June 24, 2005
Zip+4 Code: 20549-3561
Via Fax & U.S. Mail
Mr. Dominick A. Pagano
President and Chief Executive Officer
EDAC Technologies Corporation
1806 New Britain Avenue
Farmington, CT 06032
RE: EDAC Technologies Corporation (the "Company")
Form 10-K for the Fiscal Year Ended January 1, 2005
Form 10-Q for the Quarterly Period Ended April 2, 2005
File No. 0-14275
Dear Mr. Dominick A. Pagano:
We have reviewed your response letter dated May 2, 2005 and
have
the following comments. Where indicated, we think you should
revise
your future filings 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.
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 any other aspect of
our
review. Feel free to call us at the telephone numbers listed at
the
end of this letter.
Selected Financial Information
1. We have reviewed your response to our prior comment number 2,
and
note that you intend to revise your disclosures, in future
filings, to
describe or cross-reference to a discussion of factors which
materially affect the comparability of the information reflected
in
the "Selected Financial Information" section of your document.
Please
provide us with a draft of your proposed disclosures, as we asked
in
our prior comment number 13 that such drafts be submitted within
your
response to comments which request expanded disclosures.
Management Discussion and Analysis of Financial Condition and
Results
of Operations
Results of Operations
2. We have reviewed your response to our prior comment number 3
and
the additional disclosures that you have proposed. While we
acknowledge that your proposed disclosures have provided
additional
information with regard to the results of your operations, we
believe
that your disclosures still require a greater focus on the
analysis of
why there have been changes in the material line items contained
in
your statement of operations, the specific underlying factors
contributing to the changes in market conditions that you have
referenced, and discussion which provides the reader with enough
insight to develop expectations of your company`s future
performance.
For example, you have stated that there has been a decline in the
commercial aerospace market, and you have stated further that your
sales of non-jet engine parts have declined. However, you have
not
discussed the underlying factors affecting the aerospace market,
and
specifically, sales of non-jet engine parts. You also have not
provided insight as to whether the aerospace market or your non-
jet
engine part sales are expected to recover from such factors, and,
if
reasonably known, the expected impact on the future performance or
direction of your business. Please expand upon the discussion of
material line items and changes to material line items presented
in
your financial statements, accordingly. Refer to our Interpretive
Release about Management`s Discussion and Analysis (FR-72) for
further
guidance.
3. In addition, please evaluate the need to include a discussion
of
other material items affecting your results of operations, which
you
referenced in response to other comments issued in our prior
letter.
For example, you stated in your response to our prior comment
number
10 that the significant variance in your company`s accounts
receivable
balance at December 31, 2004 versus December 2003 resulted
primarily
from a significant increase in sales in December of 2004 versus
December of 2003. You state further that your sales increase in
December of 2004 was substantially driven by delivery increases
and
the delivery on several large contracts to your company`s two
largest
customers. Please expand your discussion in MD&A to discuss the
factors contributing to your delivery increases, to provide
insight as
to whether these increases are due to isolated large orders or are
the
result of increased demand and production ability, and to discuss
all
other material items or events which have had a significant affect
on
the results of your operations.
Note G - Income Taxes, page 28
4. We have reviewed your response to our prior comment number 11.
As
part of the objective of the "Critical Accounting Policies and
Estimates" section of your document is to discuss (1) why
accounting
estimates or assumptions bear risk of change and (2) how you
arrived
at material estimates that require a significant amount of
judgment,
please confirm to us that you will expand your disclosures in the
"Critical Accounting Policies and Estimates" section of your
document
to include information similar to that provided in your response
to
our prior letter.
Note I - Segment Information, page 29
5. We have reviewed your response to our prior comment number 12,
and
we still believe that your disclosures should be expanded to
report
revenues generated from each of your three major product lines.
Although we concur with your rationale for combining your
company`s
three major product lines into a single reportable segment, based
upon
your annual report, website, and response to our prior comment,
your
individual product lines appear to be material and to require the
entity-wide disclosures that are separately required by paragraph
37
of SFAS No. 131. Please revise your disclosures accordingly.
Form 10-Q for the period ended April 2, 2005
6. Please address our comments regarding your Form 10-K in your
fiscal
year 2005 Form 10-Qs, where applicable.
Condensed Consolidated Statements of Cash Flows
7. We note per "Note B - Financing Arrangements" to your document
that
your company refinanced its $995,531 term loan payable balance
held
with its former primary lender with financing from Banknorth, N.A.
As
your statement of cash flows only reflects repayments of long-term
debt of $273,098, it is unclear if you may have inappropriately
netted
debt repayments and new debt borrowings or if your statement of
cash
flows should include supplemental information regarding non-cash
financing activities in accordance with paragraph 32 of SFAS No.
95.
Please appropriately revise your statement of cash flows or tell
us
why you believe a revision is not necessary.
Other
8. In each instance that we have requested that you expand upon
your
disclosures, please include a draft of your proposed additional
disclosures within your response.
As appropriate, please revise your future filings and
respond to
these comments within 10 business days or tell us when you will
provide us with a response. 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 filing 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 the filing;
* 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.
You may contact Jeffrey Sears at (202) 551-3302 or Joseph
Foti at
(202) 551-3816 if you have questions regarding comments on the
financial statements and related matters.
Sincerely,
Joseph Foti
Senior Assistant Chief Accountant
Via facsimile: Glenn L. Purple, CFO
Mr. Dominick A. Pagano
EDAC Technologies Corporation
June 24, 2005
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