212-859-8662
September 15, 1997 (FAX: 212-859-8586)
United States Securities and Exchange Commission
450 Fifth Street, N.W.
Mail Stop 3-5
Washington, D.C. 20549
Attn: Nicholas Panos, Esq.
RE: MT INVESTORS INC.
AMENDMENT NO. 1 TO REGISTRATION STATEMENT ON FORM 10
FILE NO. 0-22493
Dear Mr. Panos:
As you are aware, pursuant to Section 12(g) of the
Securities Exchange Act of 1934, on April 30, 1997, MT
Investors Inc. (the "Company") filed with the Securities and
Exchange Commission a Registration Statement on Form 10
(File No. 0-22493) (as amended, the "Form 10"). On June 2,
1997 the Company received comments (the "First Letter") from
the SEC with respect to the Form 10. On June 30, 1997, the
Company filed Amendment No. 1 (the "Form 10 Amendment") to
the Form 10 responding to the comments and including the
most recent quarterly financial information and, pursuant to
Section 12(g), the Form 10 automatically became effective.
On August 12, the Company, submitted a letter responding to
each of the comments in the First Letter along with a copy
of the Form 10 Amendment, marked to show changes from the
Form 10 filed on April 30. On September 10, the Company
received a letter (the "Second Letter") from the SEC with
respect to the Form 10 Amendment.
This letter responds to each of the comments in the
Second Letter. As we previously advised you, the Company is
also filing today a Registration Statement on Form S-1 (the
"S-1 Registration Statement") with respect to the proposed
sale of its common stock in an initial public offering. As
indicated below, you will note that certain of the comments
raised in the Second Letter are addressed in the S-1
Registration Statement and, as a courtesy, we are sending by
overnight courier the S-1 Registration Statement which we
have marked to indicate where the comments in the Second
Letter have been addressed.
In light of the fact that (i) the S-1 Registration
Statement reflects the staff's comments in the Second
Letter, (ii) we do not believe that the revisions which the
staff has suggested be made to the Form 10 Amendment are
material and (iii) the Form 10 has been effective for two
and a half months, we propose that the Company not be
required to file a Second Amendment to the Form 10 and an
amendment to the Form 10-Q for the period ended June 30,
1997 to reflect the staff's comments in the Second Letter.
The responses set forth below are the Company's
responses. Capitalized terms used in this letter have the
meanings given to them in the Form 10, as amended. To
facilitate your review, we have set forth herein each
comment of the staff followed by its respective response.
ITEM 1. BUSINESS
- ----------------
RECENT DEVELOPMENTS, PAGE 10
- ----------------------------
1. Provide us your calculations under Rule 3-05 and Rule 1-
02(w) of Regulation S-X for the Safeline Acquisition.
Justify the denominator used in your calculation under
condition 3 of Rule 1-02(w) of Regulation S-X.
1. The Company attaches herewith as Exhibit A to this
response letter its calculations under Rule 3-05
and Rule 1-02(w) of Regulation S-X for the
Safeline Acquisition. With respect to the
denominator used in the calculation under
condition 3 of Rule 1-02(w) of Regulation S-X, the
Company respectfully advises the staff as follows:
- The Company combined its income from
continuing operations before income taxes for
the period January 1, 1996 to October 14,
1996 and loss from continuing operations
before income taxes for the October 15, 1996
to December 31, 1996 which resulted in a loss
for its most recently completed fiscal year.
- SEC Staff Interpretations in Registrant
Matters Involving Accounting and Auditing
Issues (updated May 24, 1993), VI, Definition
of a "Business" and Significant Subsidiary,
K, Significant subsidiary loss, 6, states:
"If a registrant has reported
a loss in its most recent
year, the five-year averaging
method is not permitted; the
significance of the subsidiary
should be evaluated relative
to the absolute value of the
most recent year's loss."
Accordingly, the Company used the absolute
value of its combined loss in 1996 as the
denominator in making the test of
significance required by condition 3 of Rule
1-02(w) of Regulation S-X.
ITEM 2. FINANCIAL INFORMATION
- ------------------------------
SELECTED FINANCIAL DATA
- -----------------------
FOOTNOTE (1). PRIOR COMMENT 19
- -------------------------------
2. Revise the Pro Forma 1996 information to exclude $1.3
million of the adjustment described in item (iii)
relating to the estimated additional selling, general
and administrative expenses resulting from being an
independent company. We note disclosure under "Impact
of Acquisition on Results of Operations" in MD&A that
$1.0 million of the adjustment relates to an annual fee
payable to AEA Investors. Assuming that this fee is a
contractual obligation, this portion of the adjustment
appears to be appropriate. The remaining $1.3 million;
however, appears to be more in the nature of a forecast
or projection and does not appear to meet the
requirement of Rule 11-02(b) (6) of Regulation S-X that
pro forma adjustments be factually supportable.
The pro forma statement of operations of the Company in
the S-1 Registration Statement for the year ended
December 31, 1996 has been revised to exclude the $1.3
million of estimated additional selling, general and
administrative expenses as a result of being an
independent company. Disclosure of this estimated
additional expense has been included in the
introduction to the pro forma statements.
3. We note that the portion of the other charges described
in item (v) that are related to the Acquisition appear
to be more in the nature of a forecast or projection
and are not appropriate for pro forma presentation.
Delete these items for the pro forma information. You
may describe these items in a footnote to the pro forma
information, as long as you make it clear that they are
not included in the pro forma information.
Item (v) to Footnote (1) of Item 2 describes certain
charges recognized by the Company during the period
January 1, 1996 to October 14, 1996 and during the
period October 15, 1996 to December 31, 1996 relating
to internal restructurings. These charges reflect
primarily severance costs incurred during the periods
referenced and have not been eliminated from the
historical financial information in preparing the pro
forma financial information. Similarly, the pro forma
financial information has not been adjusted to give
effect to cost savings attributable to the
restructurings.
4. We note that the adjustment described in item (v) on
page 12 does not appear to be contemplated in the
description of the pro forma adjustments described on
page 19 in MD&A. Please clarify.
Please see the response to comment 3 above.
5. Revise the pro forma presentation in MD&A to reflect
the changes made in response to the above items.
Please see the response to comment 3 above.
MANAGEMENT'S DISCUSSION AND ANALYSIS
- ------------------------------------
GENERAL AND RESULTS OF OPERATIONS
- ---------------------------------
6. We note your response to prior comment 16. In future
filings, expand the disclosure to specify the types of
cost savings (for example, labor costs, depreciation,
etc.) and to clarify that the $8.3 million in savings
is on an annual basis.
The S-1 Registration Statement provides expanded
disclosure to specify the types of annual cost savings
the Company anticipates it will realize of $8.3
million.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -----------------------------------------------------
7. As requested in prior comment 12, delete earnings per
share data for the Predecessor business from the
consolidated financial statements. Also, the loss per
share reflected on page 11 for the period October 15,
1996 to December 31, 1996 differs from that presented
on page F-5 for the same period. Please revise. Also,
tell us how you determined the weighted average number
of common shares outstanding used for that period.
Provide Exhibit 11 in future filings.
The S-1 Registration Statement does not present
earnings per common share for the Predecessor business.
Additionally, the loss per common share information
presented within the S-1 Registration Statement is in
conformity. The weighted average number of common
shares outstanding for the Successor period has been
computed based upon the length of time the common
shares were outstanding for such period. Exhibit 11
has been included in the S-1 Registration Statement and
will be included in applicable future filings.
8. We note your response to prior comment 21. Since the
loan to Mr. Spoerry is a related party transaction, an
appropriate determination of materiality may be
qualitative, rather than quantitative. In future
filings, revise the consolidated balance sheets to
separately present this item (as required by Rule 4-
08(k) of Regulation S-X), or present this item in a
footnote.
The loan to Mr. Spoerry is disclosed in a note to the
Audited Consolidated Financial Statements of the
Company in the S-1 Registration Statement and will be
incorporated in future filings of the Company in a
similar manner.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997
- ---------------------------------------------
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
- ---------------------------------------------
9. Revise the interim consolidated statements of
operations for the three and six month periods ended
June 30, 1997 to present the loss per share before
extraordinary item on the face of the statements as
required by paragraph 12 of APB 30. Disclose the
income taxes applicable to the extraordinary item on
the face of the statements or in a footnote (see
paragraph 11 of APB 30), and disclose the per-share
amount of the charge on the face of the statements or
in a footnote (see paragraph 9 of FAS 4).
The interim consolidated statement of operations for
the six months ended June 30, 1997 in the S-1
Registration Statement has been revised to present the
loss per share before extraordinary item on the face of
the statement. With respect to income taxes, the
Company allocated all tax expense, which represented
the tax effect of pre-tax income from continuing
operations for the period, to continuing operations.
The tax benefit associated with the extraordinary item
was not recognized because existing tax assets in the
respective tax jurisdictions, primarily in the U.S.,
are already subject to a 100% valuation allowance. See
footnote 16 to the Audited Consolidated Financial
Statements. As such, no tax benefit has been presented
on the face of the statement for the extraordinary
item.
10. Provide supplementally the basis for the goodwill
amortization period of 30 years for the Safeline
Acquisition.
The Company supplementally advises the Staff that in
determining a 30 year useful life for the goodwill
derived from the Safeline Acquisition, the Company
considered, among other things, the following factors:
(i) The industrial metal detection industry has operated
since the 1940's. Metal detection is a fundamental process.
Although technology has, in recent years, advanced the
methods and precision of the instruments used in the metal
detection process, the process has remained essentially the
same.
(ii) Safeline's products and systems are used principally by
companies in the food processing, pharmaceutical, cosmetic,
clothing and chemical industries. All of which represent
long established stable industries where demand for
Safeline's products can be expected to continue.
(iii) Safeline is the world's largest manufacturer and marketer
of metal detection systems for companies that produce and
package goods. Safeline controls an estimated 28% of the
market for industrial metal detection systems and is two
times larger than its nearest competitor.
(iv) Safeline has had a stable customer base. Due to the high
integration of Safeline's systems in customers' automated
processes and product certification requirements, substantial
barriers to competitors entrance into Safeline's customer
base exist.
(v) Safeline's profitability and growth relative to its
competitors.
(vi) The comparisons to similar instrument companies were also made:
- Elsag Bailey's acquisition of Hartmann and
Braun (30 years)
- Elsag Bailey's acquisition of Fisher and Porter
(30 years)
- Waters Corporation buyout (40 years)
- Thermo Instrument's acquisition of EnviroTech
Controls, Noran Instruments, TN Technologies
and Tremetrics (40 years).
Based upon the foregoing factors, the Company believes
that use of a 30 year useful life for the Safeline
Acquisition is appropriate.
11. Revise MD&A to discuss the reasons for the significant
change in your effective income tax rate. You should
address factors other than the effect of the October
15, 1996 Acquisition.
The MD&A in the S-1 Registration Statement for the six
months ended June 30, 1997 has been so revised.
If you have any questions or comments regarding the
above responses of the Company or otherwise in connection
with Amendment No. 1, please call Timothy E. Peterson at 011
44 171 825 3146 or the undersigned at (212) 859-8662.
Sincerely yours,
/s/ Jonathan S.Adler
--------------------
Jonathan S. Adler
cc: Mark S. Webb (Securities and Exchange Commission)
Steven C. Duvall (Securities and Exchange Commission)
Anne Firsching (Securities and Exchange Commission)
Lisa Mitrovich (Securities and Exchange Commission)
William P. Donnelly (Mettler-Toledo, Inc.)
Exhibit A
<TABLE>
<CAPTION>
RULE 3-05 CALCULATIONS
1996
----------------------------
Predecessor Successor
Jan 1 to Oct 15 to Fiscal
MT Investors: Oct 14 Dec 31 1996 1995
-------------------------------------------------
<S> <C> <C> <C> <C>
Net Income (loss) 14,461 -159,046 -144,585 18,254
Taxes 10,055 -938 9,117 8,782
-------------------------------------------------
Income (loss) before taxes 24,516 -159,984 -135,468 27,036
=================================================
For the years ended March 31,
Safeline: 1997 1996
----------------------------
Profit before tax in [POUND
SYMBOL]'s 6,590 6,624
Average conversion rate for related
period 1.5900 1.5630
----------------------------
Profit before tax in $'s 10,478 10,353
============================
Investment Test (per S-X Rule 1-
02(w) 1):
Purchase price in [POUND SYMBOL]'s 61,000
Potential contingent earn-out 6,000
Expenses and potential post-closing
adjustment 5,000
---------------
Total in [POUND SYMBOL]'s 72,000
Conversion rate at May 30, 1997 1.6396
---------------
Purchase price in $'s 118,051
MT Investors total assets at December
31, 1996 771,888
---------------
Percentage 15.3 % *
===============
Asset Test (per S-X Rule 1-02(w) 2):
Safelite assets in [POUND SYMBOL]'s
on March 31, 1997 12,980
Conversion rate at May 30, 1997 1.6396
---------------
Assets in $'s 21,282
MT Investors total assets at
December 31, 1996 771,888
---------------
Percentage 2.8% *
===============
Income Test (per S-X Rule 1-02(w)3):
Profit before tax for Safeline 10,478 (for the year ended March 31, 1997)
MT Investors loss before tax 135,468 (absolute value of the fiscal 1996 loss)
---------------
Percentage 7.7% *
===============
_______________________________
<FN>
* As all of the calculated percentages are less than 20%,
MT Investors is not required to file a Form 8-K in
connection with the acquisition and hence, MT Investors
is not required to prepare Safeline historical audited
financial statements or pro forma financial information
of the newly formed entity.
</FN>
</TABLE>
