Mail Stop 05-10
June 3, 2005
via U.S. mail and Facsimile
Michael J. Hoffman
President and Chief Executive Officer
Constar International Inc.
One Crown Way
Philadelphia, PA 19154-4599
Re: Constar International Inc.
Form S-4 filed May 9, 2005
File No. 333-124731
Form 10-K for Fiscal Year Ended December 31, 2004
Form 10-Q for Fiscal Quarter Ended March 31, 2005
File No. 000-16496
Dear Mr. Hoffman:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document 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 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 S-4 filed May 9, 2005
General
1. Please file all exhibits with your next amendment, or as soon
as
possible. Understand that we will need adequate time to review
these
materials before accelerating effectiveness.
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.
3. To the extent additional subsidiaries of the company come into
existence and are made guarantors on the new 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.
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.
Industry and Market Data, page ii
5. We note the statement that "While [you] believe that each of
these
studies and publications is reliable...[you] do not make any
representation as to the accuracy of such information." While you
may state that you have not independently verified the data, you
may
not disclaim responsibility for the information you elect to
include
in your prospectus. Please revise.
The Exchange Offer, page 2
6. State the exemption relied upon, and the facts used to support
the
exemption, to issue the old notes. Revise the "Description of
Notes"
section on page 94 accordingly.
Collateral, page 5
7. 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.
Risk Factors, page 10
8. Revise all risk factor headings to clearly state the risk
involved.
Our debt may negatively impact our liquidity... page 10
9. Please quantify your debt service costs.
We are subject to certain covenant restrictions, page 11
10. Please provide a cross-reference to a more complete discussion
of
the financial covenants that the company is required to meet.
Higher energy costs and interrupted power supplies may
increase...,
page 17
11. Please elaborate on the statement that frequent power
interruptions may limit your ability to supply your customers.
For
example, state whether the company has experienced frequent power
interruptions in the past and any reasons that the company expects
to
experience frequent power interruptions in the future.
Liabilities pursuant to current or future lawsuits..., page 18
12. Supplementally provide us with a copy of the complaint filed
in
the securities class action lawsuit.
The issuance of the new notes..., page 26
13. Please delete this risk factor, which does not set forth a
risk
of engaging in the transaction.
Forward-Looking Statements, page 27
14. Sections 27A(b)(2)(c) of the Securities Act and Sections
21E(b)(2)(c) of the Exchange Act expressly state that the safe
harbor
for forward-looking statements does not apply to statements made
in
connection with a tender offer. Please revise accordingly.
Selected Historical Financial Data, page 30
15. Please present income (loss) from continuing operations per
common share for each of the last five fiscal years. See Item 301
of
Regulation S-K. Similarly revise your disclosures on page 8 as
well.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations, page 43
16. Please discuss in greater detail the business reasons for the
changes between periods in net sales, gross profit, and selling
and
administrative expenses. In doing so, please disclose the amount
of
each significant change in line items between periods and the
business reasons for it. In circumstances where there is more
than
one business reason for the change, attempt to quantify the
incremental impact of each individual business reason discussed on
the overall change in the line item. For example, in regards to
net
sales, please individually quantify the amount of the increase in
net
sales that was attributable to increased sales of conventional
products and the pass-through of higher resin prices to customers,
as
well as the amount of price concessions given in exchange for
additional volume and contract extensions. See Item 303(a) of
Regulation S-K and Financial Reporting Codification 501.04.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources, page 47
17. Discuss any debt covenants or financial ratios you are subject
to
under your credit facility in reasonable detail. In addition,
discuss the financial covenant(s) you are required to meet under
your
senior subordinated notes and the senior secured notes.
Commitments, page 50
18. Please revise your table of contractual obligations to include
the following:
* Estimated interest payments on your debt
* Planned or required payments to fund pensions and other post-
employment
benefits
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.
Market Risk, page 52
19. Please include quantitative disclosure for both your foreign
currency and interest rate risks. See Item 305 of Regulation S-K.
Refer to the appendices to Item 305 for suggested formats for
presentation of the information.
Our Business, page 53
20. We note the statement that the PET container business is a
rapidly growing component of the packaging market due to continued
growth in water and isotonics, among other opportunities; however,
this appears to conflict with statements on page 12 stating that
you
believe that profitability from bottled water may decline in the
long
run, and based upon current conditions, you do not expect
appreciable
growth in the carbonated soft drink market. Please advise or
revise.
The Exchange Offer, page 85
21. Revise the first sentence to state that holders of the notes
should carefully consider whether to tender the old notes, rather
than "accept."
22. On page 86, you reserve the right "to delay the acceptance of
the
old notes". Clarify in what circumstances you will delay
acceptance
and confirm that any such delay will be consistent with Rule 14e-
1(c). For example, if you are referring to the right to delay
acceptance only due to an extension of the exchange offer, so
state.
23. We note that you reserve the right to waive any condition or
amend the terms of the exchange offer, at any time. Please revise
this language so that it is consistent with the disclosure on page
91
regarding the timing of waiving conditions of the offer.
Description of the Notes, page 94
24. Include a brief discussion regarding the original issuance of
the
old notes and related guarantees.
Reports to Holders page 118
25. Please explain what you mean by the statements
"Notwithstanding
that the Company may not be subject to the reporting requirements
of
Section 13 or 15(d) of the Exchange Act" and you will "file...the
information, documents and reports referred to in clause
(1)...(whether or not applicable to the Company)." It appears
that
you are currently subject to the Exchange Act reporting
requirements.
Legal Matters, page 149
26. Please specify the legal matters that counsel will opine upon
and
also include the guarantees in this section.
Independent Registered Public Accounting Firm, page 149
27. Since the auditor has consented to the use of its name
certifying
the financial statements included in the registration statement,
please revise to list them as "Experts."
Incorporation of Documents by Reference, page 149
28. Please tell us why you believe you may incorporate future
filings
by reference.
Financial Statements
29. Please include interim financial statements for the period
ended
March 31, 2005. Please similarly update your financial
information
throughout the filing. See Rule 3-12 of Regulation S-X.
Combined and Consolidated Statements of Stockholders` Equity, page
F-
7
30. Please disclose the amount of income tax expense or benefit
allocated to your minimum pension liability adjustments within
other
comprehensive income in accordance with paragraph 25 of SFAS 130.
Combined and Consolidated Statements of Cash Flows, page F-8
31. Please breakout for each period presented the other-net line
item
in the cash provided by operating activities sections into smaller
components having more descriptive titles. Netting of dissimilar
gains and losses is not appropriate. Netting of cash flows
related
to asset balances with cash flows related to liability balances is
also not appropriate. See SFAS 95.
Note 3 - Summary of Significant Accounting Policies
Revenue Recognition, page F-10
32. Please disclose whether your sales agreements contain right of
inspection or acceptance provisions and whether you replace goods
damaged or lost in transit. Even if your sales agreements state
that
title passes upon shipment, customer acceptance provisions or a
history of your replacing goods damaged or lost in transit may
make
the recognition of revenue upon delivery to and acceptance by the
customer more appropriate. See the Interpretive Response to
Question
3 of SAB Topic 13:A.3.b.
Note 7 - Goodwill, page F-16
33. You disclose that management identified that it had only one
reporting unit. In light of the geographically discrete nature of
your operations, it is unclear to us how management considered the
guidance in paragraph 30 of SFAS 142. Please advise us in detail.
Refer also to EITF Topic No. D-101 for additional guidance.
Note 16 - Lease Commitments, page F-31
34. Please disclose how you account for (a) step rent provisions
and
escalation clauses and (b) capital improvement funding and other
lease concessions, which may be present in your leases. Paragraph
5.n. of SFAS 13, as amended by SFAS 29, discusses how lease
payments
that depend on an existing index or rate, such as the consumer
price
index or the prime interest rate, should also be included in your
minimum lease payments. If, as we assume, they are taken into
account in computing your minimum lease payments and the minimum
lease payments are recognized on a straight-line basis over the
minimum lease term, the note should so state. If our assumption
is
incorrect, please tell us how your accounting complies with SFAS
13
and FTB 88-1.
Note 22 - Commitments and Contingencies, page F-35
35. Please confirm there is not a reasonable possibility that a
loss
exceeding amounts already recognized may be incurred and the
amount
of that additional loss may be material. If there is a reasonable
possibility, please disclose the estimated additional loss, or
range
of loss, or state that such an estimate cannot be made as required
by
paragraph 10 of SFAS 5. Refer to SAB Topic 5:Y as well.
Exhibit 12.1 - Ratio of Earnings to Fixed Charges
36. Please present your ratio of earnings to fixed charges for
each
of the last five fiscal years. See Item 503(d) of Regulation S-K.
Exhibit 99.1 - Letter of Transmittal
37. We note the statement on page 7 that you will return any old
notes not accepted for exchange "as soon as practicable" after
withdrawal, rejection of tender or termination 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 this statement and a similar statement
on
page 9.
Form 10-K for fiscal year ended December 31, 2004
Comments applicable to your overall filing
38. Please address the above comments related to the financial
statements in a similar manner in your future Forms 10-K and 10-Q.
Form 10-Q for fiscal quarter ended March 31, 2005
Disclosure Controls and Internal Controls, page 26
39. In future filings, please revise your description of internal
controls so that it tracks the language in Rule 13e-15(f) more
closely.
Limitations on Effectiveness of Controls, page 26
40. In future filings, please delete the sentences beginning with
"The design of any system of controls is based on certain
assumptions
about the likelihood of future events..." and ending with
"...policies and procedures related to the control may
deteriorate."
Please refer to Release No. 33-8238 and AU Section 319 for
information regarding the disclosure of limitations on the
effectiveness of controls.
Evaluation of Disclosure Controls, page 26
41. In future filings please revise your disclosure regarding
management`s conclusion regarding the effectiveness of your
disclosure controls to clarify, if true, that your officers
concluded
that your disclosure controls and procedures are also effective
to
ensure that information required to be disclosed in reports that
you
file or submit under the Exchange Act is accumulated and
communicated
to your management, including your chief executive officer and
chief
financial officer, to allow timely decisions regarding required
disclosure.
Closing Comments
As appropriate, please amend your 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.
Please direct accounting comments to Jeff Gordon, Staff
Accountant, at (202) 551-3866 or, in his absence, to Rufus Decker,
Branch Chief, at (202) 551-3769. Direct questions on disclosure
issues to Tamara Brightwell, Staff Attorney, at (202) 551-3751 or,
in
her absence, to Chris Edwards, Special Counsel, at (202) 551-3742,
or
the undersigned at (202) 551-3760.
Sincerely,
Pamela A. Long
Assistant Director
cc: William G. Lawlor, Esq.
Dechert LLP
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
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Michael J. Hoffman
Constar International Inc.
June 3, 2005
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-0510
DIVISION OF
CORPORATION FINANCE