Mail Stop 0510
April 6, 2005
via U.S. mail and facsimile
Mr. Thomas B. Sabol
Executive Vice President Chief Financial Officer
Wolverine Tube, Inc.
200 Clinton Avenue West, Suite 1000
Huntsville, Alabama 35801
RE: Form 10-K for the fiscal year ended December 31, 2004
Form 8-K filed on April 6, 2005
File No. 1-12164
Dear Mr. Sabol:
We have reviewed these filings and have the following
comments. If you disagree with a comment, 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.
Please understand that 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. We 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.
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2004
Comment applicable to your overall filing
1. Where a comment below requests additional disclosures or other
revisions, please show us in your supplemental response what the
revisions will look like. These revisions should be included in
your
future filings beginning, to the extent practical, with your
report
on Form 10-Q for the quarter ended March 31, 2005.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 26
2. Please disclose the impact on gross profit due to the
translation
of the Canadian dollar to the U.S. dollar in your comparison of
2004
versus 2003 operating results. Please also disclose the
percentage
of sales generated in your Canadian operations that are
denominated
in U.S. dollars. Please discuss the reasons for the decline in
other
foreign sales from $80,607,000 in 2003 to $52,303,000 in 2004.
Critical Accounting Policies, page 27
3. Please indicate whether you have discussed your critical
accounting estimates with your audit committee. Additionally, for
each critical accounting policy or estimate, please discuss the
likelihood of materially different reported results if different
assumptions or conditions were to prevail. To the extent
practicable
and meaningful, you should also quantify the effect changes in
assumptions and estimates would have on your overall financial
performance. See SEC Releases 33-8040 and 33-8098.
Liquidity and Capital Resources, page 36
4. Please disclose the expected increase in costs and the impact
on
cash flows associated with the start-up of operations at your
Monterrey, Mexico facility. Please also disclose the terms of
your
financial covenants as well as any cross default provisions in the
lines of credit. Please discuss the waivers obtained from your
creditors to waive compliance with the financial covenants.
Please
also discuss the six amendments to the financial covenants of your
credit facility since March 2002.
Contractual Obligations, page 41
5. Please revise your table of contractual cash obligations to
include the following:
(a) Estimated interest payments on your debt;
(b) Estimated payments under interest rate swaps; and
(c) Estimated payments under your Canadian defined benefit pension
plans.
6. Because the table is aimed at increasing transparency of cash
flow, we believe these payments should be included in the table.
Please also disclose any assumptions you made to derive these
amounts. Please refer to SEC Release 33-8350.
Financial Statements
7. Please disclose the types of expenses that you include in the
cost
of goods sold line item and the types of expenses that you include
in
the operating expenses line item. Please also tell us whether you
include inbound freight charges, purchasing and receiving costs,
inspection costs, warehousing costs, internal transfer costs, and
the
other costs of your distribution network in the cost of goods sold
line item. With the exception of warehousing costs, if you
currently
exclude a portion of these costs from cost of goods sold, please
disclose:
* in a footnote the line items that these excluded costs are
included
in and the amounts included in each line item for each period
presented, and
* in MD&A that your gross profit margins may not be comparable to
those of other entities, since some entities include all of the
costs
related to their distribution network in cost of goods sold and
others like you exclude a portion of them from gross profit
margin,
including them instead in another line item, such as operating
expenses.
Please refer to Chapter 4 of ARB 43 for additional guidance.
Note 2 - Summary of Significant Accounting Policies
8. The disclosures required by EITF 00-10 should be made. We have
noted your discussion of this matter in your letter dated July 19,
2002.
Revenue Recognition Policy, page F-5
9. You disclose that revenues are generally recognized when title
to
products transfer to an unaffiliated customer and the product is
shipped. Please describe the circumstances under which revenue is
recognized at variance to the general policy. Tell us the amounts
of
such revenue recognized under the variance at the end of each
quarter
during each of the last two fiscal years and the interim period in
the current year.
10. You disclose that sales are made under normal terms. It is not
clear what constitutes normal terms. We were unable to find any
clarification in the description of the company`s business.
11. Your revenue recognition policy should address each of the
general criteria for revenue recognition discussed in Topic 13:A
of
the Staff Accounting Bulletin.
Inventories, page F-6
12. Please disclose the various methods used to determine the cost
of
maintenance and operating supplies inventory across your
facilities.
Please disclose that maintenance and operating supplies are
reflected
at the lower of cost or market and have future economic value.
Please also supplementally tell us the respective amounts of
maintenance and operating supplies purchased more than one year
ago
in your inventory at December 31, 2004.
Property, Plant and Equipment, page F-6
13. Please disclose your accounting and amortization policy for
leasehold improvements on your leased facilities located in
Shanghai,
China and Monterrey, Mexico, including your accounting for rent
holidays, landlord incentives, lease renewal options, and initial
versus late-term improvements. Please also disclose separately,
if
material, the amount of leasehold improvements. Please refer to
SEC
Staff Letter dated February 7, 2005 for additional guidance.
Goodwill, page F-7
14. Please describe the factors that you considered in evaluating
the
potential impairment of goodwill for the Fabricated Products Group
in
2004. Specifically, address the consideration given to the
decline
in gross margins since the 2003 third quarter and negative or
minimal
cash flows from operations over the past two years. Please
supplementally tell us your assumed growth rate, projected future
profitability and the related assumptions, and the discount rate
for
the Fabricated Products Group for the 2004 and 2003 fiscal years.
Please also disclose the timing of your annual goodwill impairment
test. Refer to Illustration 1 in Appendix C of SFAS 142 for
additional guidance on the required disclosure.
Note 10 - Financing Arrangements and Debt, page F-17
15. Please disclose the terms of your financial covenants as well
as
any cross default provisions in the lines of credit. Please also
disclose if your credit facility has any subjective acceleration
clauses. Please also disclose the waivers obtained from your
creditors to waive compliance with financial covenants as well as
the
various amendments to your financial covenants. If the company is
in
compliance with all financial covenants, disclose that fact.
16. Please tell us the factors that you considered in classifying
your debt obligations as long-term given your recurring financial
covenant violations and low profitability in recent years. Please
refer to EITF 86-30.
Note 21 - Industry Segments and Foreign Operations, page F-38
17. Please provide the enterprise-wide product line and service
disclosures required by paragraph 37 of SFAS 131. This disclosure
should be consistent with the products and major markets data
included in your Business section.
18. Please tell us the factors that you considered in aggregating
your copper alloy tube products within the commercial products
segment. Please describe how these products have similar economic
characteristics with the other products in the commercial segment
and
how they are similar with respect to each of the five criteria
specified in paragraph 17 of SFAS 131.
Note 24 - Quarterly Results of Operations (Unaudited), page F-41
19. Please disclose the factors that contributed to the decline in
net sales from $200,038,000 for the quarter ended October 3, 2004
to
$177,952,000 for the quarter ended December 31, 2004. Please also
discuss if the decline in sales is temporary or the start of a
trend
that is expected to continue in 2005.
FORM 8-K REPORT FILED APRIL 6, 2005
20. Please disclose the status of the strike by the employee
members
of the United Steelworkers of America, the main areas of
disagreement
and the potential impact on future operating results if a new
contract is not signed prior to your next quarterly report.
* * * *
Please respond to these comments within 10 business days, or
tell us when you will provide us with a response. Please provide
us
with a supplemental response letter that keys your responses to
our
comments and provides any requested supplemental information.
Detailed letters greatly facilitate our review. Please file your
supplemental response on EDGAR as a correspondence file. Please
understand that we may have additional comments after reviewing
your
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.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in their filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
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 our review of your filing or in
response to our comments on your filing.
If you have any questions regarding these comments, please
direct them to Gus Rodriguez, Staff Accountant, at (202) 824-5524
or,
in his absence, Nathan Cheney, Assistant Chief Accountant, at
(202)
942-1804 or, to the undersigned, at (202) 942-1774.
Sincerely,
Rufus Decker
Branch Chief
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Mr. Thomas B. Sabol
April 6, 2005
Page 1 of 6
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-0510
DIVISION OF
CORPORATION FINANCE