections of
the summary, as it is unnecessary to include this information for an exchange offer where the offerees have already invested in your business.
The
Amendment has been revised to delete the sections entitled "Business Strengths" and "Business Strategy" from the summary.
Summary of the Terms of the Exchange Offer. page 4
9. State the exemption relied upon, and the facts used to support the exemption, to issue the old
notes. Revise "The Exchange Offer" section on page 27 accordingly.
The
original notes were issued by the Company on November 30, 2004 to Jefferies & Company, Inc. (the "Initial Purchaser") pursuant to Section 4(2) of the
Securities Act and resold by the Initial Purchaser to qualified institutional buyers ("QIBs") or persons reasonably believed to be QIBs pursuant to Rule 144A under the Securities Act, to
Institutional Accredited Investors pursuant to rulings promulgated under the Securities Act and to non-U.S. persons in offshore transactions pursuant to Regulation S under the
Securities Act.
Pages
4 & 27 of the Amendment have been revised accordingly.
Time of Expiration. page 6
10. As currently represented, the offer could be open for less than 20 full business clays due to the
5:00 p.m. expiration time instead of an expiration time of midnight on what ultimately be the twentieth business day following commencement. See Question and Answer Eight in Exchange Act
Release No. 16623 (March 5, 1980). Please confirm that the offer will be open at least through midnight on the twentieth business day. See
Rule 14d-1(g)(3).
The
Company hereby confirms that the offer will be open at least through midnight on the twentieth business day following commencement of the offer and it has amended its filing to
reflect this fact.
Security. page 10
11. Please provide the book value of the assets that are securing the new notes as of the date of the
latest financial statements in the prospectus. Please also revise the risk factors section with similar disclosure.
The
Company has provided the book value of the assets that are securing the new notes as of April 1, 2005 and has revised the risk factors section to include similar disclosure,
as follows: "The book value of the assets securing the new notes as of April 1, 2005 is approximately $228.3 million. The new notes are subordinated by our senior revolving credit
facility which had an outstanding balance of approximately $4.2 million as of April 1, 2005." See pages 10 and 15.
Risk Factors, page 12
12. Please delete the third and fourth sentences of the introductory paragraph. All material risks
should be described. If risks are not deemed material, then you should not reference them.
Page 12
has been revised to delete the third and fourth sentences of the introductory paragraph.
13. Revise all risk factor headings to clearly state the risk involved.
The
risk factor headings have been revised to state clearly the risk involved.
14. Throughout this section, you state that you "cannot assure" or "there can be no assurance
[of]" various facts. The real risk, however, is not your inability to assure the reader Please revise so that the risk is clear.
The
risk factors have been revised to state clearly the risk involved.
Our substantial level of indebtedness..., page 13
15. Please quantify your debt service costs.
The
Company has quantified its debt service costs in the amended filing as follows: "As of April 1, 2005, we had approximately $170.4 million of indebtedness (including
borrowings under our senior revolving credit facility and capital leases) with an estimated annual service cost of approximately $17.1 million." See page 13.
Our senior revolving credit facility and the indenture.... page 14
16. We note the statement that your financial covenants may become more restrictive over time. Please
revise to explain under what circumstances the covenants may become more restrictive. In addition, provide a cross-reference to a more complete discussion of the financial covenants that the company
is required to meet.
The Company has revised page 14 to provide a cross-reference to a more complete discussion of the financial covenants that the company is required to meet.
Other than time, there are no additional circumstances which cause the cited financial covenants to become more restrictive.
We may be subject to work stoppages at our facilities. page 23
17. We note that one of your bargaining agreements expired June 6, 2005. Please update your
risk factor, as well as the information relating to your relationship with your employees elsewhere in the prospectus, to state whether this agreement has been renegotiated, an employee strike
occurred, or otherwise.
The
Company renegotiated the bargaining agreement that was scheduled to expire on June 6, 2005. The new bargaining agreement expires on June 2, 2008 and the Company has
updated its amended filing to reflect the new agreement. See page 23.
Terms of the Exchange Offer. page 28
18. We note the disclosure indicating that you will return any old notes not accepted for exchange
"as promptly as practicable" after the expiration date of the exchange offer. Rule 14e- 1(c) requires that you exchange the notes or return the old notes "promptly" upon expiration or
termination of the offer, as applicable. Please revise here and throughout the document, as necessary.
The
Company has revised page 28 & 29 accordingly.
Expiration: Amendments. page 28
19. On page 29, we note your reservation of the right to amend the terms of the offer. Please revise
to indicate that, in the event of a material change in the offer, including the waiver of a material condition, you will extend the offer period if necessary so that at least five business days remain
in the offer following notice of the material change.
Page
29 has been revised to indicate that, in the event of a material change in the offer, including the waiver of a material condition, the Company will extend the offer period if
necessary so that at least five business days remain in the offer following notice of the material change.
20. You reserve the right to "delay accepting any old notes". Clarify in what circumstances you will
delay acceptance. For example, if you are referring to the right to delay acceptance only due to an extension of the exchange offer, so state.
Page
29 has been revised to clarify that the Company reserves the right to delay acceptance of any old notes due to an extension of the exchange offer.
Conditions, page 33
21. As you note in your disclosure all conditions to the offer must be satisfied or waived prior to
expiration of the offer, not merely before acceptance of the old notes. Please revise the introductory paragraph accordingly.
Page
33 has been revised to clarify that all conditions to the offer must be satisfied or waived prior to expiration of the offer.
Unaudited Pro Forma Financial Statements. page 37
22. Please disclose the expected useful lives of the property, plant and equipment
acquired.
The
Company has disclosed the expected useful lives of the property, plant and equipment acquired in pro forma adjustment number 1, as follows: "based on expected useful lives of 15 to
45 years for buildings and improvements and 2 to 15 years for machinery and equipment." See page 38.
23. Please explain in detail why you have not included the $600 of expenses related to services
previously provided by PTH's parent to PTH in your historical Predecessor financial statements. Similarly, please tell us why you have not included $980 of general and administrative services
previously performed by PTWs parent for PTH in your historical Predecessor financial statements. See SAB Topic 1-B.
All
costs attributable to PTH that were incurred by the parent have been allocated to PTH and are included in the Predecessor financial statements presented within the Company's filing.
Please see additional information included in the Company's response to your comment #52. Both the $600K and $980K adjustments represent the Company's estimates of additional costs required to manage
the entire Company and the Company's China operations due to its new stand alone status. These costs include additional employees already hired as well as anticipated additional new hires. The
Company's estimates also include other stand alone costs that it anticipates incurring as a new stand alone public entity versus a division of a private company, such as increased compliance, audit
and legal costs. The Company has revised the text of the related pro-forma adjustments as follows: "Additional expense required to manage China operations, including salaries, rent and
other new costs associated with being a stand alone entity" and "Additional expense required to include the full year costs of general and
administrative
services associated with being a stand alone public organization, including additional salary, compliance, audit and legal costs." See page 38.
24. Where you are reversing interest expense in your unaudited pro forma statement of income, please
amend your filing to disclose the amount of the debt repaid, the interest rate, the period it was outstanding and then arrive at the pro forma amount of interest expense reversed. Please then show the
amount of new debt issued, the interest rate and the period that you are reflecting it in your pro formas.
The
Company has amended its descriptions in pro-forma adjustment #3 to provide additional information related to the interest expense reversed and the new interest expense,
as follows: "Elimination of interest expense recorded at Kilian (consists of $.1 million of interest on $13 million of debt at 8.8% for the period from October 23 through
November 30, 2004 and the write-off of $.5 million of debt issuance costs) and PTH (consists of interest expense recorded during 2004 on varying debt balances at 5.83%
interest)" and "Additional expense required to present a full year of expense associated with the notes (consists of interest on $165 million of notes at 9% interest for eleven months)." See
page 28.
25. Based on your discussion of your management's discussion and analysis, we note you wrote off
deferred loan costs in 2004. Please tell us why you have not adjusted your unaudited pro forma statements of income to eliminate such costs.
The
Company's initial discussion addressed the gain on the sale of assets, which it will move into the operating section (see the response to comment #47), as being off-set
by other costs associated with the write-off of deferred loan costs in 2003. During 2003, the Predecessor refinanced its debt and wrote-off the deferred loan costs associated
with its previous debt facility. There were no deferred loan costs written-off in 2004. Therefore, no adjustment is required in the unaudited pro-forma statements. The Company
has revised its discussion in management's discussion and analysis as follows: "Other non-operating (income) expense