[COLEMAN CABLE, INC. LOGO]
July 27, 2005
VIA EDGAR
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: COLEMAN CABLE, INC.
REGISTRATION STATEMENT ON FORM S-4, FILED ON APRIL 26, 2005
SEC FILE NO. 333-124334
Ladies and Gentlemen:
On behalf of Coleman Cable, Inc. ("CCI"), we hereby submit for filing
Pre-Effective Amendment No. 2 (the "Amendment") to the above-referenced
Registration Statement. In addition, we are providing the following responses to
the Comment Letter, dated July 1, 2005, from the Staff of the Securities and
Exchange Commission regarding the Registration Statement. For ease of review, we
have repeated each comment in its entirety in the original numbered sequence.
Our response follows each comment.
SUMMARY CONSOLIDATED FINANCIAL DATA, PAGE 7
1. PLEASE REVISE FOOTNOTE 7 TO STATE THE AMOUNT BY WHICH PRO
FORMA FISCAL YEAR 2004 EARNINGS WERE NOT SUFFICIENT TO COVER
FIXED CHARGES. ALSO, PLEASE REMOVE THE RATIOS BELOW 1.0. REFER
TO INSTRUCTION 2 TO ITEM 503(d) OF REGULATION S-K FOR
GUIDANCE.
CCI Response
We have revised footnote 8, which relates to the pro forma ratio of
earnings to fixed charges, to state the amount by which pro forma fiscal year
2004 earnings were not sufficient to cover fixed charges. We have also removed
from the table the ratios below 1.0.
2. WE NOTE YOUR RESPONSE TO COMMENT 9 IN OUR LETTER DATED MAY 23,
2005 AND YOUR REVISED DISCLOSURES. YOU DISCLOSE THAT EBITDA IS
USEFUL TO INVESTORS BECAUSE IT "ELIMINATES THE EFFECTS OF
FINANCING AND INCOME TAXES, AS WELL AS THE ACCOUNTING EFFECTS
OF CAPITAL SPENDING." THIS STATEMENT DOES NOT ADEQUATELY
COLEMAN CABLE, INC. 1530 Shields Drive Tel 847-672-2300 Fax 847-689-1192
Waukegan, Illinois 60085 Toll-Free 800-323-9355 Web www.colemancable.com
EXPLAIN TO AN INVESTOR WHY EBITDA IS A USEFUL MEASURE. PLEASE
REVISE YOUR DISCLOSURE, AS APPROPRIATE. IN ADDITION, PLEASE
ALSO REVISE YOUR DISCLOSURE TO STATE THE ECONOMIC SUBSTANCE
BEHIND YOUR DECISION TO USE EBITDA AS A PERFORMANCE MEASURE,
AS REQUIRED BY QUESTION 8 OF THE SEC "FREQUENTLY ASKED
QUESTIONS REGARDING THE USE OF NON-GAAP FINANCIAL MEASURES."
CCI Response
We have revised footnote 5 to more fully explain to an investor why
EBITDA is a useful measure. We have also revised our disclosure to better
explain the economic substance behind our decision to use EBITDA as a
performance measure.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, PAGE 32
CONSOLIDATED RESULTS OF OPERATIONS, PAGE 34
3. PLEASE REVISE YOUR DISCUSSION OF YOUR GROSS PROFIT MARGIN FOR
THE INTERIM PERIODS ENDED MARCH 31, 2005 AND 2004 TO QUANTIFY
THE IMPACT OF THE INEFFICIENCIES RELATED TO THE MANUFACTURING
CONSOLIDATION, AS WELL AS TO PROVIDE ADDITIONAL INSIGHT AS TO
WHETHER THE INEFFICIENCIES ARE EXPECTED TO CONTINUE IN THE
FUTURE OR HAVE BEEN CORRECTED AND ARE NOT EXPECTED TO IMPACT
FUTURE PERIODS.
CCI Response
We have revised our discussion of our gross profit margin for the
interim periods ended March 31, 2005 and 2004 to quantify the impact of the
inefficiencies related to the manufacturing consolidation, as well as to provide
additional insight as to whether the inefficiencies are expected to continue in
the future or have been corrected and are not expected to impact future periods.
4. PLEASE REVISE YOUR DISCUSSION OF INCOME TAX EXPENSE TO PROVIDE
A REASONABLY DETAILED EXPLANATION AS TO WHY YOUR EFFECTIVE TAX
RATE SIGNIFICANTLY INCREASED FOR THE THREE-MONTH PERIOD ENDED
MARCH 31, 2005 TO 90% WHEN COMPARED TO THE 19% EFFECTIVE TAX
RATE FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2004.
CCI Response
We have revised our discussion of income tax expense to describe why
our effective tax rate significantly increased for the three-month period ended
March 31, 2005 to 90% when compared to the 19% effective tax rate for the
three-month period ended March 31, 2004.
COLEMAN CABLE, INC. 1530 Shields Drive Tel 847-672-2300 Fax 847-689-1192
Waukegan, Illinois 60085 Toll-Free 800-323-9355 Web www.colemancable.com
LIQUIDITY AND CAPITAL RESOURCES, PAGE 40
5. WE NOTE YOUR RESPONSE TO COMMENT 24 IN OUR LETTER DATED MAY
23, 2005 AND YOUR REVISED DISCLOSURES TO INCLUDE INFORMATION
REGARDING THE MATERIAL DEBT COVENANTS CONTAINED IN YOUR CREDIT
FACILITY AND INDENTURE TO THE NOTES. HOWEVER, IT DOES NOT
APPEAR THAT YOU HAVE REVISED YOUR DISCLOSURE TO PROVIDE A
COMPREHENSIVE DISCUSSION AND ANALYSIS OF YOUR SOURCES AND USES
OF CASH, SUCH AS YOUR HISTORICAL AND CURRENT FINANCING
ARRANGEMENTS, OR ANY FINANCIAL COVENANTS AS NOTED ON PAGES
59-60. AS SUCH, PLEASE REVISE YOUR DISCUSSION TO INCLUDE THE
FOLLOWING:
- A DISCUSSION THAT CLEARLY ARTICULATES WHY YOU BELIEVE
CASH FLOW FROM OPERATIONS AND BORROWINGS UNDER YOUR
SENIOR SECURED CREDIT FACILITY WILL BE SUFFICIENT TO
FUND YOUR OPERATIONS, DEBT SERVICE AND CAPITAL
EXPENDITURES FOR THE FORESEEABLE FUTURE;
- A DETAILED DESCRIPTION OF YOUR DEBT INSTRUMENTS AND
THE AMOUNT AVAILABLE UNDER EACH INSTRUMENT WITHOUT
VIOLATING ANY DEBT COVENANTS FOR THE MOST RECENT
PERIOD PRESENTED;
- A DESCRIPTION OF YOUR FINANCIAL COVENANTS, INCLUDING
ACTUAL RESULTS; AND
- A STATEMENT THAT YOU WERE IN COMPLIANCE WITH ALL OF
YOUR DEBT COVENANTS AS OF MARCH 31, 2005, IF TRUE.
PLEASE REFER TO SECTION IV.B. AND IV.C. OF THE SEC
INTERPRETIVE RELEASE NO. 33-8350 DATED DECEMBER 19, 2003, ITEM
303.A.1. OF REGULATION S-K, AND SECTION 501.03 OF THE
FINANCIAL REPORTING CODIFICATION FOR ADDITIONAL GUIDANCE.
CCI Response
We have expanded the disclosure in the Liquidity section of
Management's Discussion and Analysis of Financial Condition and Results of
Operations to include:
o a more comprehensive discussion of our sources and uses of cash;
o a discussion that articulates the basis for our management's belief
that cash flow from operations and borrowings under our senior secured
credit facility will be sufficient to fund our operations, debt service
and capital expenditures for the foreseeable future;
o a detailed description of our debt instruments and the amount available
under each instrument without violating any debt covenants at March 31,
2005;
o a description of the financial covenants under our senior secured
credit facility and senior notes, including actual results at March 31,
2005; and
o a statement that we were in compliance with all of our debt covenants
as of March 31, 2005.
COLEMAN CABLE, INC. 1530 Shields Drive Tel 847-672-2300 Fax 847-689-1192
Waukegan, Illinois 60085 Toll-Free 800-323-9355 Web www.colemancable.com
CRITICAL ACCOUNTING POLICIES, PAGE 43
6. WE NOTE YOUR RESPONSE TO COMMENT 26 IN OUR LETTER DATED MAY
23, 2005 AND YOUR REVISED DISCLOSURES. WE NOTE THAT YOU HAVE
NOT REVISED YOUR DISCLOSURES RELATED TO YOUR INVENTORIES AND
PLANT AND EQUIPMENT CRITICAL ACCOUNTING ESTIMATES. PLEASE
REVISE YOUR DISCLOSURE TO PROVIDE THE FOLLOWING INFORMATION,
OR TELL US HOW YOU DETERMINED YOUR CURRENT DISCLOSURE FULLY
COMPLIES WITH ITEM 303 OF REGULATION S-K:
- INVENTORIES:
- YOUR METHOD FOR EVALUATING INVENTORY FOR
OBSOLESCENCE, DAMAGE AND/OR EXCESS;
- THE SIGNIFICANT ASSUMPTIONS MADE BY MANAGEMENT;
AND
- THE SENSITIVITY OF THE ASSUMPTIONS USED TO
ESTIMATE OBSOLESCENCE, DAMAGE AND/OR EXCESS.
- PLANT AND EQUIPMENT: A SENSITIVITY ANALYSIS REGARDING
YOUR ESTIMATED USEFUL LIVES BY MAJOR ASSET CATEGORY.
- GOODWILL:
- STATE THE VALUATION METHOD USED TO DETERMINE IF
GOODWILL IS IMPAIRED;
- A DISCUSSION OF THE ASSUMPTIONS USED TO ESTIMATE
FUTURE CASH FLOWS; AND
- THE TYPES OF EVENTS THAT COULD RESULT IN AN
IMPAIRMENT TO YOUR GOODWILL BALANCE.
REFER TO SEC INTERPRETIVE RELEASE NO. 33-8350, SEC OTHER
RELEASE NO. 33-8040 AND SEC PROPOSED RELEASE NO. 33-8098 FOR
ADDITIONAL GUIDANCE.
CCI Response
Inventories:
Our charges to cost of good sold and our inventory reserves for excess
and obsolete stock have been consistent over the last three years and within our
expected ranges. The reserve at March 31, 2005 is $2,542.
Plant and Equipment:
Adjustments to the carrying value of plant and equipment in the last
three years were due solely to restructuring actions, including the closure of a
manufacturing facility. No further restructuring actions are planned at this
time.
COLEMAN CABLE, INC. 1530 Shields Drive Tel 847-672-2300 Fax 847-689-1192
Waukegan, Illinois 60085 Toll-Free 800-323-9355 Web www.colemancable.com
Goodwill:
As requested, we have added additional disclosure to the discussion of
our Critical Accounting Policies in Management's Discussion and Analysis of
Financial Condition and Results of Operation regarding goodwill.
SECURITY OWNERSHIP, PAGE 53
7. WE HAVE REVIEWED YOUR RESPONSE TO OUR PRIOR COMMENT 30 IN OUR
LETTER DATED MAY 23, 2005. PLEASE INCLUDE THE INFORMATION
PROVIDED IN THAT RESPONSE IN A FOOTNOTE TO THE TABLE.
CCI Response
We have included the requested disclosure in a footnote to the table.
COLEMAN CABLE, INC. CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
DECEMBER 31, 2004
5. GOODWILL AND INTELLECTUAL PROPERTY
8. WE NOTE YOUR RESPONSE TO COMMENT 36 IN OUR LETTER DATED MAY
23, 2005. HOWEVER, IT REMAINS UNCLEAR WHY YOU ARE NOT REQUIRED
TO ALLOCATE GOODWILL TO YOUR OPERATING SEGMENTS IN ACCORDANCE
WITH SFAS 142. PARAGRAPH 30 OF SFAS 142 STATES, "A REPORTING
UNIT IS AN OPERATING SEGMENT OR ONE LEVEL BELOW AN OPERATING
SEGMENT (REFERRED TO AS A COMPONENT). A COMPONENT OF AN
OPERATING SEGMENT IS A REPORTING UNIT IF THE COMPONENT
CONSTITUTES A BUSINESS FOR WHICH DISCRETE FINANCIAL
INFORMATION IS AVAILABLE AND SEGMENT MANAGEMENT REGULARLY
REVIEWS THE OPERATING RESULTS OF THAT COMPONENT." PARAGRAPH 54
OF SFAS 142 REQUIRES ALL GOODWILL RECOGNIZED IN AN ENTITY'S
BALANCE SHEET AT THE DATE SFAS 142 IS INITIALLY APPLIED TO BE
ASSIGNED TO ONE OR MORE REPORTING UNITS. AS SUCH, IT APPEARS
THAT GOODWILL MUST BE ALLOCATED TO YOUR OPERATING SEGMENTS.
PLEASE REFER TO PARAGRAPHS 34 AND 35 OF SFAS 142 FOR GUIDANCE
ON ALLOCATING GOODWILL TO YOUR OPERATING SEGMENTS AND PERFORM
THE APPROPRIATE IMPAIRMENT TESTS.
CCI Response
We have allocated the goodwill to our eleven operating segments and
have performed our impairment testing at that level. Accordingly, we have
revised Note 5.
COLEMAN CABLE, INC. 1530 Shields Drive Tel 847-672-2300 Fax 847-689-1192
Waukegan, Illinois 60085 Toll-Free 800-323-9355 Web www.colemancable.com
8. BUSINESS SEGMENT INFORMATION, PAGE F-33
9. WE NOTE YOUR RESPONSE TO COMMENTS 38 AND 39 IN OUR LETTER
DATED MAY 23, 2005. IT REMAINS UNCLEAR TO US WHY YOU ARE NOT
DISCLOSING FIXED ASSET DEPRECIATION AND AMORTIZATION EXPENSE
BY REPORTABLE SEGMENT, SINCE:
- IT IS NOT LISTED AS AN UNALLOCABLE COST THAT IS
INCLUDED WITHIN CORPORATE, BUT RATHER IS ALLOCATED TO
YOUR OPERATING SEGMENTS USING PRODUCT COSTING;
- IT IS INCLUDED IN THE DETERMINATION OF SEGMENT
OPERATING INCOME, WHICH IS DISCLOSED BY REPORTABLE
SEGMENT; AND
- PARAGRAPH 90 OF SFAS 131 STATES, "AN ENTERPRISE MAY
ALLOCATE EXPENSE TO A SEGMENT WITHOUT ALLOCATING THE
RELATED ASSET; HOWEVER, DISCLOSURE OF THAT FACT IS
REQUIRED."
PLEASE REVISE YOUR DISCLOSURES ACCORDINGLY.
COLEMAN CABLE, INC. 1530 Shields Drive Tel 847-672-2300 Fax 847-689-1192
Waukegan, Illinois 60085 Toll-Free 800-323-9355 Web www.colemancable.com
CCI Response
We do not allocate depreciation and amortization expense to our
segments. Depreciation and amortization expense is included in our manufacturing
overhead cost pools and is absorbed into product cost (and inventory) as each
product passes through a manufacturing work center. We currently have in excess
of 100 active work centers across all our manufacturing plants. An example for
one such product follows:
Product Number: 21501-06-08 - 16/6 SEOW 600V 1000' CABLE
Operating Work Overhead Cost Feet per Hr Overhead
Sequence Center per Hour Cost per
1,000 FT
10 807 $ 54 43K $ 9
20 807 $ 54 20K $ 9
30 833 $ 48 9K $ 8
40 806 $ 54 7K $ 9
50 251 $ 49 12K $ 8
$ 44
Each of the work center overhead costs per hour consists of indirect
labor, repair and maintenance labor, quality control labor, plant personnel
labor and bonus, overhead benefit expenses, overhead variable expenses, and
overhead fixed expenses, which include depreciation.
This product runs through each of the above sequences accumulating an
overhead cost depending on time to run and number of process required for
completion. Depreciation is one of the components for this accumulated cost.
Once this product is complete, it is received into inventory and once
sold, its cost flows through the cost of goods sold portion of the selling
segment. This cost of goods sold number contains the deprecation cost contained
in the overhead cost and is reflected in the selling segments' operating profit.
The disclosure has been updated to reflect our allocation of expense,
but not the related assets.
* * * * * *
COLEMAN CABLE, INC. 1530 Shields Drive Tel 847-672-2300 Fax 847-689-1192
Waukegan, Illinois 60085 Toll-Free 800-323-9355 Web www.colemancable.com
If you have any questions or comments regarding this letter or the
Registration Statement, please contact George C. McKann (312-569-1127) or Troy
M. Calkins (312-569-1150) of Gardner Carton & Douglas LLP, our counsel.
Very truly yours,
COLEMAN CABLE, INC.
By: /s/ Richard N. Burger
----------------------------------------
Richard N. Burger
Executive Vice President, Chief Financial
Officer, Secretary and Treasurer
cc: Ms. Pamela A. Long [Securities and Exchange Commission]
Ms. Brigitte Lippmann [Securities and Exchange Commission]
Ms. Tracey Houser [Securities and Exchange Commission]
Mr. George C. McKann [Gardner Carton & Douglas LLP]
COLEMAN CABLE, INC. 1586 South Lakeside Drive Tel 847-672-2300 Fax 847-689-1192
Waukegan, Illinois 60085 Toll-Free 800-323-9355 Web www.colemancable.com