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Mail Stop 3561
January 19, 2006
W. Nicholas Howley
Chief Executive Officer
TD Holding Corporation
1301 East 9th Street, Suite 3710
Cleveland, OH 44114
Re: TD Holding Corporation
Registration Statement on Form S-1
Filed December 20, 2005
File No. 333-130483
Dear Mr. Howley:
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
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 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 a number of blank spaces throughout your registration
statement for information that you are not entitled to omit under
Rule 430A. Please allow us sufficient time to review your
complete
disclosure prior to any distribution of preliminary prospectuses.
2. Please provide support for the qualitative and comparative
statements contained in your prospectus. We note the following
examples:
* "We are a leading global designer, producer and supplier of
highly
engineered aircraft components for use on nearly all
commercial...,"
page 1;
* "Our products have strong brand names within the industry and we
have a reputation for high quality, reliability and customer
support," page 2; and
* "Because we deliver products that meet or exceed our customers`
expectations and performance standards...," page 3.
These are only examples. To the extent the statement represents
management`s belief, please state so and tell us the basis for
that
belief. Please mark your furnished support or provide page
references in your response to the sections you rely upon for each
specific statement. To the extent you are unable to provide
support,
please delete the qualitative and comparative statement. Please
revise throughout your prospectus as necessary.
3. Please provide us with any gatefold information such as
pictures,
graphics or artwork that will be used in the prospectus.
Front Cover of Prospectus
4. Please omit the Transdigm logo since it is not the issuer.
Special Note Regarding Forward-Looking Statements, page ii
5. Please move this section so that it appears after the risk
factors
section.
Industry and Market Data, page ii
6. We note your representation that some of the information in the
prospectus is based on independent industry publications,
government
publications, etc. and that you have not independently verified
the
information and cannot assure the accuracy or completeness of the
information. Please note that you are responsible for the entire
content of the registration statement and cannot include language
that can be interpreted as a disclaimer of the information
contained
in the filing. Please revise.
Basis of Presentation, page ii
7. Please revise to omit the use of defined terms and use
abbreviated
names including TD Holding, Transdigm Holding, and Transdigm Inc.,
or
terms that are clear from their context. Further, please omit the
corporate history and the discussion of the accounting
presentation
since these disclosures are repeated elsewhere in the document.
Prospectus Summary, page 1
8. Please note that the summary is merely intended to provide a
brief
overview of the key aspects of the offering. As currently
disclosed,
the summary appears lengthy and repeats much of the information
fully
discussed in the business section. Please revise accordingly.
See
Instruction to Item 503(a) to Regulation S-K. To the extent you
retain limited amounts of disclosure, please consider the
applicability of comments issued in the business section.
Our Company, page 2
9. We note that you disclosed certain large customers beginning in
the second full paragraph on page 2 and in the fourth paragraph
under
"Customers" on page 53. Please delete the names of your
customers,
unless the customer provides 10% or more of your revenues.
Our Formation and Recent Transactions, page 5
10. Please revise your organizational chart to include ownership
percentages. Further, please include Warburg, TD Co-investors and
TD
LLC in the chart.
Summary Historical Consolidated Financial Data, page 9
11. Please provide separate statements of the reasons why you
believe
that EBITDA and EBITDA As Defined provide useful information to
investors, as required by Item 10(e)(1)(i)(C) to Regulation S-K.
In
addition, please provide separate statements of the reason why you
use each of the non-GAAP measures.
12. Please provide the disclosure set forth in Answer 8 of the
Frequently Asked Questions Regarding the Use of Non-GAAP Financial
Measures dated June 13, 2003.
13. Please make conforming changes to the other sections of your
document where you present non-GAAP.
Risk Factors, page 12
14. Some of your risk factors appear overly lengthy and should be
shortened to concisely disclose the material risk. For example,
we
note the following risk factors:
* Government contracts contain unfavorable termination..., page
14;
* Substantial leverage - Our substantial indebtedness..., page 15;
and
* The terms of the Amended and Restated Senior Credit Facility...,
page 16.
15. In general, information that may be readily transferable to
other
offering documents or describes circumstances that may apply
equally
to other businesses that are similarly situated is generic
immaterial
information, which should not be included in your risk factor
section. Please eliminate all generic or speculative disclosure
from
your risk factor section, or revise to state specific material
risks
to your particular company, or to the purchasers in this offering.
For example, we note the following risk factors:
* Our international business exposes us to risks..., page 18;
* We could be adversely affected as a result..., page 19;
* Our stock price may be volatile, and your investment..., page
20;
and
* The requirements of being a public company may strain..., page
23.
If you elect to retain these risk factors in your prospectus, you
must clearly explain how they specifically or uniquely apply to
your
company, industry, offering, etc. Again, these are only a few
examples. Please revise accordingly throughout.
16. Some of your risk factors indicate that if the risk
materializes,
it could have a material effect on your "[b]usiness, financial
condition and results of operations" or other similar language.
Please revise to more precisely articulate the specific risk or
consequence that would result from each risk factor.
Government contracts contain unfavorable termination
provisions...,
page 14
17. We note that it appears that you discuss multiple risks under
this one heading. Please discuss the current pricing review by
the
DOD under a separate risk factor heading and disclose the report
recommendation to refund $2.6 million. Further, please update the
status of the pricing review, whether you intend to refund the
entire
amount or a lesser amount, and the status of your negotiations.
Similarly, please update the disclosure of the pricing review in
the
Management`s Discussion and Analysis section on page 33.
If we lose our senior management..., page 17
18. Please revise to identify each member of senior management on
whom you depend. We note that you list only the key employees with
whom you have employment agreements.
Our international business exposes us to risks..., page 18
19. Please identify any material foreign suppliers or foreign
customers.
Management`s Discussion and Analysis of Financial Condition and
Results..., page 31
20. Throughout this section, please provide more analysis of the
disclosure provided and avoid repeating data in the tables
presented.
As an example, on page 37 you provide several factors contributing
to
the increase in net sales, yet you do not provide an analysis for
the
reasons underlying the increases in those factors. Without
describing the reasons for the increase in factors such as OEM net
sales or aftermarket net sales, there is insufficient insight for
a
reader to see the business through the eyes of management. Please
refer to FR 72 for guidance.
Recent Developments, page 32
Government Pricing Review, page 32
21. Please tell us the likelihood of a negative outcome of the
pricing review by the DOD Office of Inspector General. Also,
discuss
in liquidity and capital resources the potential impact to your
liquidity in regards to Strategic Supplier Agreements
incorporating
prices for parts based on cost, rather than based on prices of
comparable commercial parts or other methods.
Motor Product Line Acquisition, page 33
22. Please disclose the type and amount of consideration you paid
for
the motor product line acquisition.
Critical Accounting Policies, page 35
23. Please revise your disclosure to (i) identify the certain
types
of contracts that contain right of return provisions, (ii) explain
the reason you grant these customers a right of return, and (iii)
identify the terms of the right of return.
Results of Operations, page 37
24. Please describe any known trends or uncertainties that have
had
or that you reasonably expect will have a material favorable or
unfavorable impact on net sales or revenues or income from
continuing
operations. See Item 303(a)(3)(ii) to Regulation S-K.
25. For each period, please revise to discuss the cost of sales.
Further, where you discuss an increase or decrease that is
attributable to more than one factor, please revise to quantify
the
separate impact of each factor.
Interest Expense page 38
26. Please tell us why interest expense increased on the Senior
Unsecured Promissory Notes in fiscal year ended September 30, 2005
compared with fiscal year ended September 30, 2004. Reference is
made to Note 10 to the consolidated financial statements, which
indicate that the Senior Unsecured Promissory Notes were issued in
July 2003 at a 12% fixed rate.
Liquidity and Capital Resources, page 41
27. Please identify any known trends or any known demands,
commitments, events or uncertainties that will result or that are
reasonably likely to result in the registrant`s liquidity
increasing
or decreasing in any material way. Please also describe any known
material trends, favorable or unfavorable, in the registrant`s
capital resources. See Item 303(a)(1) and (2) to Regulation S-K.
28. Please provide the calculations of the significant financial
covenant ratios that use EBITDA and EBITDA As Defined, as well as
the
disclosure set forth in Answer 10 of the Frequently Asked
Questions
Regarding the Use of Non-GAAP Financial Measures dated June 13,
2003.
Financing Activities, page 41
29. In order to increase the readability of your disclosure,
please
revise this section to include the use of headings. Please see
SEC
Release No. 33-8350 (December 29, 2003).
Quantitative and Qualitative Disclosures About Market Risk, page
46
30. Please revise to include a discussion regarding the potential
exposure to foreign currency exchange rate risk in connection with
your direct sales to foreign customers and purchases from foreign
suppliers. Your revised disclosure should be presented in one of
the
suggested formats outlined in Item 305(a)(1) to Regulation S-K.
Business, page 48
31. Please describe the DOD pricing review, refund recommendation
and
renegotiation. Refer to Item 101(c)(ix) to Regulation S-K.
General, page 48
32. Please expand your disclosure to describe the general
development
of the business of you, your subsidiaries and any predecessor(s)
during the past five years, or any earlier periods if material to
understanding the general development of your business. See Item
101(a) to Regulation S-K.
33. We note that the fourth paragraph suggests that you are not
dependent on a single type of customer. Please balance this
statement by disclosing that your top ten customers accounted for
approximately 52% of your net sales and that your top three
customers
accounted for 30%, as disclosed on page 13.
Selective Acquisition Strategy, page 51
34. According to your disclosure, it appears that the acquisition
of
businesses and/or product lines is an important part of your
growth
strategy. For example, you state in the first full paragraph on
page
50 that management has achieved growth through a "[m]ethological
and
focused acquisition strategy," and in the first paragraph under
"Business Strategy" that you have a "[p]roven acquisition
strategy."
Please expand your disclosure here to more fully describe your
acquisition strategy, including the criteria used in determining
an
appropriate acquisition candidate. Further, you state that you
have
"[a]cquired and integrated fifteen businesses and/or product lines
since [y]our formation in 1993," and that in each case, you have
"[s]ignificantly improved operating and financial performance."
Please describe any recent, material acquisition(s) and explain
how
you integrated the business(es) or product line(s) into your
operations. Please also describe specifically how the
acquisition(s)
significantly improved your operating and financial performance.
Sales and Marketing, page 52
35. According to your disclosure, Aviall, Inc. and Satair A/S are
your major distributors. If material, please disclose the terms
of
your distributor agreements with Availl, Inc. and Satair A/S and
file
the agreements as exhibits.
Raw Materials and Patents, page 54
36. Please identify any significant suppliers on whom you rely.
Foreign Operations, page 55
37. Please include all the information required by Item 101(d) to
Regulation S-K, or advise us.
Management, page 57
Executive Officers and Directors, page 57
38. Please revise the descriptions of business experience to
disclose
the type of business conducted by each entity, if not clear from
the
business name. Please revise to clarify when an entity is a
subsidiary of Transdigm Inc.
Director Compensation, page 60
39. Please estimate the amount of the annual stipend and fee you
intend to pay your non-employee directors. See Item 402(g) to
Regulation S-K.
Executive Compensation, page 62
40. We note that Note 11 on page F-25 describes your pension
plans.
Please revise to include the information required by Item 402(f)
to
Regulation S-K, or advise us.
Employment Related Agreements, page 64
41. Please describe any change of control provisions and discuss
whether this offering constitutes a change of control or other
event
that would trigger payments.
42. Describe the bonus plan and how the bonuses are determined.
Principal and Selling Stockholders, page 72
43. We note that certain of the principal and selling stockholders
are non-natural persons. Please disclose the natural persons who
exercise sole or shared voting or investment power over the
entity.
See Telephone Interpretation 4S in the Regulation S-K section of
the
March 1999 Telephone Interpretation Manual. If any of the
entities
listed are public entities, majority-owned subsidiaries of public
entities or registered investment companies, please disclose this
by
way of footnote.
44. Please identify all selling shareholders who are registered
broker-dealers or affiliates of broker dealers. Additionally,
please
tell us if the broker-dealer received the securities as
underwriting
compensation. Please note that a registration statement
registering
the resale of shares being offered by broker-dealers must identify
the broker dealers as underwriters if the shares were not issued
as
underwriting compensation.
45. If any of the selling shareholders are broker-dealers or
affiliates of broker-dealers, please provide an analysis
supporting
your position that the resale of securities by any affiliates of
broker-dealers is not an indirect primary offering. Your analysis
should address the following points:
* how long the selling shareholders have held the securities;
* the circumstances under which the selling shareholders received
the
securities;
* the selling shareholders` relationship to the issuer;
* the amount of securities involved;
* whether the sellers are in the business of underwriting
securities;
and
* whether under all the circumstances it appears that the seller
is
acting as a conduit for the issuer.
Assuming the resale of securities by affiliates of broker-dealers
is
not an indirect primary offering, you must clearly state in your
prospectus:
* the seller purchased in the ordinary course of business; and
* at the time of the purchase of the securities to be resold the
seller had no agreements or understandings, directly or
indirectly,
with any person to distribute the securities.
46. Please disclose how the selling stockholders received their
shares. Further, we note that on page 91, the underwriters may
purchase shares from Warburg and "certain members of management"
to
cover the over-allotment. Please include the selling stockholders
who may sell to cover the over-allotment.
Certain Relationships and Related Party Transactions, page 75
Stockholders` Agreement and Management Stockholders` Agreement,
page
75
47. Please revise your use of the term "certain." For example,
please quantify the "certain specified percentages" of ownership,
describe the number of "certain individuals" that Warburg may
designate, and describe the "certain contractual restrictions." In
addition, please quantify the "certain thresholds" under the
registration rights agreement.
Recent Transactions, page 76
48. We note that you present the bonus and distribution amounts on
an
aggregated basis. Please identify the individual members of
management and the amounts each received. Please also describe
how
the payment amounts were determined.
Shares Eligible for Future Sale, page 80
49. Please disclose the approximate number of holders of each
class
of common equity as of the latest practicable date. See Item
201(b)
to Regulation S-K.
50. For ease of investor understanding, please revise to include a
table at the beginning of your disclosure showing the dates when
all
of your common shares outstanding immediately prior to the
offering
may be resold following the completion of the offering. For
example,
the table should further classify the outstanding shares based on
the
first date on which those shares may be resold into the market
once
any applicable lockup restrictions have lapsed, either because
those
shares have been or will be registered for resale under the
Securities Act or have become or will become eligible for resale
under Rule 144 or any other applicable resale exemptions.
Lock-up Agreements, page 81
51. Please disclose the factors that the underwriters will
consider
if they agree to permit persons subject to the lock-up agreement
to
sell securities.
Description of Certain Indebtedness, page 82
52. Please disclose whether you and your subsidiaries are in
compliance with the covenants in each facility or indenture.
Amended and Restated Senior Credit Facility, page 82
53. We note that this offering will not constitute a change of
control under the indenture or the TD Holding facility. Please
disclose whether this offering will constitute a change of control
under the amended senior credit facility.
Certain Covenants, page 83
54. Please revise to quantify the financial covenants.
Underwriting, page 91
55. According to your disclosure toward the bottom of page 92, it
appears that you have a directed share program for employees.
Please
tell us the mechanics of how and when these shares will be offered
and sold to persons in the directed share program. For example,
please explain to us how you will determine the prospective
recipients of reserved shares. Please tell us when and how they
will
indicate their interest in purchasing shares. Also, please tell us
how and when the issuer and underwriters will contact the direct
share investors, including the types of communications used. Will
any electronic communications or procedures be used by the
underwriter or company, such as e-mail? When will the shares and
money be exchanged? When do purchasers become committed to
purchase
their shares? How and when will the number of shares offered be
determined? Will the procedures for the directed share program
differ from the procedures for the general offering to the public?
56. We note your disclosure in the first full paragraph on page 93
that a prospectus in electronic format will be made available on
the
websites of the underwriters. To the extent that you will engage
in
any marketing of this offering online, please confirm that your
procedures for electronic postings or links to the prospectus or
for
electronic distributions have been reviewed and cleared by the
Division`s Office of Chief Counsel, and that the procedures have
not
changed since such clearance.
Recent Sales of Unregistered Securities, page II-2
57. We note your disclosure that in connection with the closing of
the mergers, you issued shares to "certain members of management."
Please revise your disclosure to identify the members of
management
and the number of options rolled over by each individual and the
number of shares received.
Consolidated Financial Statements, page F-1
Notes to the Consolidated Financial Statements, page F-10
Note 1: Description of the Business and Merger, page F-10
Merger, page F-10
58. Please include all of the disclosure required by paragraphs 51
and 52 of SFAS 141 including a description of the factors that
contributed to a purchase price that resulted in recognition of
goodwill.
59. The certifications discussed on page 1 appear to be a contract
based intangible asset under paragraph 39 of SFAS 141. Please
explain to us how you have considered the need to recognize as an
asset apart from goodwill for the rights generated from these
certifications in connection with your merger and each of your
acquisitions.
60. Please explain why you did not recognize an asset apart from
goodwill for customer lists in connection with your merger and
each
of your acquisitions.
Note 2: Acquisitions, page F-12
61. Please disclose the cost of the Eaton acquisition and the
amount
of goodwill recognized.
Note 3: Summary of Significant Accounting Policies, page F-14
Revenue Recognition and Related Allowances, page F-14
62. We note that you design, produce and supply highly-engineered,
highly customized products to solve specific needs for aircraft
operators and manufactures. Please tell us the consideration
given
to accounting for your fix price contracts under the guidance in
SOP
81-1, "Accounting for Performance of Construction-Type and Certain
Production-Type Contracts."
Research and Development Costs, page F-15
63. Please tell us if you are reimbursed by your customers for
research and development costs. Second, tell us where you charge
research and development costs in your consolidated income
statements.
Segment Reporting, page F-17
64. Please provide the disclosure required by paragraphs 37 and 38
of
SFAS 131. It appears that you should disclose the revenue
attributable to each of your eleven major product lines.
65. Please revise your disclosure to clarify the reason why your
presentation of one segment is not inconsistent with your
reference
to various lines of business on page 37.
Note 20: New Accounting Standards, page F-36
66. Please clarify your disclosure to explain the reason you have
not
determined the impact of adopting Statement No. 123(R).
Note 21: Subsequent Events, page F-36
67. Please provide pro forma financial statements in accordance
with
Article 11 to give effect to the described events.
Financial Statement Schedules, page II6
Valuation and Qualifying Accounts, page II6
68. Please expand the schedule to include the valuation allowance
for
obsolete inventory, sales returns and deferred tax assets.
* * * *
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 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 filing to be certain that the
filing includes all information required under the Securities Act
of
1933 and that they have provided all information investors require
for an informed investment 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 staff comments and the declaration
of
effectiveness 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 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 Patrick Kuhn, Staff Accountant, at (202) 551-
3308, or Michael Fay, Branch Chief, at (202) 551-3812, if you have
questions regarding comments on the financial statements and
related
matters. Please contact Kurt Murao, Attorney Advisor, at (202)
551-
3338, or Peggy Kim, Senior Staff Attorney, at (202) 551-3411 with
any
other questions you may have.
Sincerely,
Max Webb
Assistant Director
cc: Stephen J. Gartner, Esq.
Willkie Farr & Gallagher LLP
Fax: (212) 728-9222
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W. Nicholas Howley
TD Holding Corporation
January 19, 2006
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