Mail Stop 3-5
February 8, 2005
By U.S. Mail and Facsimile
John R. Murphy
Chief Financial Officer
Accuride Corporation
7140 Office Circle
Evansville, Indiana 47715
Re: Accuride Corporation
Form S-1 filed January 10, 2005
File No. 333-121944
Dear Mr. Murphy:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your documents in
response to these comments. If you disagree, we will consider
your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
The purpose of our review process is to assist you in your
compliance with the applicable disclosure requirements and to
enhance
the overall disclosure in your filing. We look forward to working
with you in these respects and welcome any questions you may have
about our comments or on any other aspect of our review. Feel
free
to call us at the telephone numbers listed at the end of this
letter.
General
1. We note from your discussion of the various components of the
transactions and offering that you intend to affect a stock split
immediately prior to the consummation of this offering. Please
give
retroactive effect to this split throughout your document. Refer
to
the guidance in SAB Topic 4C.
2. Please provide us with any artwork you intend to use prior to
printing the red herrings. The artwork you present on the inside
front cover of the prospectus should provide clear illustrations
of
your product or business with concise language describing the
illustrations. Artwork that does not convey the business purpose
or
language that strays beyond a limited scope will not be
appropriate
inside the front cover. Refer to Section VIII of the Division of
Corporation Finance March 31, 2001 Current Issues and Rulemaking
Projects Quarterly Update available at www.sec.gov.
3. Please update your prospectus to provide accurate disclosure as
of
the most recent practicable date. For example, we have reviewed
press reports dated January 31, 2005, indicating that on that date
you completed the TTI acquisition and related $950 million of
refinancing transactions.
4. We note that you plan a split of your common stock immediately
prior to the consummation of the offering but before the sale of
shares of your common stock in the offering. On a supplemental
basis, please tell us your present plans with regard to the split
and
explain to us the underlying business purpose, including whether
and
how it relates to the TTI merger.
5. We note that you completed the Accuride and TTI merger in
January
2005. On a supplemental basis, please describe the exemption from
registration on which you relied to issue Accuride stock to TTI
stockholders as a result of the merger. Also, please provide us
with
your analysis as to why the issuance of common stock to
Technologies
Industries shareholders should not be integrated with the public
common stock offering. Refer to the SEC no-action letter Black
Box
(avail. June 26, 1990).
6. Please confirm your intention to file the employment agreements
with Messrs. Weller and Cirar as material contract exhibits.
Although these agreements are referenced as exhibits in the merger
agreement filed in the December 30, 2004 Form 8-K, they do not
appear
to be included.
7. Please update your filing as required by Rule 3-12 of
Regulation
S-X.
8. Updated accountants consents should be included in any
amendment
to the filing.
Table of Contents
9. Please move the two sections after the table of contents to
appear
in the summary section, or after the summary section. Generally
there should be no disclosure between the table of contents and
the
summary.
Prospectus Summary, page 1
10. Please delete the disclaimer language in the first paragraph
that
the summary is "qualified in its entirety by..." because the
summary
by its nature should not include such detailed financial
information.
The summary should instead include a concise depiction of the
overall
financial condition of the company.
11. It appears that the summary merely repeats, at length,
information that appears later in the filing. Please revise for
brevity and balance. We note, for instance, no discussion of the
company`s substantial level of indebtedness. To balance
disclosure,
please provide disclosure regarding your debt ratio, for example.
Our Company, page 1
12. In the fourth sentence of the first paragraph, please clarify
the
"major product categories" in which you state you have the number
one
or number two market positions. Are you referring to the products
listed in the table on page 2, or in the list on page 4, or some
other category of products? Please make corresponding changes to
the
Business section on page 69 as well.
Our competitive strengths, page 4
13. On a supplemental basis, please tell us the criteria and
framework underlying the "internal market data" you appear to
utilize
in referring to your market position.
Our Strategy, page 6
14. To the extent you discuss your strategy in the summary
section,
please revise disclosure to include a discussion of the risks
associated with the implementation of your business strategy.
Corporate Information, page 7
Our Sponsors, page 7
15. Please delete this section from the summary and move it to the
selling stockholders section and/or the business section. Please
also revise to focus the disclosure regarding KKR and Trimaran on
the
information that is relevant to this offering and the combined
company going forward, such as the management services agreement
with
each entity and the ownership stake each entity has in the
combined
company.
Summary Historical and Pro Forma Consolidated Financial and Other
Data, page 11
(d) Interest Income (Expense), net, page 11
16. Please revise your description of the gain taken on the note
repurchase in 2000 to remove any reference to this gain as
"extraordinary." Refer to the guidance in paragraph A4 of SFAS
145.
(c) Cost of Sales and Gross Profit, page 11
17. Supplementally tell us whether the $2.2 million included in
cost
of sales for costs associated with fire damage and resulting
business
interruption is gross or net of insurance proceeds. If you have
included insurance proceeds in this amount, please also tell us
whether these have been received. We may have further comment on
your response.
(i) EBITDA Reconciliation, page 12
18. Please revise your presentation to also include the Net Income
to
EBITDA reconciliation for the Pro Forma amounts presented in
tabular
form for the latest year and interim period, as EBITDA on a pro
forma
basis for these periods has been presented on page 11. This
reconciliation should be similar to the reconciliation presented
on
page 43.
(j) Unusual Items affecting Net Income, page 12
19. We note on page 11, footnote (c), that $0.9 million of costs
associated with a reduction in employee workforce were included in
2002, but that footnote (1) to explanation (j) cites the amount as
$1.2 million. Please explain this difference or revise your
footnote
(1) to explanation (j) for consistency with your explanation (c)
on
page 11.
20. Supplementally explain to us what items comprise the $2.1
million
of "other non-recurring items" described in footnote (5) to
explanation (j).
(f) EBITDA Reconciliation, page 15
21. Please revise your reconciliation to exclude the adjustment
for
Loss on Debt Extinguishment as this item does not appear to be a
non-
recurring item. Refer to the guidance in FR 65.
Risk Factors, page 17
General
22. Please consider adding a risk factor alerting shareholders to
the
terms of the severance of agreements with members of senior
management. For example, it appears that some agreements provide
for
severance benefits equal to 300% of the employee`s salary at
termination plus 300% of the greater of annualized incentive
compensation and the average compensation award over the three
years
prior to termination. To the extent material, you should quantify
the potential costs associated with these agreements and what
impact
such costs would have on your financial condition.
As a result of the TTI merger, we will be a substantially larger
and
broader organization..., page 20
23. Please revise to include other details of the merger, such as
the
number of employees that each of TTI and Accuride are contributing
to
the combined 4,700 employees resulting from the merger, and
whether
that number includes any layoffs planned in connection with the
merger.
We face exposure to foreign exchange rate fluctuations..., page 20
24. You should briefly outline your hedging strategy and provide a
cross-reference to the more detailed discussion in the MD&A
section.
Also discuss whether either business has ever experienced a
significant change in exchange rates, and what impact that had on
the
company`s expenses for that fiscal period(s).
We might fail to adequately protect our intellectual property...,
page 23
25. To the extent material, briefly discuss the pending or future
trademark, copyright and patent applications on which you rely
and/or
include a cross-reference to a more detailed discussion later in
the
document. Also discuss whether you have had litigation on these
matters in the past.
Litigation against us could be costly..., page 23
26. Please provide information regarding either company`s
experience
with litigation in the past, if any, so that investors can better
appreciate the magnitude of the risk.
If we fail to retain our executive officers, page 23
27. Please include additional detail in order to make the
discussion
more meaningful. For example, disclose how many years each of the
executive officers and key employees have been with TTI and
Accuride,
and whether they have employment contracts with the company.
Other Risks Related to Our Business, page 24
We will incur increased costs, page 29
28. To the extent practicable and material, please quantify the
anticipated costs and expenses you expect to incur as a result of
being a public company. Also consider mentioning that both TTI
and
Accuride were public companies for several years in the recent
past.
TTI Merger, page 31
29. We note that certain holders of TTI common and preferred stock
will receive cash in exchange for their interest in TTI prior to
the
closing of the merger transaction. Supplementally tell us the
amount
of consideration these preferred stockholders will receive and the
carrying amount (liquidation preference) of the preferred stock to
be
redeemed. Also, please revise the subsequent event footnote on
page
F-69 and in your pro forma explanations to reflect the amount paid
in
cash.
Use of Proceeds, page 32
30. Please confirm that you will calculate the Use of Proceeds
table
using the midpoint of the price range when that information
becomes
available.
31. Please specify the amount of indebtedness to be repaid as well
as
any prepayment penalty in your description of Use of Proceeds.
Similar revisions should be made throughout your filing.
Dilution, page 34
32. Please supplementally provide us with your computation of net
tangible book value as of September 20, 2004. Reconcile the
information in your schedule to the numerical information in your
financial statements. We may have further comments upon review of
your response.
Notes to the Unaudited Pro Forma Consolidated Financial
Statements,
page 40
Note 1: Pro Forma Adjustments, page 40
(a) TTI Merger Asset Allocation page 40
33. We note that you have assigned an indefinite life to the trade
names intangible asset acquired in the TTI transaction. Please
supplementally explain to us why you believe assigning this asset
an
indefinite life is appropriate. Please also revise your
disclosure
to indicate the lives of the designated finite-lived intangible
assets listed in the purchase price allocation, explanation (a).
34. Revise your disclosures to clearly explain how the $90 million
purchase price was derived. Explain your significant assumptions.
35. Refer to page 8 of the filing. You state that you expect to
pay
approximately $32 million of transaction fees and expenses.
Supplementally reconcile this balance to the information in the
pro
forma financial statements.
36. We note that you have included adjustments eliminating
deferred
financing costs of $9.278 million (a(vii)) and increasing the fair
value of long term debt by $7 million for a prepayment penalty
(a(xii)). We also note from the disclosure in Note 6 of TTI`s
financial statements, page F-53, that, upon the occurrence of a
change in control, TTI will be required to offer to repurchase the
"new notes" at a price equal to 101% of the principal amount
thereof,
plus accrued interest. It appears that a portion of the above-
referenced adjustments is due to the change-in-control
stipulations
of the "new notes." Please explain to us and revise your
explanations a(vii) and a(xii) to indicate the purposes for, and
corresponding amounts of, the components of these adjustments. As
a
related matter, if you are eliminating $9.278 of deferred
financing
costs from your pro forma balance sheet, how has the related
amortization expense been considered in the pro forma income
statement?
37. You state on page 58 that the offering is likely to result in
an
"ownership change" of Accuride. Please explain whether and how
this
ownership change has been reflected in your pro forma financial
statements.
(c) Acquisition Income Statement Adjustments, page 41
38. Please revise all adjustments presented to include enough
detail
to allow the reader of the document to recalculate each adjustment
presented. Explanations included in (d) should be similarly
revised.
Note 2: Earnings Per Share, page 42
39. Please revise your disclosure to include a reconciliation of
the
shares used in your historical financial statements, to the shares
used to calculate pro forma earnings per share. Your computation
should be transparent to investors.
Note 3: Management Services Agreement, page 42
40. Supplementally tell us if the management services agreement
described will be commenced in connection with the TTI merger. In
this regard, it appears that the annual fees should be reflected
in
your pro forma income statement. Please revise or advise.
Management`s Discussion and Analysis, page 48
Results of Operations, pages 50
41. We note that Accuride and TTI each assess surcharges to cover
a
portion of the increase in material costs for production. In your
discussions of sales and cost of sales, please disclose the dollar
amount of the surcharges recorded in each period for which an
income
statement has been presented. Please also provide this disclosure
in
a footnote to each set of historical financial statements.
Liquidity and Capital Resources, page 56
42. Please explain how you plan to fund the approximately $50
million
required for capital expenditures in 2005.
43. We note that you have appropriately included disclosures on a
pro
forma basis so that investors can easily assess your obligations,
commitments and risks upon consummation of the transactions.
However, we would also generally expect to see disclosures
regarding
contractual obligations and commercial commitments and those
relating
to market risk for Accuride on a historical basis as well,
pursuant
to the requirements of Item 303 of Regulation S-K. Please expand
your presentation to also include these disclosures prior to the
Pro
Forma section of MD&A.
44. We note, from page 18, that you sometimes enter into high
volume
purchase contracts with third parties with terms of one to three
years. If any of these contracts contain minimum purchase
requirements, please supplementally describe and quantify them.
Are
these contracts included in the table on page 57?
Pro Forma Contractual Obligations and Commercial Commitments, page
57
45. Please revise your pro forma table of contractual obligations
to
include interest payments on variable rate indebtedness. You
should
also include a footnote explanation of the interest rate used in
the
calculation and the basis for your assumptions.
46. Please update your table of contractual obligations for the
most
recent balance sheet date presented.
Business, page 69
47. Please revise this section to include a brief discussion of
the
recent TTI merger and related transactions, so that investors can
get
a better understanding of your corporate structure. Consider a
chart
or other pictorial depiction of your business operations, and some
discussion as to how the two businesses will be integrated as one
company. For example, will TTI continue to operate essentially as
an
independent subsidiary of Accuride?
48. You should also consider disclosing some historical
information
about the background of the combined company, such as the fact
that
TTI was a public reporting company that was recently privatized,
and
that Accuride was also a public company for several years.
Employees and Labor Unions, page 80
49. Supplementally explain to us and revise your disclosure to
include a discussion of how you expect the unionization of workers
at
the Cuyahoga Falls, Ohio facility to effect your operating costs.
Also, please expand your disclosure to indicate the progress of
negotiations with the UAW and employees at your Rockford, Illinois
facility, as their contract expires in the near term.
Environmental Matters, page 81
50. We note that you currently expect capital costs associated
with
NESHAP to be approximately $5 million. Please tell us whether
these
costs have been recorded, how you have assessed the probability of
these payments, and whether these have been included in the table
of
contractual obligations.
Principal Stockholders and Selling Stockholders, page 95
51. Please reorganize this section to comply with the separate
requirements of Items 403 and 507 of Regulation S-K. We suggest
that
you present the disclosure in two separate sections.
52. In this regard, please revise the separate section relating to
selling stockholders to include a textual discussion that
describes
how the selling stockholders received the shares to be offered for
resale in this prospectus, any material relationship the selling
stockholders have had with the company over the last three years,
and
include tabular disclosure of the specific number of shares to be
offered for resale.
53. Please explain the business purpose of the options granted to
Messrs. Keating, Murphy, Armstrong, Hamme, Taylor. On a
supplemental
basis, explain to us how the options will be treated pursuant to
the
contemplated stock split.
54. Please provide expanded disclosure on the shares issuable to
Messrs. Weller and Cirar based on the "achievement of certain
performance goals." Please define and explain this arrangement.
Certain Relationships and Related Party Transactions, page 99
Stockholders Agreement, page 99
55. Please disclose the share ownership requirements and provide
specific disclosure on KKR and Trimaran affiliates` right to
designate directors to your board and other committees.
56. Please update your disclosure to reflect whether you have
entered
into the Shareholder Rights Agreement. Also provide a description
of
that agreement and include that agreement as a filed exhibit if
material.
Description of Certain Indebtedness, page 102
Restrictive Debt Covenants, page 102
57. Please revise this section to remove references to the term
"certain" and provide the intended specific reference.
58. Explain the specific restrictions to which you are subject and
disclose the financial ratios and tests.
59. In greater detail, please describe the potential risks
associated
with default events and describe how these impact your other debt
instruments.
Underwriting, page 113
60. Please provide us with all materials that you will provide to
potential purchasers of any shares in the directed share program.
61. Based on press reports, please expand disclosure to include
information relating to the participation of Citigroup Global
Markets, Inc. and UBS Securities LLC in your recent private
placement
of $275 million 81/2% Senior Subordinated Notes due 2015. See
Item
508(a) of Regulation S-K.
62. We note that a prospectus in electronic format may be made
available on the websites maintained by one or more of the
underwriters. Please supplementally confirm that their procedures
have been cleared with us. Any electronic offer, sale or
distribution should also be reflected in this section. If you
become
aware of any member of the underlying syndicate that may engage in
electronic offers, sales or distributions after you respond to
this
comment, please supplement your response.
Accuride Corporation Financial Statements as of 12/31/2003 and
9/30/2004 (Unaudited)
Note 1. Summary of Significant Accounting Policies
Revenue Recognition, page F-7
63. As you recognize sales upon shipment, we assume that none of
your
sales involve customer acceptance provisions. Please confirm,
supplementally, or explain how any such provisions impact the
timing
of revenue recognition.
64. Please describe the specific nature and contractual terms of
each
of your significant customer incentive programs. Supplementally
and
in detail, explain exactly when and how related reserve balances
are
computed, recorded and classified in your financial statements,
and
when and how adjustments are recorded each period. Provide a
schedule of activity for each related reserve account during each
period for which an income statement has been presented. Provide
similar information and schedules for significant customer
incentive
programs offered by TTI. We may have further comments upon review
of
your response.
Inventories and Supplies, page F-7
65. Please revise your policy note related to inventories to
include
a discussion of how you calculate your reserve for excess and
obsolete inventory.
Supplies, page F-7
66. Supplementally explain to us how "inventories" and "supplies"
differ. Also, if your process for determining excess and obsolete
items differs between these two categories, please expand your
disclosure to clarify this difference.
Income Taxes, page F-9
67. Please revise your discussion of policies related to Income
Taxes
to address how you assess the need for a valuation allowance on
your
deferred tax assets.
Note 2. Recapitalization of Accuride Corporation, page F-15
68. We see that a recapitalization occurred in fiscal 1998. You
recorded the related tax effects of changes in the tax bases of
assets and liabilities in equity in that period. Please tell us
more
about the events and circumstances that arose in fiscal 2002,
causing
management to conclude that an additional $27.1 million should be
recognized in equity as an adjustment to the recapitalization.
Provide supplemental support for the nature, amount and timing of
this adjustment.
Note 6. Property, Plant, and Equipment Held for Sale, page F-17
69. We note that you have reclassified various assets previously
classified as held-for-sale to assets held and used. Please
confirm
to us that you have recorded these assets at the lower of their
carrying value before they were classified as held for sale, net
of
depreciation incurred had they been held and used the entire time,
and the fair value at which they were recorded at the time of
reclassification. Refer to the guidance in paragraph 38 of SFAS
144.
Note 10. Income Taxes, page F-26
70. You have disclosed in various places in your filing that not
all
net operating loss carryforwards may be realizable subsequent to
the
merger due to changes in control. Please explain to us how you
have
considered the valuation of your net operating loss carryforwards
in
light of the probable merger. Include in your explanation why you
believe an adjustment of your deferred tax asset for such reasons
in
your pro forma balance sheet and income statement would not be
appropriate. If you do not believe the impact will be material,
please provide numerical support for your conclusion.
Note 11. Stock Purchase and Option Plan, page F-29
71. We note from your disclosure that you offered eligible
employees
the opportunity to exchange performance options with an exercise
price over $5,000 per share that vested in 2001 or 2002 for new
options with an exercise price of $1,750. Supplementally explain
to
us how you have accounted for this apparent repricing. Refer to
the
guidance in APB 25 and SFAS 123. We may have further comment on
your
response.
Note 13. Contingencies, page F-30
72. As discussed in SFAS 5 and in SAB Topic 5-Y, Interpretive
Response to Question 2, if there is a reasonable possibility that
a
loss exceeding amounts already recognized may have been incurred
and
the amount of that additional loss would be material to a
decisions
to buy or sell your securities, additional disclosure is required.
Please consider whether additional disclosures may be appropriate
in
these circumstances and revise or advise.
Note 14. Segment Reporting, page F-30
73. You state that you are one of the largest and most diversified
manufacturers and suppliers of commercial vehicle components in
North
America. Your products include wheels, seating assemblies and
truck
body and chassis parts. You sell in the OEM market and in the
aftermarket. You track operating metrics on a weekly and monthly
basis and performance is tied to annual compensation. In view of
these facts, provide detailed support for your conclusion that you
operate in one business segment. In addition, supplementally
identify and quantify your reporting units. We may have further
comments upon review of your response.
Note 24. Subsequent Event, page F-69
74. We note from the disclosure on page F-54 that dividends on the
Series E preferred stock are payable in shares, and that accrued
dividends at the transaction date totaled $11.2 million in
liquidation preference, or 11,200 shares at a liquidation value of
$1,000 per share. Please explain to us how you determined the
number
of shares that were exchangeable into Accuride shares, who the
"non-
accredited shareholders" are, why they received cash, and how much
cash they received. Please also provide us with your calculation
for
the conversion of all series of preferred stock (A, C, D, E).
75. We note that an additional 3% ownership interest will be given
to
the stockholders of TTI on achievement of certain performance
goals.
Supplementally explain to us and expand your disclosure to include
a
discussion of how these shares will be allocated.
Part II
76. According to press reports, you completed the sale of $275
million in aggregate principal amount of your 8 1/2% Senior
Subordinated Notes due 2015 in a private placement transaction led
by
Lehman Bros. and two of your underwriters. Please disclose this
transaction, stating the grounds for your reliance on the
exemption
from registration as well as the detailed facts supporting your
reliance.
Closing
As appropriate, please amend the registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that
* Should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* The action of the Commission or the staff, acting pursuant to
delegated authority in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* The company may not assert this action as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting
acceleration of a registration statement. Please allow adequate
time
after the filing of any amendment for further review before
submitting a request for acceleration. Please provide this
request
at least two business days in advance of the requested effective
date.
You may contact Amy Geddes at (202) 824-2885, or Margery
Reich
at (202) 942-1839 if you have questions regarding comments on the
financial statements and related matters. Please contact Johanna
Vega Losert at (202) 942-2931 or me with any other questions.
Sincerely,
Sara Dunton
Branch Chief
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John R. Murphy
Accuride Corporation
February 8, 2005
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