January
5, 2010
Jim B.
Rosenberg
Senior
Assistant Chief Accountant
United
States Securities and Exchange Commission
100 F
Street, N.E.
Washington,
D.C. 20549
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Re:
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The
Quigley Corporation
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Form
10-K for the Fiscal Year Ended December 31,
2008
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Filed
March 9, 2009
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Definitive
Proxy Statement on Schedule 14A
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Filed
April 2, 2009
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File Number:
000-21617
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Dear Mr.
Rosenberg:
On behalf
of The Quigley Corporation (the “Company”) we hereby transmit via EDGAR the
following responses to the Staff’s verbal comments provided to the Company on
December 15, 2009. To assist your review, we have typed the text of
the Staff’s comments in bold face type.
Form
10-K for Fiscal Year Ended December 31, 2008
Item 7, Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
Critical Accounting
Estimates, page 27
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1.
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Please
refer to your response to prior comment one. Please revise your
proposed disclosure to clarify what the charge for the $103,000
represents.
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Response:
The
Company does not impose a period of time within which product may be
returned. All requests for product returns must be submitted to the
Company for pre-approval. The main components of the Company’s
returns policy are: (i) the Company will accept returns that are due
to damaged product that is un-saleable and such return request activity fall
within an acceptable range, (ii) the Company will accept returns for products
that have reached or exceeded designated expiration dates and (iii) the Company
will accept returns in the event that the Company discontinues a product such
that the customer will have the right to return only such item that it purchased
directly from the Company. The Company will not accept return
requests pertaining to customer inventory “Overstocking” or
“Resets”. The Company will only accept return requests for
product in its intended package configuration. The Company reserves
the right to terminate shipment of product to customers who have made
unauthorized deductions contrary to the Company’s Return Policy or pursue other
methods of reimbursement. The Company compensates the customer for authorized
returns by means of a credit applied to amounts owed or to be owed and in the
case of discontinued product only, also by way of an exchange. The
Company does not have any significant product exchange history.
KELLS
BUILDING · 621 N.
Shady Retreat Road ·
PO Box1349 ·
Doylestown, PA 18901-1349 · U.S.A
Telephone:
215-345-0919 · Fax:
215-345-5920 · For
information: www.quigleyco.com
The
increase in the fiscal 2008 return provision was principally due to non-routine
returns, obsolete product and product mix realignment by certain of our
customers. “Non-routine” returns are defined as product returned to
the Company as a consequence of unanticipated circumstances principally due to
(i) retail store closings or (ii) unexpected poor retail sell through to
consumers causing the Company to discontinue the product. “Obsolete”
returns are defined as product returned to the Company as a consequence of
product shelf-life “use by” expiration date. “Product mix realignment”
returns are defined as product returned to the Company due to initiatives by the
trade to discontinue purchasing certain of the Company’s
products. Product mix realignment returns are generally nominal and
are frequently related to discontinued or soon to be discontinued
products.
The
Company’s return policy accommodates returns for (i) discontinued products, (ii)
store closings and (iii) products that have reached or exceeded designated
expiration date. The following is a summary of the change in the return
provision for the year ended December 31, 2008 (in thousands):
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Amount
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Return
provision at December 31, 2007
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$ | 296 | ||
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Return
provision at December 31, 2008
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1,427 | |||
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Increase
in the return provision at
December 31, 2008
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$ | 1,131 | ||
For the
year ended December 31, 2008, the return provision increased by $1.1 million to
$1.4 million. The increase in the return provision was principally
due to (i) a charge of $552,000 attributable to products which were discontinued
during Fiscal 2008 as a consequence of both return criterion of (a) poor retail
sell through to consumers (non-routine returns) and (b) the decreasing
shelf-life of the products as expiration dates came due (obsolete returns), (ii)
a charge of $209,000 due principally to discontinued product flavors
(non-routine returns), (iii) a charge of $165,000 for product returns
attributable to store closings (non-routine returns), (iv) a charge of $102,000
for products with shelf-life expiration dates (obsolete returns) and (v) a
charge of $103,000 as a consequence of an increase in product returns
experienced due principally to damaged product, claimed shortages and other
related returns during the period.
We will
provide disclosure of the above-mentioned definitions in future filings, as well
as other subject matters discussed in this response if we determine that a
reasonable investor would consider such information to be material to an
investment decision.
2
Item 8. Financial
Statements and Supplementary Data
Consolidated Financial
Statements
Consolidated Statements of
Cash Flows, page F-4
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2.
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Please
refer to the revised Statements of Cash Flows for the three year fiscal
period ended December 31, 2008 and the quarterly period ended March 31,
2008 in response to prior comment three. Please explain to us
why the cash flows related to the proceeds from the sale of Darius are not
presented within your 2008 investing activities for the fiscal year ended
December 31, 2008 and the interim periods of
2008.
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Response:
The
Company has revised the presentation of its Statement of Cash Flows (the
“Statement”) to present the proceeds from the sale of Darius as an investing
activity.
To
clarify the impact of cash flows on cash and cash equivalents we propose to
revise the cash flows presentation previously provided to you as
follows:
3
1. Years ended December 31, 2008, 2007 and 2006:
CONSOLIDATED STATEMENTS OF CASH FLOWS
(REVISED)