● | need to divert a significant portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of cash to fund working capital, capital expenditures, acquisitions, investments and other general corporate purposes; |
● | limited ability to obtain additional financing, on terms we find acceptable, if needed, for working capital, capital expenditures, acquisitions and other investments, which may adversely affect our ability to implement our business strategy; |
● | limited flexibility in planning for, or reacting to, changes in our businesses and the markets in which we operate or to take advantage of market opportunities; and |
● | a competitive disadvantage compared to our competitors that have less debt. |
In addition, it is possible that we may need to incur additional indebtedness in the future in the ordinary course of business. The terms of our Term Loan Agreement and the ABL Credit Agreement allow us to incur additional debt subject to certain limitations. If new debt is added to current debt levels, the risks described above could intensify. In addition, our inability to maintain certain leverage ratios could result in acceleration of a portion of our debt obligations and could cause us to be in default if we are unable to repay the accelerated obligations.
Changes in interest rates may adversely affect our earnings and/or cash flows.
Our indebtedness under our Term Loan Agreement and our ABL Credit Agreement bears interest at variable interest rates that use the London Inter-Bank Offered Rate (“LIBOR”) as a benchmark rate. On July 27, 2017, the United Kingdom’s Financial Conduct Authority (“FCA”), which regulates LIBOR, announced that it intends to stop persuading or compelling banks to submit LIBOR quotations after 2021 (the “FCA Announcement”). The FCA announcement indicates that the continuation of LIBOR on the current basis cannot and will not be assured after 2021, and LIBOR may cease to exist or otherwise be unsuitable for use as a benchmark. Recent proposals for LIBOR reforms may result in the establishment of new methods of calculating LIBOR or the establishment of one or more alternative benchmark rates. Although our revolving credit facility provides for successor base rates, the successor base rates may be related to LIBOR, and the consequences of any potential cessation, modification or other reform of LIBOR cannot be predicted at this time. If LIBOR ceases to exist, we may need to amend our revolving credit facility and Term Loan, and we cannot predict what alternative interest rate(s) will be negotiated with our counterparties. As a result, our interest expense may increase, our ability to refinance some or all of our existing indebtedness may be effected and our available cash flow may be adversely affected.
Our business could be hurt if we are unable to obtain capital as required, resulting in a decrease in our revenue and cash flows.
We require capital for, among other purposes, purchasing equipment to replace existing equipment that has reached the end of its useful life and for growth resulting from expansion into new markets, completing acquisitions and refinancing existing debt. If the cash that we generate from our business, together with cash that we may borrow under our credit facilities, is not sufficient to fund our capital requirements, we will require additional debt or equity financing. If such additional financing is not available to fund our capital requirements, we could suffer a decrease in our revenue and cash flows that would have a material adverse effect on our business. Furthermore, our ability to incur additional debt is and will be contingent upon, among other things, the covenants contained in our credit facilities. In addition, our credit facilities place restrictions on our and our restricted subsidiaries’ ability to pay dividends and make other restricted payments (subject to certain exceptions). We cannot be certain that any additional financing that we require will be available or, if available, will be available on terms that are satisfactory to us. If we are unable to obtain sufficient additional capital in the future, our business could be materially adversely affected.
We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under applicable debt instruments, which may not be successful.
Our ability to make scheduled payments on or to refinance our indebtedness obligations, including our credit facilities, depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and certain financial, business and other factors beyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.
If our cash flows and capital resources are insufficient to fund debt service obligations, we may be forced to reduce or delay investments and capital expenditures, sell assets, seek additional capital or restructure or refinance indebtedness. Our ability to restructure or refinance our indebtedness will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict business operations. The terms of existing or future debt instruments may restrict us from adopting some of these alternatives. In addition, any failure to make payments of interest and principal on outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness.
If we are unable to collect on contracts with customers, our operating results would be adversely affected.
We have billing arrangements with a majority of our customers that provide for payment on agreed terms after our services are provided. If we are unable to manage credit risk issues adequately, or if a large number of customers should have financial difficulties at the same time, our credit losses could increase significantly above their low historical levels and our operating results would be adversely affected. Further, delinquencies and credit losses increased during the last recession and generally can be expected to increase during economic slowdowns or recessions.
If we are unable to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act or our internal control over financial reporting is not effective, the reliability of our financial statements may be questioned, and our stock price may suffer.
Section 404 of the Sarbanes-Oxley Act requires any company subject to the reporting requirements of the U.S. securities laws to do a comprehensive evaluation of its and its consolidated subsidiaries’ internal control over financial reporting. To comply with this statute, we are currently required to document, test and report on our internal controls over financial reporting. In addition, starting in our 2022 fiscal year (and possibly earlier), our independent auditors will be required to issue an opinion on our audit of our internal control over financial reporting. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation to meet the detailed standards under the rules. During the course of our testing, our management may identify material weaknesses or deficiencies which may not be remedied in time to meet the deadline imposed by the Sarbanes-Oxley Act.
Disruptions in our information technology systems due to cyber security threats or other factors could limit our ability to effectively monitor and control our operations and adversely affect our operating results, and unauthorized access to customer information on our systems could adversely affect our relationships with our customers or result in liability.
Our information technology systems, including our enterprise resource planning system, facilitate our ability to monitor and control our assets and operations and adjust to changing market conditions and customer needs. Any disruptions in these systems or the failure of these systems to operate as expected could, depending on the magnitude of the problem, adversely affect our operating results by limiting our capacity to effectively monitor and control our assets and operations and adjust to changing market conditions in a timely manner. Many of our business records at most of our branches are still maintained manually, and loss of those records as a result of facility damage, personnel changes or otherwise could also cause such disruptions. In addition, because our systems sometimes contain information about individuals and businesses, our failure to appropriately safeguard the security of the data it holds, whether as a result of our own error or the malfeasance or errors of others, could harm our reputation or give rise to legal liabilities, leading to lower revenue, increased costs and other material adverse effects on our results of operations.
We have taken steps intended to mitigate these risks, including business continuity planning, disaster recovery planning and business impact analysis. However, a significant disruption or cyber intrusion could adversely affect our results of operations, financial condition and liquidity. Furthermore, instability in the financial markets as a result of terrorism, sustained or significant cyber-attacks, or war could also materially adversely affect our ability to raise capital.
Fluctuations in fuel costs or reduced supplies of fuel could harm our business.
Fuel costs represent a significant portion of our operating expenses and we are dependent upon fuel to transport and operate our equipment. We could be adversely affected by limitations on fuel supplies or increases in fuel prices that result in higher costs of transporting equipment to and from job sites and higher costs to operate our concrete pumps and other equipment. Although we are able to pass through the impact of fuel price charges to most of our customers, there is often a lag before such pass-through arrangements are reflected in our operating results and there may be a limit to how much of any fuel price increases we can pass onto our customers. Any such limits may adversely affect our results of operations.
We depend on access to our branch facilities to service our customers and maintain and store our equipment.
We depend on our primary branch facilities in the U.S. and U.K., respectively, to store, service and maintain our fleet. These facilities contain most of the specialized equipment we require to service our fleet, in addition to the extensive secure storage areas needed for a significant number of large vehicles. If any of our facilities were to sustain significant damage or become unavailable to us for any reason, including natural disasters, our operations could be disrupted, which could in turn adversely affect our relationships with our customers and our results of operations and cash flow. Any limitation on our access to facilities as a result of any breach of, or dispute under, our leases could also disrupt and adversely affect our operations.
We may be adversely affected by recent developments relating to the U.K.’s referendum vote in favor of leaving the European Union.
The U.K. held a referendum on June 23, 2016 in which a majority voted for the U.K.’s withdrawal from the European Union, which is commonly referred to as Brexit. As a result of this vote, a process of negotiation has begun to determine the terms of Brexit and of the U.K.’s relationship with the European Union going forward. The effects of the Brexit vote and the perceptions as to the impact of the withdrawal of the U.K. from the European Union may adversely affect business activity and economic and market conditions in the U.K., the Eurozone, and globally and could contribute to instability in global financial and foreign exchange markets, including volatility in the value of the pound sterling and the euro. In addition, Brexit could lead to additional political, legal and economic instability in the European Union. Currently, the date set for when the U.K. will withdraw from the European Union is January 31, 2020. Specifically, we have not identified any additional risk factors under Brexit than those discussed herein. Additionally, we have not identified any trends or potential changes to critical accounting estimates as a result of Brexit. We will continue to assess risk factors and accounting and reporting considerations Any of these effects of Brexit, and others we cannot anticipate, could adversely affect the value of our assets in the U.K., as well as our business, financial condition, results of operations and cash flows.
Due to the material portion of our business conducted in currency other than U.S. dollars, we have significant foreign currency risk.
Our consolidated financial statements are presented in accordance with GAAP, and we report, and will continue to report, our results in U.S. dollars. Some of our operations are conducted by subsidiaries in the United Kingdom. The results of operations and the financial position of these subsidiaries are recorded in the relevant foreign currencies and then translated into U.S. dollars. Any change in the value of the pound sterling against the U.S. dollar during a given financial reporting period would result in a foreign currency loss or gain on the translation of U.S. dollar denominated revenues and costs. The exchange rates between the pound sterling against the U.S. dollar have fluctuated significantly in recent years and may fluctuate significantly in the future. Consequently, our reported earnings could fluctuate materially as a result of foreign exchange translation gains or losses and may not be comparable from period to period.
We face market risks attributable to fluctuations in foreign currency exchange rates and foreign currency exposure on the translation into U.S. dollars of the financial results of our operations in the United Kingdom. Exchange rate fluctuations could have an adverse effect on our results of operations. Both favorable and unfavorable foreign currency impacts to our foreign currency-denominated operating expenses are mitigated to a certain extent by the natural, opposite impact on our foreign currency-denominated revenue.
Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations.
We will be subject to income taxes in the United States, and our domestic tax liabilities will be subject to the allocation of expenses in differing jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:
● | expected timing and amount of the release of any tax valuation allowances; |
● | tax effects of stock-based compensation; |
● | costs related to intercompany restructurings; |
● | changes in tax laws, regulations or interpretations thereof; and |
● | lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates |
In addition, we may be subject to audits of our income, sales and other transaction taxes by U.S. federal and state authorities. Outcomes from these audits could have an adverse effect on our financial condition and results of operations.
Risks Related to our Securities
There can be no assurance that we will be able to comply with Nasdaq’s continued listing standards.
If Nasdaq delists our securities from trading on its exchange for failure to meet the continued listing standards, we and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, wesecurity holders could face significant material adverse consequences including:
● | a limited availability of market quotations for our securities; |
● | a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our common stock; |
● | a decreased ability to issue additional securities or obtain additional financing in the future. |
Shares of our common stock have been thinly traded in the past.
Although a trading market for our securities;
The National Securities Markets Improvement Act As a result of 1996, which is a federal statute, preventsthe thin trading market or preempts“float” for our stock, the states from regulating the sale of certain securities, which are referred to as “covered securities.” Our units, Class Amarket price for our common stock and warrants are listed on Nasdaq,may fluctuate significantly more than the stock market as a whole. Without a large float, our common stock is less liquid than the stock of companies with broader public ownership and, as a result, are covered securities. Although the states are preempted from regulatingtrading prices of our common stock may be more volatile. In the saleabsence of an active public trading market, an investor may be unable to liquidate his or her investment in our common stock. Trading of a relatively small volume of our common stock may have a greater impact on the trading price for our stock than would be the case if our public float were larger. We cannot predict the prices at which our common stock will trade in the future.
In addition, the price of our securities can vary due to general economic conditions and forecasts, our general business condition and the federal statute does allowrelease of our financial reports. Additionally, if our securities become delisted from Nasdaq for any reason, and are quoted on the states to investigate companies if there is a suspicionOTC Markets, the liquidity and price of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of coveredour securities in a particular case. While we are not aware of a state having used these powers to prohibit or restrict the sale of securities issued by blank check companies, othermay be more limited than the State of Idaho, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were no longerquoted or listed on Nasdaq or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.
Future sales of our common stock may cause the market price of our securities wouldto drop significantly, even if our business is doing well.
Pursuant to that certain stockholders agreement, dated as of December 6, 2018 and amended on April 1, 2019 (the “Stockholders Agreement”), by and between the Company, CFLL Sponsor Holdings, LLC (formerly known as Industrea Alexandria LLC) (“CFLL Sponsor” or the “Sponsor”), Industrea’s former independent directors (collectively with the Sponsor and affiliates, the “Initial Stockholders”), Argand Partners Fund, LP (the “Argand Investor”) and certain holders of CPH’s capital stock prior to the Business Combination (the “CPH stockholders”):
● | Subject to certain exceptions, the CFLL Sponsor has agreed not to transfer 4,403,325 shares of our common stock (which were issued upon conversion of Industrea’s Class B common stock in connection with the Business Combination) (the “founder shares”) until the earlier of (A) March 6, 2020 or (B) earlier if (x) the last sale price of our common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing May 5, 2019 or (y) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of our common stock for cash, securities or other property; |
● | Each CPH Management Holder (as defined therein) has agreed not to transfer any shares of our common stock acquired by such CPH Management Holder in connection with the Business Combination for a period commencing on December 6, 2018 and ending on (a) December 6, 2019 with respect to one-third of such CPH Management Holder’s securities of the Company held as of the date of Closing; (b) December 6, 2020 with respect to one-third of such CPH Management Holder’s securities of the Company held as of the date of Closing; and (c) December 6, 2021 with respect to one-third of such CPH Management Holder’s securities of the Company held as of the date of Closing; |
● | Subject to certain exceptions, until March 6, 2020, (i) CFLL Holdings, LLC (“CFLL Holdings”), an affiliate of the Argand Investor, may not transfer 7,784,313 shares of our common stock held by it and (ii) the CFLL Sponsor may not transfer 1,664,500 shares of our common stock held by it. |
Notwithstanding the foregoing, if Peninsula Pacific or its affiliates no longer own in excess of 882,353 shares of our common stock, then the transfer restrictions on the shares of our common stock held the CFLL Sponsor and CFLL Holdings will be coveredshortened to December 6, 2019. In addition, transfers of these securities are permitted in certain limited circumstances as set forth in the Stockholders Agreement, including with the prior written consent of our Board (with any director who has been designated to serve on our Board by or who is an affiliate of the requesting party abstaining from such vote) and we would be subject to regulation“affiliates,” as defined in each state in which we offerthe Stockholders Agreement.
In addition, the Initial Stockholders and certain of our securities, includingother stockholders who received shares of our common stock in connection with our initial business combination.
You will not bethe Closing are entitled to protections normally affordedregistration rights, subject to investors of many other blank check companies.
Sincecertain limitations, with respect to our common stock they received in the net proceedsBusiness Combination pursuant to the Stockholders Agreement entered into in connection with the consummation of the initial public offering andBusiness Combination. Pursuant to the sale ofStockholders Agreement, we filed a registration statement covering the founder shares, the private placement warrants are intended to be used to complete an initial business combination with a target business that has not been identified, we may be deemed to be a “blank check” company under the United States securities laws. However, because we have net tangible assets in excess of $5,000,000 and have filed a Current Report on Form 8-K, including an audited balance sheet demonstrating this fact, we are exempt from rules promulgated by the SEC to protect investors in blank check companies, such as Rule 419. Accordingly, investors will not be afforded the benefits(including any common stock issued or protections of those rules. Among other things, this means that we will have a longer period of time to complete our initial business combination than do companies subject to Rule 419. Moreover, if the initial public offering had been subject to Rule 419, that rule would have prohibited the releaseissuable upon exercise of any interest earned on funds held insuch private placement warrants) and the trust account to us unlessshares of our common stock issued at the Closing. In addition, these stockholders have certain demand and until“piggyback” registration rights following the funds inconsummation of the trust account were released to usBusiness Combination. We will bear certain expenses incurred in connection with our completionthe exercise of an initial business combination.such rights.
IfFurthermore, we seek stockholder approvalfinanced the acquisition of Capital through the sale of shares of common stock and an additional $60 million of borrowings under our initial business combination and we do not conduct redemptionsTerm Loan Agreement.
The presence of these additional securities trading in the public market as well as the shares of the Company’s common stock that may be issued pursuant to the tender offer rules,Offer and if you or a “group”Consent Solicitation, may have an adverse effect on the market price of stockholders are deemed to hold in excess of 15% of our Class A common stock, you will lose the ability to redeem all such shares in excess of 15% of our Class ACompany’s common stock.
If we seek stockholder approvalOur quarterly operating results may fluctuate significantly and could fall below the expectations of our initial business combinationsecurities analysts and we do not conduct redemptions in connection with our initial business combination pursuantinvestors due to the tender offer rules, our amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 15% of the shares sold in the initial public offering without our prior consent, which we refer to as the “Excess Shares.” However, we would not be restricting our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our initial business combination. Your inability to redeem the Excess Shares will reduce your influence over our ability to complete our initial business combination and you could suffer a material loss on your investment in us if you sell Excess Shares in open market transactions. Additionally, you will not receive redemption distributions with respect to the Excess Shares if we complete our initial business combination. And as a result, you will continue to hold that number of shares exceeding 15% and, in order to dispose of such shares, would be required to sell your stock in open market transactions, potentially at a loss.
Because of our limited resources and the significant competition for business combination opportunities, it may be more difficult for us to complete our initial business combination. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.20 per share on our redemption of our public shares, or less than such amount in certain circumstances, and our warrants will expire worthless.
We expect to encounter intense competition from other entities having a business objective similar to ours, including private investors (which may be individuals or investment partnerships), other blank check companiesseasonality and other entities competing for the typesfactors, some of businesses we intend to acquire. Many of these individuals and entitieswhich are well-established and have extensive experiencebeyond our control, resulting in identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries. Many of these competitors possess greater technical, human and other resources or more industry knowledge than we do, and our financial resources will be relatively limited when contrasted with those of many of these competitors. While we believe there are numerous target businesses we could potentially acquire, our ability to compete with respect to the acquisition of certain target businesses that are sizable will be limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses. Furthermore, because we are obligated to pay cash for the shares of Class A common stock which our public stockholders redeem in connection with our initial business combination, target companies will be aware that this may reduce the resources available to us for our initial business combination. This may place us at a competitive disadvantage in successfully negotiating an initial business combination. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.20 per share on the liquidation of our trust account and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.20 per share upon our liquidation. See “— If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.20 per share” and other risk factors below.
If our funds held outside the trust account are insufficient to allow us to operate until August 1, 2019, we may be unable to complete our initial business combination, in which case our public stockholders may only receive $10.20 per share, or less than such amount in certain circumstances, and our warrants will expire worthless.
As of December 31 2017, we have approximately $829,000 available to us outside the trust account to fund our working capital requirements. The funds available to us outside of the trust account may not be sufficient to allow us to operate until August 1, 2019, assuming that our initial business combination is not completed during that time. We believe that the funds available to us outside of the trust account are sufficient to allow us to operate until August 1, 2019; however, we cannot assure you that our estimate is accurate. Of the funds available to us, we could use a portion of the funds available to us to pay fees to consultants to assist us with our search for a target business. We could also use a portion of the funds as a down payment or to fund a “no-shop” provision (a provision in letters of intent or merger agreements designed to keep target businesses from “shopping” around for transactions with other companies on terms more favorable to such target businesses) with respect to a particular proposed initial business combination, although we do not have any current intention to do so. If we entered into a letter of intent or merger agreement where we paid for the right to receive exclusivity from a target business and were subsequently required to forfeit such funds (whether as a result of our breach or otherwise), we might not have sufficient funds to continue searching for, or conduct due diligence with respect to, a target business. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.20 per share on the liquidation of our trust account and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.20 per share upon our liquidation. See “— If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.20 per share” and other risk factors below.
If our funds held outside the trust account are insufficient, it could limit the amount available to fund our search for a target business or businesses and complete our initial business combination and we will depend on loans from our Sponsor or management team to fund our search for an initial business combination, to pay our franchise and income taxes and to complete our initial business combination. If we are unable to obtain these loans, we may be unable to complete our initial business combination.
As of December 31 2017, we have approximately $829,000 available to us outside the trust account to fund our working capital requirements. If we are required to seek additional capital, we would need to borrow funds from our Sponsor, management team or other third parties to operate or may be forced to liquidate. None of our Sponsor, members of our management team nor any of their affiliates is under any obligation to advance funds to us in such circumstances. Any such advances would be repaid only from funds held outside the trust account or from funds released to us upon completion of our initial business combination. Up to $1,500,000 of such loans may be convertible into private placement-equivalent warrants at a price of $1.00 per warrant at the option of the lender. Prior to the completion of our initial business combination, we do not expect to seek loans from parties other than our Sponsor or an affiliate of our Sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to fundsdecline in our trust account. If we are unable to obtain these loans, we may be unable to complete our initial business combination. If we are unable to complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. Consequently, our public stockholders may only receive approximately $10.20 per share on our redemption of our public shares, and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.20 per share on the redemption of their shares. See “— If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.20 per share” and other risk factors below.
Subsequent to the completion of our initial business combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price, which could cause you to lose some or all of your investment.
Even if we conduct extensive due diligence on a target business with which we combine, we cannot assure you that this diligence will surface all material issues that may be present inside a particular target business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of the target business and outside of our control will not later arise. As a result of these factors, we may be forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in our reporting losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities. In addition, charges of this nature may cause us to violate net worth or other covenants to which we may be subject as a result of assuming pre-existing debt held by a target business or by virtue of our obtaining debt financing to partially finance the initial business combination. Accordingly, any stockholders who choose to remain stockholders following the initial business combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the proxy solicitation or tender offer materials, as applicable, relating to the initial business combination constituted an actionable material misstatement or omission.
If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.20 per share.price.
Our placingquarterly operating results may fluctuate significantly because of funds in the trust account may not protect those funds from third-party claims against us. Although we will seek to have all vendors, service providers, prospective target businesses and other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public stockholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the trust account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. WithumSmith+Brown, PC, our independent registered public accounting firm, and FBR Capital Markets & Co. and B. Riley & Co., LLC, the underwriters in the initial public offering, did not execute agreements with us waiving such claims to the monies held in the trust account.several factors, including:
Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the trust account for any reason. Upon redemption of our public shares, if we are unable to complete our initial business combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with our initial business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the 10 years following redemption. Accordingly, the per-share redemption amount received by public stockholders could be less than the $10.20 per share initially held in the trust account, due to claims of such creditors. Our Sponsor agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.20 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.20 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of the initial public offering against certain liabilities, including liabilities under the Securities Act. However, we have not asked our Sponsor to reserve for such indemnification obligations, nor have we independently verified whether our Sponsor has sufficient funds to satisfy its indemnity obligations and believe that our Sponsor’s only assets are securities of our company. Therefore, we cannot assure you that our Sponsor would be able to satisfy those obligations. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
Our directors may decide not to enforce the indemnification obligations of our Sponsor, resulting in a reduction in the amount of funds in the trust account available for distribution to our public stockholders.
In the event that the proceeds in the trust account are reduced below the lesser of (i) $10.20 per share and (ii) the actual amount per share held in the trust account as of the date of the liquidation of the trust account if less than $10.20 per share due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, and our Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our Sponsor to enforce its indemnification obligations.
While we currently expect that our independent directors would take legal action on our behalf against our Sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment and subject to their fiduciary duties may choose not to do so in any particular instance if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in the trust account available for distribution to our public stockholders may be reduced below $10.20 per share.
● | labor availability and costs for hourly and management personnel; |
We may not have sufficient funds to satisfy indemnification claims of our directors and executive officers.
We have agreed to indemnify our officers and directors to the fullest extent permitted by law. However, our officers and directors have agreed to waive any right, title, interest or claim of any kind in or to any monies in the trust account and to not seek recourse against the trust account for any reason whatsoever. Accordingly, any indemnification provided will be able to be satisfied by us only if (i) we have sufficient funds outside of the trust account or (ii) we consummate an initial business combination. Our obligation to indemnify our officers and directors may discourage stockholders from bringing a lawsuit against our officers or directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against our officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against our officers and directors pursuant to these indemnification provisions.
If, after we distribute the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and we and our board may be exposed to claims of punitive damages.
If, after we distribute the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by our stockholders. In addition, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors.
If, before distributing the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
If, before distributing the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete our initial business combination.
If we are deemed to be an investment company under the Investment Company Act, our activities may be restricted, including:
In addition, we may have imposed upon us burdensome requirements, including:
In order not to be regulated as an investment company under the Investment Company Act, unless we can qualify for an exclusion, we must ensure that we are engaged primarily in a business other than investing, reinvesting or trading in securities and that our activities do not include investing, reinvesting, owning, holding or trading “investment securities” constituting more than 40% of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Our business is to identify and complete an initial business combination and thereafter to operate the post-transaction business or assets for the long term. We do not plan to buy businesses or assets with a view to resale or profit from their resale. We do not plan to buy unrelated businesses or assets or to be a passive investor.
● | profitability of our products, especially in new markets and due to seasonal fluctuations; |
● | changes in interest rates; |
● | impairment of long-lived assets; |
● | macroeconomic conditions, both nationally and locally; |
● | negative publicity relating to products we serve; |
● | changes in consumer preferences and competitive conditions; |
● | expansion to new markets; and |
● | fluctuations in commodity prices. |
WeIf securities or industry analysts do not believe thatpublish or cease publishing research or reports about us, our principal activities subject us tobusiness, or our industry, or if they change their recommendations regarding our common stock adversely, then the Investment Company Act. To this end, the proceeds held in the trust account may only be invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations. Pursuant to the trust agreement, the trustee is not permitted to invest in other securities or assets. By restricting the investment of the proceeds to these instruments,price and by having a business plan targeted at acquiring and growing businesses for the long term (rather than on buying and selling businesses in the manner of a merchant bank or private equity fund), we intend to avoid being deemed an “investment company” within the meaning of the Investment Company Act. The trust account is intended as a holding place for funds pending the earliest to occur of: (i) the completiontrading volume of our initial business combination; (ii) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the closing of the initial public offering; or (iii) absent an initial business combination within 24 months from the closing of the initial public offering, our return of the funds held in the trust account to our public stockholders as part of our redemption of the public shares. If we do not invest the proceeds as discussed above, we may be deemed to be subject to the Investment Company Act. If we were deemed to be subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional expenses for which we have not allotted funds and may hinder our ability to complete an initial business combination or may result in our liquidation. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.20 per share on the liquidation of our trust account and our warrants will expire worthless.common stock could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our industry, or our competitors. Securities and industry analysts do not currently, and may never, publish research on us. If no securities or industry analysts commence coverage of the Company, our stock price and trading volume would likely be negatively impacted. If any of the analysts who may cover the Company change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, the price of our common stock would likely decline. If any analyst who may cover the Company were to cease coverage of the Company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.
Changes in laws or, regulations or rules, or a failure to comply with any laws, and regulations or rules, may adversely affect our business, including our ability to negotiate and complete our initial business combinationinvestments and results of operations.
We are subject to laws, regulations and regulationsrules enacted by national, regional and local governments.governments and Nasdaq. In particular, we will beare required to comply with certain SEC, Nasdaq and other legal or regulatory requirements. Compliance with, and monitoring of, applicable laws, regulations and regulationsrules may be difficult, time consuming and costly.
Those laws, and regulations or rules and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws, regulations or regulations,rules, as interpreted and applied, could have a material adverse effect on our business including our ability to negotiate and complete our initial business combination and results of operations.
Our stockholders may be held liable for claims by third parties against us to the extent
Under the Delaware’s General Corporation Law (the “DGCL”), stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 24 months from the closing of the initial public offering may be considered a liquidating distribution under Delaware law. If a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. However, it is our intention to redeem our public shares as soon as reasonably possible following the 24th month from the closing of the initial public offering in the event we do not complete our initial business combination and, therefore, we do not intend to comply with the foregoing procedures.
Because we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the 10 years following our dissolution. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. If our plan of distribution complies with Section 281(b) of the DGCL, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would likely be barred after the third anniversary of the dissolution. We cannot assure you that we will properly assess all claims that may be potentially brought against us. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend beyond the third anniversary of such date. Furthermore, if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 24 months from the closing of the initial public offering is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution.
We may not hold an annual meeting of stockholders until after the consummation of our initial business combination, which could delay the opportunity for our stockholders to elect directors.
In accordance with Nasdaq corporate governance requirements, we are not required to hold an annual meeting until no later than one year after our first fiscal year end following our listing on Nasdaq. Under Section 211(b) of the DGCL, we are, however, required to hold an annual meeting of stockholders for the purposes of electing directors in accordance with our bylaws unless such election is made by written consent in lieu of such a meeting. We may not hold an annual meeting of stockholders to elect new directors prior to the consummation of our initial business combination, and thus we may not be in compliance with Section 211(b) of the DGCL, which requires an annual meeting. Therefore, if our stockholders want us to hold an annual meeting prior to the consummation of our initial business combination, they may attempt to force us to hold one by submitting an application to the Delaware Court of Chancery in accordance with Section 211(c) of the DGCL.
We have not registered the shares of Class A common stock issuable upon exercise of the warrants under the Securities Act or any state securities laws, and such registration may not be in place when an investor desires to exercise warrants, thus precluding such investor from being able to exercise its warrants except on a cashless basis. If the issuance of the shares upon exercise of warrants is not registered, qualified or exempt from registration or qualification, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless.
We have not registered the shares of Class A common stock issuable upon exercise of the warrants under the Securities Act or any state securities laws. However, under the terms of the warrant agreement, we have agreed that as soon as practicable, but in no event later than 15 business days after the closing of our initial business combination, we will use our best efforts to file with the SEC a registration statement for the registration under the Securities Act of the shares of Class A common stock issuable upon exercise of the warrants and thereafter will use our best efforts to cause the same to become effective within 60 business days following our initial business combination and to maintain a current prospectus relating to the Class A common stock issuable upon exercise of the warrants, until the expiration of the warrants in accordance with the provisions of the warrant agreement. We cannot assure you that we will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in the registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current or correct or the SEC issues a stop order. If the shares issuable upon exercise of the warrants are not registered under the Securities Act, we will be required to permit holders to exercise their warrants on a cashless basis. However, no warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available. Notwithstanding the above, if our Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, and in the event we do not so elect, we will use our best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. In no event will we be required to net cash settle any warrant, or issue securities or other compensation in exchange for the warrants in the event that we are unable to register or qualify the shares underlying the warrants under applicable state securities laws and there is no exemption available. If the issuance of the shares upon exercise of the warrants is not so registered or qualified or exempt from registration or qualification, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In such event, holders who acquired their warrants as part of a purchase of units will have paid the full unit purchase price solely for the shares of Class A common stock included in the units. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying shares of Class A common stock for sale under all applicable state securities laws.
If you exercise your public warrants on a “cashless basis,” you will receive fewer shares of Class A common stock from such exercise than if you were to exercise such warrants for cash.
There are circumstances in which the exercise of the public warrants may be required or permitted to be made on a cashless basis. First, if a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th day after the closing of our initial business combination, warrantholders may, until such time as there is an effective registration statement, exercise warrants on a cashless basis in accordance with Section 3(a)(9) of the Securities Act or another exemption. Second, if our Class A common stock is at any time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a cashless basis in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, and in the event we do not so elect, we will use our best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. Third, if we call the public warrants for redemption, our management will have the option to require all holders that wish to exercise warrants to do so on a cashless basis. In the event of an exercise on a cashless basis, a holder would pay the warrant exercise price by surrendering the warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (as defined in the next sentence) by (y) the fair market value. The “fair market value” is the average reported last sale price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of exercise is received by the warrant agent or on which the notice of redemption is sent to the holders of warrants, as applicable. As a result, you would receive fewer shares of Class A common stock from such exercise than if you were to exercise such warrants for cash.
The grant of registration rights to our initial stockholders may make it more difficult to complete our initial business combination, and the future exercise of such rights may adversely affect the market price of our Class A common stock.
Pursuant to an agreement entered into concurrently with the initial public offering, our initial stockholders and their permitted transferees can demand that we register the private placement warrants and the shares of Class A common stock issuable upon exercise of the founder shares and the private placement warrants held by them and holders of warrants that may be issued upon conversion of working capital loans may demand that we register such warrants or the Class A common stock issuable upon exercise of such warrants. We will bear the cost of registering these securities. The registration and availability of such a significant number of securities for trading in the public market may have an adverse effect on the market price of our Class A common stock. In addition, the existence of the registration rights may make our initial business combination more costly or difficult to conclude. This is because the stockholders of the target business may increase the equity stake they seek in the combined entity or ask for more cash consideration to offset the negative impact on the market price of our Class A common stock that is expected when the securities owned by our initial stockholders or holders of working capital loans or their respective permitted transferees are registered.
Because we are neither limited to evaluating a target business in a particular industry sector nor have we selected any specific target businesses with which to pursue our initial business combination, you will be unable to ascertain the merits or risks of any particular target business’s operations.
We will seek to complete an initial business combination with manufacturing and service companies in the industrial sector but may also pursue business combination opportunities in other industries, except that we will not, under our amended and restated certificate of incorporation, be permitted to effectuate our initial business combination with another blank check company or similar company with nominal operations. Because we have not yet selected or approached any specific target business with respect to a business combination, there is no basis to evaluate the possible merits or risks of any particular target business’s operations, results of operations, cash flows, liquidity, financial condition or prospects. To the extent we complete our initial business combination, we may be affected by numerous risks inherent in the business operations with which we combine. For example, if we combine with a financially unstable business or an entity lacking an established record of sales or earnings, we may be affected by the risks inherent in the business and operations of a financially unstable or a development stage entity. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all of the significant risk factors or that we will have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business. We also cannot assure you that an investment in our units will ultimately prove to be more favorable to investors than a direct investment, if such opportunity were available, in a business combination target. Accordingly, any stockholders who choose to remain stockholders following our initial business combination could suffer a reduction in the value of their securities. Such stockholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the proxy solicitation or tender offer materials, as applicable, relating to the business combination contained an actionable material misstatement or material omission.
Because we intend to seek an initial business combination with manufacturing and service companies in the industrial sector, we expect our future operations to be subject to risks associated with this sector.
We intend to focus our search for manufacturing and service companies in the industrial sector. Because we have not yet identified or approached any specific target business, we cannot provide specific risks of any business combination. However, risks inherent in investments in this sector include, but are not limited to, the following:
Past performance by Argand Partners, including our management team, may not be indicative of future performance of an investment in the Company.
Information regarding performance by, or businesses associated with, Argand Partners and its affiliates is presented for informational purposes only. Past performance by Argand Partners, including our management team, is not a guarantee either (i) of success with respect to any business combination we may consummate or (ii) that we will be able to locate a suitable candidate for our initial business combination. You should not rely on the historical record of Argand Partners’ or our management team’s performance as indicative of our future performance of an investment in the company or the returns the company will, or is likely to, generate going forward. Our officers and directors have not had experience with blank check companies or special purpose acquisition companies in the past.
We may seek business combination opportunities in industries or sectors which may or may not be outside of our management’s area of expertise.
Although we intend to focus on identifying manufacturing and service companies in the industrial sector, we will consider an initial business combination outside of our management’s area of expertise if an initial business combination candidate is presented to us and we determine that such candidate offers an attractive business combination opportunity for our company or we are unable to identify a suitable candidate in this sector after having expanded a reasonable amount of time and effort in an attempt to do so. Although our management will endeavor to evaluate the risks inherent in any particular business combination candidate, we cannot assure you that we will adequately ascertain or assess all of the significant risk factors. We also cannot assure you that an investment in our units will not ultimately prove to be less favorable to investors in the initial public offering than a direct investment, if an opportunity were available, in an initial business combination candidate. In the event we elect to pursue a business combination outside of the areas of our management’s expertise, our management’s expertise may not be directly applicable to its evaluation or operation, and the information contained in our prospectus regarding the areas of our management’s expertise would not be relevant to an understanding of the business that we elect to acquire. As a result, our management may not be able to adequately ascertain or assess all of the significant risk factors. Accordingly, any stockholders who choose to remain stockholders following our initial business combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value.
Although we have identified general criteria and guidelines that we believe are important in evaluating prospective target businesses, we may enter into our initial business combination with a target that does not meet such criteria and guidelines, and as a result, the target business with which we enter into our initial business combination may not have attributes entirely consistent with our general criteria and guidelines.
Although we have identified general criteria and guidelines for evaluating prospective target businesses, it is possible that a target business with which we enter into our initial business combination will not have all of these positive attributes. If we complete our initial business combination with a target that does not meet some or all of these guidelines, such combination may not be as successful as a combination with a business that does meet all of our general criteria and guidelines. In addition, if we announce a prospective business combination with a target that does not meet our general criteria and guidelines, a greater number of stockholders may exercise their redemption rights, which may make it difficult for us to meet any closing condition with a target business that requires us to have a minimum net worth or a certain amount of cash. In addition, if stockholder approval of the transaction is required by law, or we decide to obtain stockholder approval for business or other legal reasons, it may be more difficult for us to attain stockholder approval of our initial business combination if the target business does not meet our general criteria and guidelines. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.20 per share on the liquidation of our trust account and our warrants will expire worthless.
We may seek business combination opportunities with a financially unstable business or an entity lacking an established record of revenue, cash flow or earnings, which could subject us to volatile revenues, cash flows or earnings or difficulty in retaining key personnel.
To the extent we complete our initial business combination with a financially unstable business or an entity lacking an established record of revenues or earnings, we may be affected by numerous risks inherent in the operations of the business with which we combine. These risks include volatile revenues or earnings and difficulties in obtaining and retaining key personnel. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we may not be able to properly ascertain or assess all of the significant risk factors and we may not have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business.
We are not required to obtain an opinion from an independent investment banking firm or from an independent accounting firm, and consequently, you may have no assurance from an independent source that the price we are paying for the business is fair to our company from a financial point of view.
Unless we complete our initial business combination with an affiliated entity or our board cannot independently determine the fair market value of the target business or businesses, we are not required to obtain an opinion from an independent investment banking firm that is a member of FINRA or from an independent accounting firm that the price we are paying is fair to our company from a financial point of view. If no opinion is obtained, our stockholders will be relying on the judgment of our board of directors, who will determine fair market value based on standards generally accepted by the financial community. Such standards used will be disclosed in our proxy materials or tender offer documents, as applicable, related to our initial business combination.
We may issue additional common stock or preferred stock to complete our initial business combination or under an employee incentive plan after completion of our initial business combination. We may also issue shares of Class A common stock upon the conversion of the Class B common stock at a ratio greater than one-to-one at the time of our initial business combination as a result of the anti-dilution provisions contained in our amended and restated certificate of incorporation. Any such issuances would dilute the interest of our stockholders and likely present other risks.
Our amended and restated certificate of incorporation authorizes the issuance of up to 200,000,000 shares of Class A common stock, par value $0.0001 per share, 20,000,000 shares of Class B common stock, par value $0.0001 per share, and 1,000,000 shares of preferred stock, par value $0.0001 per share. There are 142,900,000 and 14,250,000 authorized but unissued shares of Class A common stock and Class B common stock, respectively, available for issuance, which amount takes into account the shares of Class A common stock reserved for issuance upon exercise of outstanding warrants but not the shares of Class A common stock issuable upon conversion of Class B common stock. There are no shares of preferred stock issued and outstanding. Shares of Class B common stock are convertible into shares of our Class A common stock initially at a one-for-one ratio but subject to adjustment as set forth herein, including in certain circumstances in which we issue Class A common stock or equity-linked securities related to our initial business combination. Shares of Class B common stock are also convertible at the option of the holder at any time.
We may issue a substantial number of additional shares of common or preferred stock to complete our initial business combination (including pursuant to a specified future issuance) or under an employee incentive plan after completion of our initial business combination. We may also issue shares of Class A common stock upon conversion of the Class B common stock at a ratio greater than one-to-one at the time of our initial business combination as a result of the anti-dilution provisions contained in our amended and restated certificate of incorporation. However, our amended and restated certificate of incorporation provides, among other things, that prior to our initial business combination, we may not issue additional shares of capital stock that would entitle the holders thereof to (i) receive funds from the trust account or (ii) vote on any initial business combination. The issuance of additional shares of common or preferred stock:
Resources could be wasted in researching business combinations that are not completed, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.20 per share, or less than such amount in certain circumstances, on the liquidation of our trust account and our warrants will expire worthless.
We anticipate that the investigation of each specific target business and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys, consultants and others. If we decide not to complete a specific initial business combination, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore, if we reach an agreement relating to a specific target business, we may fail to complete our initial business combination for any number of reasons including those beyond our control. Any such event will result in a loss to us of the related costs incurred which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.20 per share on the liquidation of our trust account and our warrants will expire worthless.
Our ability to successfully effect our initial business combination and to be successful thereafter will be totally dependent upon the efforts of our key personnel, some of whom may join us following our initial business combination. The loss of key personnel could negatively impact the operations and profitability of our post-combination business.
Our ability to successfully effect our initial business combination is dependent upon the efforts of our key personnel. The role of our key personnel in the target business, however, cannot presently be ascertained. Although some of our key personnel may remain with the target business in senior management or advisory positions following our initial business combination, it is likely that some or all of the management of the target business will remain in place. While we intend to closely scrutinize any individuals we employ after our initial business combination, we cannot assure you that our assessment of these individuals will prove to be correct. These individuals may be unfamiliar with the requirements of operating a company regulated by the SEC, which could cause us to have to expend time and resources helping them become familiar with such requirements. In addition, the officers and directors of an initial business combination candidate may resign upon completion of our initial business combination. The departure of an initial business combination target’s key personnel could negatively impact the operations and profitability of our post-combination business. The role of an initial business combination candidate’s key personnel upon the completion of our initial business combination cannot be ascertained at this time. Although we contemplate that certain members of an initial business combination candidate’s management team will remain associated with the initial business combination candidate following our initial business combination, it is possible that members of the management of an initial business combination candidate will not wish to remain in place. The loss of key personnel could negatively impact the operations and profitability of our post-combination business.
Argand Partners’ financial position could change, negatively impacting its role in helping us complete our initial business combination.
Argand Partners’ financial position could be negatively impacted due to a variety of factors, including lower management fees and/or performance fees and higher operating expenses. From time to time, Argand Partners may be a party to lawsuits, which if resolved in an unfavorable manner for Argand Partners, could have a material impact on Argand Partners’ financial position. To the extent Argand Partners’ financial position is less stable, it may have difficulty retaining certain key investment professionals, which could negatively impact Argand Partners’ ability to help us complete our initial business combination.
We are dependent upon our executive officers and directors and their departure could adversely affect our ability to operate.
Our operations are dependent upon a relatively small group of individuals and, in particular, our executive officers and directors. We believe that our success depends on the continued service of our executive officers and directors, at least until we have completed our initial business combination. We do not have an employment agreement with, or key-man insurance on the life of, any of our directors or executive officers. The unexpected loss of the services of one or more of our directors or executive officers could have a detrimental effect on us.
Our key personnel may negotiate employment or consulting agreements with a target business in connection with a particular business combination. These agreements may provide for them to receive compensation following our initial business combination and as a result, may cause them to have conflicts of interest in determining whether a particular business combination is the most advantageous.
Our key personnel may be able to remain with the company after the completion of our initial business combination only if they are able to negotiate employment or consulting agreements in connection with the initial business combination. Such negotiations would take place simultaneously with the negotiation of the initial business combination and could provide for such individuals to receive compensation in the form of cash payments and/or our securities for services they would render to us after the completion of the initial business combination. The personal and financial interests of such individuals may influence their motivation in identifying and selecting a target business. However, we believe the ability of such individuals to remain with us after the completion of our initial business combination will not be the determining factor in our decision as to whether or not we will proceed with any potential business combination. There is no certainty, however, that any of our key personnel will remain with us after the completion of our initial business combination. We cannot assure you that any of our key personnel will remain in senior management or advisory positions with us. The determination as to whether any of our key personnel will remain with us will be made at the time of our initial business combination.
We may have a limited ability to assess the management of a prospective target business and, as a result, may effect our initial business combination with a target business whose management may not have the skills, qualifications or abilities to manage a public company, which could, in turn, negatively impact the value of our stockholders’ investment in us.
When evaluating the desirability of effecting our initial business combination with a prospective target business, our ability to assess the target business’s management may be limited due to a lack of time, resources or information. Our assessment of the capabilities of the target’s management, therefore, may prove to be incorrect and such management may lack the skills, qualifications or abilities we suspected. Should the target’s management not possess the skills, qualifications or abilities necessary to manage a public company, the operations and profitability of the post-combination business may be negatively impacted. Accordingly, any stockholders who choose to remain stockholders following the initial business combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value.
Our officers and directors will allocate their time to other businesses thereby causing conflicts of interest in their determination as to how much time to devote to our affairs. This conflict of interest could have a negative impact on our ability to complete our initial business combination.
Our officers and directors are not required to, and will not, commit their full time to our affairs, which may result in a conflict of interest in allocating their time between our operations and our search for an initial business combination and their other businesses. We do not intend to have any full-time employees prior to the completion of our initial business combination. Each of our officers is engaged in other business endeavors for which he may be entitled to substantial compensation and our officers are not obligated to contribute any specific number of hours per week to our affairs. In particular, all of our officers and directors are employed by Argand Partners, which is an investment manager to various public and private investment funds, which make investments in securities or other interests of or relating to companies in industries we may target for our initial business combination. Our independent directors may also serve as officers or board members for other entities. If our officers’ and directors’ other business affairs require them to devote substantial amounts of time to such affairs in excess of their current commitment levels, it could limit their ability to devote time to our affairs which may have a negative impact on our ability to complete our initial business combination.
Certain of our officers and directors are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to be conducted by us and, accordingly, may have conflicts of interest in allocating their time and determining to which entity a particular business opportunity should be presented.
Following the completion of the initial public offering and until we consummate our initial business combination, we intend to engage in the business of identifying and combining with one or more businesses. Our Sponsor and officers and directors are, and may in the future become, affiliated with entities that are engaged in a similar business.
Our officers and directors also may become aware of business opportunities which may be appropriate for presentation to us and the other entities to which they owe certain fiduciary or contractual duties.
Accordingly, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in our favor and a potential target business may be presented to another entity prior to its presentation to us. Our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation.
Our officers, directors, security holders and their respective affiliates may have competitive pecuniary interests that conflict with our interests.
We have not adopted a policy that expressly prohibits our directors, officers, security holders or affiliates from having a direct or indirect pecuniary or financial interest in any investment to be acquired or disposed of by us or in any transaction to which we are a party or have an interest. In fact, we may enter into an initial business combination with a target business that is affiliated with our Sponsor, our directors or officers, although we do not intend to do so, or we may acquire a target business through an Affiliated Joint Acquisition with one or more affiliates of Argand Partners. We do not have a policy that expressly prohibits any such persons from engaging for their own account in business activities of the types conducted by us. Accordingly, such persons or entities may have a conflict between their interests and ours.
In particular, Argand Partners and its affiliates also are focused on investments in the industrial sector. As a result, there may be substantial overlap between companies that would be a suitable business combination for us and companies that would make an attractive target for such other affiliates.
We may engage in an initial business combination with one or more target businesses that have relationships with entities that may be affiliated with our Sponsor, officers, directors or existing holders which may raise potential conflicts of interest.
In light of the involvement of our Sponsor, officers and directors with other entities, we may decide to acquire one or more businesses affiliated with our Sponsor, officers or directors. Our directors also serve as officers and board members for other entities. Such entities may compete with us for business combination opportunities. Our Sponsor, officers and directors are not currently aware of any specific opportunities for us to complete our initial business combination with any entities with which they are affiliated, and there have been no preliminary discussions concerning an initial business combination with any such entity or entities. Although we will not be specifically focusing on, or targeting, any transaction with any affiliated entities, we would pursue such a transaction if we determined that such affiliated entity met our criteria for an initial business combination and such transaction was approved by a majority of our disinterested directors. Despite our agreement to obtain an opinion from an independent investment banking firm that is a member of FINRA, or from an independent accounting firm, regarding the fairness to our stockholders from a financial point of view of an initial business combination with one or more domestic or international businesses affiliated with our officers, directors or existing holders, potential conflicts of interest still may exist and, as a result, the terms of the initial business combination may not be as advantageous to our public stockholders as they would be absent any conflicts of interest. In order to satisfy applicable regulatory or other legal requirements applicable to an Affiliated Joint Acquisition, our initial business combination may be effected on less favorable terms than otherwise would apply if the initial business combination were not an Affiliated Joint Acquisition.
We may acquire a target business through an Affiliated Joint Acquisition with one or more affiliates of Argand Partners. This may result in conflicts of interest as well as dilutive issuances of our securities.
We may, at our option, pursue an Affiliated Joint Acquisition opportunity with an entity affiliated with Argand Partners. Any such parties would co-invest only if (i) permitted by applicable regulatory and other legal limitations; (ii) we and Argand Partners considered a transaction to be mutually beneficial to us as well as the affiliated entity; and (iii) other business reasons exist to do so, such as the strategic merits of including such co-investors, the need for additional capital beyond the amount held in our trust account to fund the initial business combination and/or the desire to obtain committed capital for closing the initial business combination. An Affiliated Joint Acquisition may be effected through a co-investment with us in the target business at the time of our initial business combination, or we could raise additional proceeds to complete the initial business combination by issuing to such parties a class of equity or equity-linked securities. Accordingly, such persons or entities may have a conflict between their interests and ours.
In addition, any specified future issuance in connection with Affiliated Joint Acquisition would trigger the anti-dilution provisions of our Class B common stock, which, unless waived, would result in an adjustment to the conversion ratio of our Class B common stock such that our initial stockholders and their permitted transferees, if any, would retain their aggregate percentage ownership at 20% of the sum of the total number of all shares of common stock outstanding upon completion of the initial public offering plus all shares issued in the specified future issuance. If such adjustment is not waived as described elsewhere in our prospectus, the specified future issuance would not reduce the percentage ownership of holders of our Class B common stock, but would reduce the percentage ownership of holders of our Class A common stock.
Since our Sponsor, officers and directors will lose their entire investment in us if our initial business combination is not completed, a conflict of interest may arise in determining whether a particular business combination target is appropriate for our initial business combination.
On April 10, 2017, our Sponsor purchased an aggregate of 5,750,000 founder shares for an aggregate purchase price of $25,000, or approximately $0.004 per share. In April and May 2017, our Sponsor transferred 28,750 founder shares to each of our independent director nominees at their original purchase price. The number of founder shares issued was determined based on the expectation that such founder shares would represent 20% of the outstanding shares after the initial public offering. The founder shares will be worthless if we do not complete an initial business combination. In addition, our Sponsor has committed 11,100,000 private placement warrants, each exercisable for one share of our Class A common stock at $11.50 per share, for $11,100,000, or $1.00 per warrant, that will also be worthless if we do not complete an initial business combination. Holders of founder shares have agreed (A) to vote any shares owned by them in favor of any proposed initial business combination and (B) not to redeem any founder shares in connection with a stockholder vote to approve a proposed initial business combination. In addition, we may obtain loans from our Sponsor, affiliates of our Sponsor or an officer or director. The personal and financial interests of our officers and directors may influence their motivation in identifying and selecting a target business combination, completing an initial business combination and influencing the operation of the business following the initial business combination.
We may issue notes or other debt securities, or otherwise incur substantial debt, to complete an initial business combination, which may adversely affect our leverage and financial condition and thus negatively impact the value of our stockholders’ investment in us.
Although we have no commitments as of the date of this Form 10-K to issue any notes or other debt securities, or to otherwise incur outstanding debt, we may choose to incur substantial debt to complete our initial business combination. We have agreed that we will not incur any indebtedness unless we have obtained from the lender a waiver of any right, title, interest or claim of any kind in or to the monies held in the trust account. As such, no issuance of debt will affect the per-share amount available for redemption from the trust account. Nevertheless, the incurrence of debt could have a variety of negative effects, including:
We may only be able to complete one business combination with the proceeds of our initial public offering and the sale of the private placement warrants, which will cause us to be solely dependent on a single business which may have a limited number of services and limited operating activities. This lack of diversification may negatively impact our operating results and profitability.
The net proceeds from our initial public offering and the sale of the private placement warrants provided us with $234,600,000 that we may use to complete our initial business combination and pay related fees and expenses (which includes up to $8,050,000 for the payment of deferred underwriting commissions held in the trust account).
We may effectuate our initial business combination with a single target business or multiple target businesses simultaneously or within a short period of time. However, we may not be able to effectuate our initial business combination with more than one target business because of various factors, including the existence of complex accounting issues and the requirement that we prepare and file pro forma financial statements with the SEC that present operating results and the financial condition of several target businesses as if they had been operated on a combined basis. By completing our initial business combination with only a single entity, our lack of diversification may subject us to numerous economic, competitive and regulatory developments. Further, we would not be able to diversify our operations or benefit from the possible spreading of risks or offsetting of losses, unlike other entities which may have the resources to complete several business combinations in different industries or different areas of a single industry. In addition, we intend to focus our search for an initial business combination in a single industry. Accordingly, the prospects for our success may be:
This lack of diversification may subject us to numerous economic, competitive and regulatory risks, any or all of which may have a substantial adverse impact upon the particular industry in which we may operate subsequent to our initial business combination.
We may attempt to simultaneously complete business combinations with multiple prospective targets, which may hinder our ability to complete our initial business combination and give rise to increased costs and risks that could negatively impact our operations and profitability.
If we determine to simultaneously acquire several businesses that are owned by different sellers, we will need for each of such sellers to agree that our purchase of its business is contingent on the simultaneous closings of the other business combinations, which may make it more difficult for us, and delay our ability, to complete our initial business combination. We do not, however, intend to purchase multiple businesses in unrelated industries in conjunction with our initial business combination. With multiple business combinations, we could also face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence investigations (if there are multiple sellers) and the additional risks associated with the subsequent assimilation of the operations and services or products of the acquired companies in a single operating business. If we are unable to adequately address these risks, it could negatively impact our profitability and results of operations.
We may attempt to complete our initial business combination with a private company about which little information is available, which may result in an initial business combination with a company that is not as profitable as we suspected, if at all.
In pursuing our initial business combination strategy, we may seek to effectuate our initial business combination with a privately held company. Very little public information generally exists about private companies, and we could be required to make our decision on whether to pursue a potential initial business combination on the basis of limited information, which may result in an initial business combination with a company that is not as profitable as we suspected, if at all.
Our management may not be able to maintain control of a target business after our initial business combination.
We may structure an initial business combination so that the post-transaction company in which our public stockholders own shares will own less than 100% of the equity interests or assets of a target business, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for us not to be required to register as an investment company under the Investment Company Act. We will not consider any transaction that does not meet such criteria. Even if the post-transaction company owns 50% or more of the voting securities of the target, our stockholders prior to the initial business combination may collectively own a minority interest in the post business combination company, depending on valuations ascribed to the target and us in the initial business combination. For example, we could pursue a transaction in which we issue a substantial number of new shares of Class A common stock in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% interest in the target. However, as a result of the issuance of a substantial number of new shares of common stock, our stockholders immediately prior to such transaction could own less than a majority of our outstanding shares of common stock subsequent to such transaction. In addition, other minority stockholders may subsequently combine their holdings resulting in a single person or group obtaining a larger share of the company’s stock than we initially acquired. Accordingly, this may make it more likely that our management will not be able to maintain our control of the target business. We cannot provide assurance that, upon loss of control of a target business, new management will possess the skills, qualifications or abilities necessary to profitably operate such business.
We do not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for us to complete an initial business combination with which a substantial majority of our stockholders do not agree.
Our amended and restated certificate of incorporation does not provide a specified maximum redemption threshold, except that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (such that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. As a result, we may be able to complete our initial business combination even though a substantial majority of our public stockholders do not agree with the transaction and have redeemed their shares or, if we seek stockholder approval of our initial business combination and do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, have entered into privately negotiated agreements to sell their shares to our Sponsor, officers, directors, advisors or their affiliates. In the event the aggregate cash consideration we would be required to pay for all shares of Class A common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed initial business combination exceed the aggregate amount of cash available to us, we will not complete the initial business combination or redeem any shares, all shares of Class A common stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate business combination.
In order to effectuate an initial business combination, blank check companies have, in the recent past, amended various provisions of their charters and other governing instruments, including their warrant agreements. We cannot assure you that we will not seek to amend our amended and restated certificate of incorporation or governing instruments in a manner that will make it easier for us to complete our initial business combination that our stockholders may not support.
In order to effectuate an initial business combination, blank check companies have, in the recent past, amended various provisions of their charters and modified governing instruments, including their warrant agreements. For example, blank check companies have amended the definition of business combination, increased redemption thresholds and extended the time to consummate an initial business combination and, with respect to their warrants, amended their warrant agreements to require the warrants to be exchanged for cash and/or other securities. Amending our amended and restated certificate of incorporation requires the approval of holders of 65% of our common stock, and amending our warrant agreement will require a vote of holders of at least 65% of the public warrants. In addition, our amended and restated certificate of incorporation requires us to provide our public stockholders with the opportunity to redeem their public shares for cash if we propose an amendment to our amended and restated certificate of incorporation to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete an initial business combination within 24 months of the closing of the initial public offering. To the extent any such amendments would be deemed to fundamentally change the nature of any securities offered through this registration statement, we would register, or seek an exemption from registration for, the affected securities. We cannot assure you that we will not seek to amend our charter or governing instruments or extend the time to consummate an initial business combination in order to effectuate our initial business combination.
The provisions of our amended and restated certificate of incorporation that relate to our pre-business combination activity (and corresponding provisions of the agreement governing the release of funds from our trust account) may be amended with the approval of holders of 65% of our common stock, which is a lower amendment threshold than that of some other blank check companies. It may be easier for us, therefore, to amend our amended and restated certificate of incorporation and the trust agreement to facilitate the completion of an initial business combination that some of our stockholders may not support.
Our amended and restated certificate of incorporation provides that any of its provisions related to pre-business combination activity (including the requirement to deposit proceeds of the initial public offering and the private placement of warrants into the trust account and not release such amounts except in specified circumstances, and to provide redemption rights to public stockholders as described herein) may be amended if approved by holders of 65% of our common stock entitled to vote thereon, and corresponding provisions of the trust agreement governing the release of funds from our trust account may be amended if approved by holders of 65% of our common stock entitled to vote thereon. In all other instances, our amended and restated certificate of incorporation may be amended by holders of a majority of our outstanding common stock entitled to vote thereon, subject to applicable provisions of the DGCL or applicable stock exchange rules. Our initial stockholders, who will collectively beneficially own up to 20% of our common stock upon the closing of the initial public offering (assuming they do not purchase any units in the initial public offering), will participate in any vote to amend our amended and restated certificate of incorporation and/or trust agreement and will have the discretion to vote in any manner they choose. As a result, we may be able to amend the provisions of our amended and restated certificate of incorporation which govern our pre-business combination behavior more easily than some other blank check companies, and this may increase our ability to complete an initial business combination with which you do not agree. Our stockholders may pursue remedies against us for any breach of our amended and restated certificate of incorporation.
Our Sponsor, officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination by August 1, 2019, unless we provide our public stockholders with the opportunity to redeem their shares of Class A common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, divided by the number of then outstanding public shares. Our stockholders are not parties to, or third-party beneficiaries of, these agreements and, as a result, will not have the ability to pursue remedies against our Sponsor, officers or directors for any breach of these agreements. As a result, in the event of a breach, our stockholders would need to pursue a stockholder derivative action, subject to applicable law.
We may be unable to obtain additional financing to complete our initial business combination or to fund the operations and growth of a target business, which could compel us to restructure or abandon a particular business combination.
We have not selected any specific business combination target, but intend to target businesses larger than we could acquire with the net proceeds of the initial public offering and the sale of the private placement warrants. As a result, we may be required to seek additional financing to complete such proposed initial business combination. We cannot assure you that such financing will be available on acceptable terms, if at all. To the extent that additional financing proves to be unavailable when needed to complete our initial business combination, we would be compelled to either restructure the transaction or abandon that particular business combination and seek an alternative target business candidate. Further, the amount of additional financing we may be required to obtain could increase as a result of future growth capital needs for any particular transaction, the depletion of the available net proceeds in search of a target business, the obligation to repurchase for cash a significant number of shares from stockholders who elect redemption in connection with our initial business combination and/or the terms of negotiated transactions to purchase shares in connection with our initial business combination. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.20 per share plus any pro rata interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes on the liquidation of our trust account and our warrants will expire worthless. In addition, even if we do not need additional financing to complete our initial business combination, we may require such financing to fund the operations or growth of the target business. The failure to secure additional financing could have a material adverse effect on the continued development or growth of the target business. None of our officers, directors or stockholders is required to provide any financing to us in connection with or after our initial business combination. If we are unable to complete our initial business combination, our public stockholders may only receive approximately $10.20 per share on the liquidation of our trust account, and our warrants will expire worthless.
Our initial stockholders may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support.
Our initial stockholders own 20% of our issued and outstanding shares of common stock. Accordingly, they may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support, including amendments to our amended and restated certificate of incorporation and approval of major corporate transactions. If our initial stockholders purchase any additional shares of common stock in the aftermarket or in privately negotiated transactions, this would increase their control. Factors that would be considered in making such additional purchases would include consideration of the current trading price of our Class A common stock. In addition, our board of directors, whose members were elected by our initial stockholders, is and will be divided into three classes, each of which will generally serve for a term of three years with only one class of directors being elected in each year. We may not hold an annual meeting of stockholders to elect new directors prior to the completion of our initial business combination, in which case all of the current directors will continue in office until at least the completion of the initial business combination. If there is an annual meeting, as a consequence of our “staggered” board of directors, only a minority of the board of directors will be considered for election and our initial stockholders, because of their ownership position, will have considerable influence regarding the outcome. Accordingly, our initial stockholders will continue to exert control at least until the completion of our initial business combination.
We may amend the terms of the warrants in a manner that may be adverse to holders of public warrants with the approval by the holders of at least 65% of the then outstanding publicthen-outstanding warrants. As a result, the exercise price of yourour warrants could be increased, the exercise period could be shortened and the number of shares of our Class A common stock purchasable upon exercise of a warrant could be decreased all without youra warrant holder’s approval.
Our warrants will bewere issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision but requires the approval by the holders of at least 65% of the then outstandingthen-outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants.holders. Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 65% of the then outstandingthen-outstanding public warrants approve of such amendment. Although our ability to amend the terms of the public warrants with the consent of at least 65% of the then outstandingthen-outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the warrants into cash or stock, shorten the exercise period or decrease the number of shares of our Class A common stock purchasable upon exercise of a warrant.warrant or automatically at our option.
We may redeem your unexpiredOur warrants priorare exercisable for common stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.our stockholders.
We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a priceAs of $0.01 per warrant, provided that the last reported sales price of our Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date on which we give proper notice of such redemption and provided certain other conditions are met. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force you (i) to exercise yourOctober 31, 2019, there were 13,017,777 public warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your warrants at the then-current market price when you might otherwise wish to hold your warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of your warrants. None of theno private placement warrants outstanding, respectively. The public warrants have an exercise price of $11.50 per share. To the extent such warrants are exercised, additional shares of common stock will be redeemable by us so long as they are held byissued, which will result in dilution to the Sponsor or its permitted transferees.
Our warrantsholders of common stock and founderincrease the number of shares may have an adverse effect oneligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our Class A common stock and make it more difficult to effectuate our initial business combination.stock.
We issued warrants to purchase 23,000,000 sharesare a holding company with no business operations of Class A common stock as part of the units sold in the initial public offering,our own and we issued 11,100,000 private placement warrantsdepend on cash flow from our wholly owned subsidiaries to purchase an aggregate of 11,100,000 shares of Class A common stock at $11.50 per share. Our initial stockholders currently own an aggregate of 5,750,000 founder shares. The founder shares are convertible into shares of Class A common stock on a one-for-one basis, subject to adjustment as set forth herein. In addition, ifmeet our Sponsor makes any working capital loans, up to $1,500,000 of such loans may be converted into warrants, at the price of $1.00 per warrant at the option of the lender. Such warrants would be identical to the private placement warrants, including as to exercise price, exercisability and exercise period.
To the extent we issue shares of Class A common stock to effectuate an initial business combination, the potential for the issuance of a substantial number of additional shares of Class A common stock upon exercise of these warrants and conversion rights could make us a less attractive business combination vehicle to a target business. Any such issuance will increase the number of issued and outstanding shares of our Class A common stock and reduce the value of the shares of Class A common stock issued to complete the initial business combination. Therefore, our warrants and founder shares may make it more difficult to effectuate an initial business combination or increase the cost of acquiring the target business.
The private placement warrants are identical to the warrants sold as part of the units in the initial public offering except that, so long as they are held by our Sponsor or its permitted transferees, (i) they will not be redeemable by us, (ii) they (including the Class A common stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by our Sponsor until 30 days after the completion of our initial business combination and (iii) they may be exercised by the holders on a cashless basis.
Because we must furnish our stockholders with target business financial statements, we may lose the ability to complete an otherwise advantageous initial business combination with some prospective target businesses.
The federal proxy rules require that a proxy statement with respect to a vote on an initial business combination meeting certain financial significance tests include historical and/or pro forma financial statement disclosure in periodic reports. We will include the same financial statement disclosure in connection with our tender offer documents, whether or not they are required under the tender offer rules. These financial statements may be required to be prepared in accordance with, or be reconciled to, accounting principles generally accepted in the United States of America, or GAAP, or international financial reporting standards as issued by the International Accounting Standards Board, or IFRS, depending on the circumstances and the historical financial statements may be required to be audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), or PCAOB. These financial statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide such financial statements in time for us to disclose such statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame.obligations.
We are a holding company with no business operations of its own or material assets other than the stock of our subsidiaries, all of which are wholly-owned. All of our operations are conducted by our subsidiaries and as a holding company, we require dividends and other payments from our subsidiaries to meet cash requirements. The terms of any credit facility may restrict our subsidiaries from paying dividends and otherwise transferring cash or other assets to us. If there is an emerging growth companyinsolvency, liquidation or other reorganization of any of our subsidiaries, our stockholders likely will have no right to proceed against their assets. Creditors of those subsidiaries will be entitled to payment in full from the sale or other disposal of the assets of those subsidiaries before we, as an equity holder, would be entitled to receive any distribution from that sale or disposal. If our subsidiaries are unable to pay dividends or make other payments to us when needed, we will be unable to satisfy our obligations.
Anti-takeover provisions contained in the Charter and Bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
The Charter contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions include:
● | a staggered board of directors providing for three classes of directors, which limits the ability of a stockholder or group to gain control of our Board; |
● | no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; |
● | the right of our Board to elect a director to fill a vacancy created by the expansion of our Board or the resignation, death or removal of a director in certain circumstances, which prevents stockholders from being able to fill vacancies on our Board; |
● | a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; |
● | a prohibition on stockholders calling a special meeting and the requirement that a meeting of stockholders may only be called by members of our Board, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and |
● | advance notice procedures that stockholders must comply with in order to nominate candidates to our Board or to propose matters to be acted upon at a meeting of stockholders, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us. |
The Charter designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
The Charter provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Company to the Company or our stockholders, (iii) any action asserting a claim against the Company, our directors, officers or employees arising pursuant to any provision of the DGCL, the Charter or the Bylaws, or (iv) any action asserting a claim against the Company, our directors, officers or employees governed by the internal affairs doctrine, except for, as to each of (i) through (iv) above, any claim (A) as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (B) which is vested in the meaningexclusive jurisdiction of a court or forum other than the Court of Chancery, or (C) arising under the Securities Act or for which the Court of Chancery does not have subject matter jurisdiction including, without limitation, any claim arising under the Exchange Act, as to which the federal district court for the District of Delaware shall be the sole and ifexclusive forum.
Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of, and consented to, the provisions of the Charter described in the preceding paragraph. However, stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and such persons. Alternatively, a court may determine that the choice of forum provision is unenforceable. If a court were to find these provisions of the Charter inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.
The JOBS Act permits “emerging growth companies” like us to take advantage of certain exemptions from disclosurevarious reporting requirements availableapplicable to other public companies that are not emerging growth companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We arequalify as an “emerging growth company” within the meaningas defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, (thewhich we refer to as the “JOBS Act”), andAct.” As such, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including but not limited to, not being required to comply with(i) the exemption from the auditor attestation requirements ofwith respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.statements. As a result, our stockholders may not have access to certain information they may deem important. We could behad revenues during the fiscal year ended October 31, 2019 of approximately $258.6 million. We will remain an emerging growth company for upuntil the earliest of (i) the last day of the fiscal year (a) following August 1, 2022, the fifth anniversary of the Industrea IPO, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to five years, although circumstances could cause us to lose that status earlier, including ifbe a large accelerated filer, which means the market value of our Class A common stock that is held by non-affiliates exceeds $700 million as of any June 30 beforethe last business day of our prior second fiscal quarter, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
In addition, Section 107 of the JOBS Act also provides that time, in which case we would no longer be an emerging growth company ascan take advantage of the following December 31. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companiesexemption from being required to complycomplying with new or revised financialaccounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.companies. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accountantaccounting standards used.
We cannot predict if investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result, there may be a less active trading market for securities and our stock price may be more volatile.
Compliance obligations under the Sarbanes-Oxley Act may make it more difficult for us to effectuate our initial business combination, require substantial financial and management resources, and increase the time and costs of completing an initial business combination.Item 1B. Unresolved Staff Comments.
Section 404 of the Sarbanes-Oxley Act requires that we evaluate and report on our system of internal controls beginning with our Annual Report on Form 10-K for the year ending December 31, 2018. Only in the event we are deemed to be a large accelerated filer or an accelerated filer will we be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. Further, for as long as we remain an emerging growth company, we will not be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. The fact that we are a blank check company makes compliance with the requirements of the Sarbanes-Oxley Act particularly burdensome on us as compared to other public companies because a target company with which we seek to complete our initial business combination may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of its internal controls. The development of the internal control of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such business combination.
Provisions in our amended and restated certificate of incorporation and Delaware law may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our Class A common stock and could entrench management.
Our amended and restated certificate of incorporation contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. These provisions include a staggered board of directors and the ability of the board of directors to designate the terms of and issue new series of preferred shares, which may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these provisions may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
Provisions in our amended and restated certificate of incorporation and Delaware law may have the effect of discouraging lawsuits against our directors and officers.
Our amended and restated certificate of incorporation requires, to the fullest extent permitted by law, that derivative actions brought in our name, actions against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing such suit will be deemed to have consented to service of process on such stockholder’s counsel. This provision may have the effect of discouraging lawsuits against our directors and officers.
Cyber incidents or attacks directed at us could result in information theft, data corruption, operational disruption and/or financial loss.
We depend on digital technologies, including information systems, infrastructure and cloud applications and services, including those of third parties with which we may deal. Sophisticated and deliberate attacks on, or security breaches in, our systems or infrastructure, or the systems or infrastructure of third parties or the cloud, could lead to corruption or misappropriation of our assets, proprietary information and sensitive or confidential data. As an early stage company without significant investments in data security protection, we may not be sufficiently protected against such occurrences. We may not have sufficient resources to adequately protect against, or to investigate and remediate any vulnerability to, cyber incidents. It is possible that any of these occurrences, or a combination of them, could have adverse consequences on our business and lead to financial loss.
If we effect our initial business combination with a company with operations or opportunities outside of the United States, we would be subject to a variety of additional risks that may negatively impact our operations.
If we effect our initial business combination with a company with operations or opportunities outside of the United States, we would be subject to any special considerations or risks associated with companies operating in an international setting, including any of the following:
We may not be able to adequately address these additional risks. If we were unable to do so, our operations might suffer, which may adversely impact our results of operations and financial condition.
None.
Our executive offices arecorporate office is located at 28 West 44500 E. 84th Street,Avenue, Suite 501, New York, NY 10036. Our executive offices are provided to us by our Sponsor andA-5, Thornton, CO 80229, where we have agreed to pay our Sponsor a totallease approximately 13,415 square feet of $10,000 per month for office space utilitiesin the building. We operate from a base of approximately 90 locations in 22 states in the U.S. and secretarial29 locations in the U.K. as of October 31, 2019. We own 18 of our locations in the U.S. and administrative support.lease the remaining locations and all of our locations in the U.K. are leased. Certain facilities are shared between Brundage-Bone and Eco-Pan and certain locations operate at construction sites without a formal lease. We considerbelieve that our current office space adequateproperties are suitable for our current operations.operating needs.
From time to time, we have been and may again become involved in legal proceedings arising in the ordinary course of our business. We are not currently subjectpresently a party to any litigation that we believe to be material legal proceedings, nor, to our knowledge, isand we are not aware of any material legal proceedingpending or threatened litigation against us or anythat we believe could have a material adverse effect of our officersbusiness, operating result, financial condition or directors in their corporate capacity.cash flows.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
PART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our units, Class A common stock and warrants are tradedis currently listed on Nasdaq under the symbols “INDUU,symbol “BBCP” and our public warrants are quoted on the OTC Pink marketplace operated by OTC Markets Group, Inc. under the symbol “BBCPW.” “INDU” and “INDUW,” respectively.
The following table sets forth the high and low sales prices forAs of October 31, 2019, there were 138 holders of record of shares of our units, Class A common stock and warrants for the periods presented.
| Units(1) | Common Stock(2) | Warrants(3) | ||||||||||||||||||||||
| 2017 | High | Low | High | Low | High | Low | ||||||||||||||||||
| Third Quarter | $ | 10.17 | $ | 10.00 | $ | 9.83 | $ | 9.65 | $ | 0.55 | $ | 0.37 | ||||||||||||
| Fourth Quarter | $ | 10.46 | $ | 9.95 | $ | 9.81 | $ | 9.68 | $ | 0.46 | $ | 0.36 | ||||||||||||
Holders
As of March 28, 2018, there was one1 holder of record of our units, one holder of recordpublic warrants. Because many of our Class Ashares of common stock are held by brokers and sevenother institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by the record holders of record of our warrants.
Dividendscommon stock.
We haveDividend Policy
The Company has not paid any cash dividends on ourits common stock to datedate. It is the present intention of the Company to retain any earnings for use in its business operations and, do not intend to pay cash dividends prior toaccordingly, the completion of our initial business combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of our initial business combination. The payment of any cash dividends subsequent to our initial business combination will be within the discretion of our board of directors. In addition, our board of directors is not currently contemplating andCompany does not anticipate the Board declaring stockany dividends in the foreseeable future. Further, if we incur any indebtedness in connection with our initial business combination, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.
Securities Authorized for Issuance Under Equity Compensation PlansItem 6. Selected Financial Data
None.
Performance Graph
The graph below compares the cumulative total return of our units from July 27, 2017, the date that our units were first began trading on Nasdaq, through December 31, 2017 with the comparable cumulative return of two indices, the S&P 500 Index and the Russell 2000 Index. The graph plots the growthWe are a smaller reporting company as defined in value of an initial investment of $100 in each of our units, the S&P 500 Index and the Russell 2000 over the indicated time periods, and assumes reinvestment of all dividends, if any, paid on the securities. We have not paid any cash dividends and, therefore, the cumulative total return calculation for us is based solely upon stock price appreciation and not upon reinvestment of cash dividends. The stock price performance shown on the graph is not necessarily indicative of future price performance.
* $100 invested on July 27, 2017 in stock or index, including reinvestment of dividends.
| 7/27/2017 | 12/31/2017 | |||||||
| Industrea Acquisition Corp. | $ | 100.00 | $ | 100.20 | ||||
| S&P 500 | $ | 100.00 | $ | 108.01 | ||||
| RUSSELL 2000 | $ | 100.00 | $ | 107.11 | ||||
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Offerings
On April 10, 2017, the Sponsor purchased 5,750,000 founder shares for an aggregate purchase price of $25,000. In April and May 2017, the Sponsor transferred a total of 28,750 founder shares to each of our five independent director nominees at their original purchase price.
Simultaneously with the closingRule 12b-2 of the initial public offering,Exchange Act; therefore, pursuant to Item 301(c) of Regulation S-K, we are not required to provide the Company consummated the private placement of 11,100,000 warrants (the “private placement warrants”), each exercisable to purchase one share of Class A common stock at a price of $11.50 per share, at a price of $1.00 per private placement warrant, with the Sponsor, generating gross proceeds of $11.1 million. On August 22, 2017, the Sponsor sold 55,500 private placement warrants at their original purchase price to each of the Company’s five independent directors, or an aggregate of 277,500 private placement warrants for $277,500. The sales of the above securitiesinformation required by the Company were deemed to be exempt from registration under the Securities Act, in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering.
On August 1, 2017, we consummated our initial public offering of 23,000,000 units, including the issuance of 3,000,000 units as a result of the underwriters’ exercise of their over-allotment option in full. Each unit consists of one share of Class A common stock and one redeemable warrant to purchase one share of Class A common stock. FBR Capital Markets & Co. and B. Riley & Co, LLC acted as joint book-running managers for the offering. The units were sold at a price of $10.20 per unit, generating gross proceeds to the Company of $234.6 million. Following the closing of the initial public offering and the private placement, an aggregate of $234.6 million was placed in the trust account.
The Company incurred approximately $13.3 million of offering costs in connection with the initial public offering, inclusive of $8.05 million in deferred underwriting commissions. There has been no material change in the planned use of proceeds from the initial public offering as described in our final prospectus dated July 26, 2017 which was filed with the SEC.this Item.
The following table sets forth selected historical financial information derived from our audited financial statements included elsewhere in this report for the period from April 7, 2017 (date of inception) through December 31, 2017. You should read the following selected financial data in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and the related notes appearing elsewhere in this report.
| For the period from April 7, 2017 | ||||
| (date of inception) through | ||||
| December 31, 2017 | ||||
| Statement of Operations Data: | ||||
| Total interest income | $ | 935,034 | ||
| Total expenses | 1,252,700 | |||
| Net loss | $ | (317,666 | ) | |
| Basic and diluted net loss per ordinary share | $ | (0.05 | ) | |
| Weighted average shares outstanding, basic and diluted(1) | 6,416,126 | |||
| Balance Sheet Data (end of period): | ||||
| Cash | $ | 828,555 | ||
| Cash and marketable securities held in Trust Account | $ | 235,195,034 | ||
| Total assets | $ | 236,295,754 | ||
| Class A common stock, $0.0001 par value; 21,815,963 shares subject to possible redemption (at $10.20 per share) | $ | 222,522,823 | ||
| Total liabilities | $ | 8,772,930 | ||
| Total stockholders' equity | $ | 5,000,001 | ||
| Cash Flow Data: | ||||
| Net cash used in operating activities | $ | (801,935 | ) | |
| Net cash used in investing activities | $ | (234,260,000 | ) | |
| Net cash provided by financing activities | $ | 235,890,490 | ||
(1) This number excludes an aggregate of up to 21,815,963 shares subject to redemption at December 31, 2017.Operations
References to the “Company,” “our,” “us” or “we” refer to Industrea Acquisition Corp. The following discussion and analysis of the Company’sour financial condition and results of operations should be read in conjunction with the financial statementsour Consolidated Financial Statements and therelated notes thereto containedincluded elsewhere in this report. CertainAnnual Report. In addition to historical information, contained in the following discussion and analysis set forth below includescontains forward-looking statements, such as statements regarding the Company’s expectation for future performance, liquidity and capital resources that involve risks, uncertainties and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Form 10-K including, without limitation, statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward looking statements. When used in this Form 10-K, words such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions, as they relate to us or our management, identify forward looking statements. Factorsassumptions that mightcould cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings. Such forward looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. No assurance can be given that results in any forward-looking statement will be achieved and actual results could be affected by one or more factors, which could cause them to differ materially.materially from the Company's expectations. The cautionary statements made in this Form 10-K should be read as being applicable to all forward-looking statements whenever they appear in this Form 10-K. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act. ActualCompany's actual results couldmay differ materially from those contemplatedcontained in or implied by theany forward-looking statements as a resultstatements. Factors that could cause such differences include those identified below and those described in “Cautionary Note Regarding Forward-Looking Statements,” and in Item 1A “Risk Factors” of certain factors detailed in our filings with the SEC. All subsequent written or oralthis Annual Report on Form 10-K. The Company assumes no obligation to update any of these forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.statements.
Overview
We are a blank check company incorporated on April 7, 2017 as a Delaware corporation for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. Although we are not limited to a particular industry or sector for purposes of consummating an initial business combination, we intend to focus on manufacturing and service companies in the industrial sector. Our sponsor is Industrea Alexandria LLC, a Delaware limited liability company.Business Overview
The registration statementCompany is a Delaware corporation headquartered in Thornton, Colorado. The audited consolidated financial statements included herein include the accounts of Concrete Pumping Holdings, Inc. and its wholly owned subsidiaries including Brundage-Bone Concrete Pumping, Inc. (“Brundage-Bone”), Capital Pumping (“Capital”), and Camfaud Group Limited (“Camfaud”), and Eco-Pan, Inc. (“Eco-Pan”).
On December 6, 2018, the Company, formerly known as Concrete Pumping Holdings Acquisition Corp., consummated a business combination transaction (the “Business Combination”) pursuant to which it acquired (i) the private operating company formerly called Concrete Pumping Holdings, Inc. (“CPH”) and (ii) the former special purpose acquisition company called Industrea Acquisition Corp (“Industrea”). In connection with the closing of the Business Combination, the Company changed its name to Concrete Pumping Holdings, Inc. The financial results described herein for the dates and periods prior to the Business Combination relate to the operations of CPH prior to the consummation of the Business Combination.
U.S. Concrete Pumping
In May 2019, the Company, through its wholly-owned subsidiary Brundage-Bone, acquired Capital Pumping, LP and its affiliates, a concrete pumping provider based in Texas for a purchase price of $129.2 million. The closing of this acquisition provided the Company with complementary assets and operations and significantly expanded its footprint and business in Texas.
Brundage-Bone and Capital are concrete pumping service providers in the United States ("U.S."). Their core business is the provision of concrete pumping services to general contractors and concrete finishing companies in the commercial, infrastructure and residential sectors. Equipment generally returns to a “home base” nightly and neither company contracts to purchase, mix, or deliver concrete. Brundage-Bone and Capital collectively have approximately 90 branch locations across 22 states with their corporate headquarters in Thornton (near Denver), Colorado.
In addition, in April 2018, Brundage-Bone completed the acquisition of substantially all of the assets of Richard O’Brien Companies, Inc., O’Brien Concrete Pumping-Arizona, Inc., O’Brien Concrete Pumping-Colorado, Inc. and O’Brien Concrete Pumping, LLC (collectively, “O’Brien” or the “O’Brien Companies”), solidifying Brundage-Bone’s presence in the Colorado and Phoenix, Arizona markets. All trucks of O'Brien were rebranded as Brundage-Bone trucks.
Eco-Pan provides industrial cleanup and containment services, primarily to customers in the construction industry. Eco-Pan uses containment pans specifically designed to hold waste products from concrete and other industrial cleanup operations. Eco-Pan has 16 operating locations across the United States with its corporate headquarters in Thornton, Colorado.
U.K. Operations
Camfaud is a concrete pumping service provider in the United Kingdom (“U.K.”). Their core business is primarily the provision of concrete pumping services to general contractors and concrete finishing companies in the commercial, infrastructure and residential sectors. Equipment generally returns to a “home base” nightly and does not contract to purchase, mix, or deliver concrete. Camfaud has 28 branch locations throughout the U.K., with its corporate headquarters in Epping (near London), England. In addition, during the third fiscal quarter of 2019, we started concrete waste management operations under our initial public offering was declared effective on July 26, 2017. On AugustEco-Pan brand name in the U.K. and currently operate from 1 2017, we consummatedlocation.
Results of Operations
To reflect the initial public offeringapplication of 23,000,000 units, including the issuancedifferent bases of 3,000,000 unitsaccounting as a result of the underwriters’ exercise of their over-allotment option in full at $10.00 per unit, generating gross proceeds of $230 million. We incurred offering costs of $13.3 million, inclusive of $8.05 million in deferred underwriting commissions.Business Combination, the tables provided below separate the Company’s results via a black line into two distinct periods as follows: (1) up to and including the Business Combination closing date (labeled “Predecessor”) and (2) the period after that date (labeled “Successor”). The periods after December 5, 2018 are the “Successor” periods while the periods before December 6, 2018 are the “Predecessor” periods.
Simultaneously withThe historical financial information of Industrea prior to the closingBusiness Combination (a special purpose acquisition company, or “SPAC”) has not been reflected in the Predecessor financial statements as these historical amounts have been determined to be not useful information to a user of the initial public offering, we consummated the private placement of 11,100,000 private placement warrants at a price of $1.00 per private placement warrant with our Sponsor generating gross proceeds of approximately $11.1 million.
On August 22, 2017, the Sponsor sold 55,500 private placement warrants at their original purchase price to each of the Company’s five independent directors, or an aggregate of 277,500 private placement warrants for $277,500.
Prior to the consummation of the initial public offering, on April 10, 2017, the Sponsor purchased 5,750,000 founder shares for an aggregate purchase price of $25,000. In April and May 2017, the Sponsor transferred a total of 28,750 founder shares to each of our five independent director nominees at their original purchase price.
Upon the closing of the initial public offering and private placement, $234.6 million from the net proceeds of the sale of the units in the initial public offering and the private placement was placed in a U.S.-based trust account maintained by Continental Stock Transfer & Trust Company, acting as trustee. The funds in the trust account were invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with maturities of 180 days or less or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by us, until the earlier of: (i) the completion of an initial business combination and (ii) the distribution of the funds in the trust account.
Our management has broad discretion with respect to the specific application of the net proceeds of the initial public offering and the private placement, although substantially all of the net proceeds are intended to be applied toward consummating an initial business combination.
If we are unable to complete an initial business combination within 24 months from the closing of the initial public offering (the “Combination Period”), we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares at a per-share price, payable in cash, equal to the aggregate amount then onfinancial statements. SPACs deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of the outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
Liquidity and Capital Resources
As indicated in the accompanying financial statements, at December 31, 2017, we had approximately $829,000 in our operating bank account, approximately $595,000 of interest available to pay for franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses) and working capital of approximately $378,000. We expect to continue to incur significant costs in pursuit of our initial business combination plans.
Through December 31, 2017, our liquidity needs have been satisfied through receipt of a $25,000 capital contribution from the Sponsor in exchange for the issuance of the founder shares to the Sponsor, $224,403 in loans from the Sponsor, and the proceeds from the consummation of the private placement not held in trust account. We repaid such loans from the Sponsor in full on August 1, 2017.
We intend to use substantially all of the funds held in thetheir initial public offerings into a segregated trust account including any amounts representing interest earned on the trust account holding the net proceeds of the initial public offering (less taxes payable and deferred underwriting commissions) to complete our initial business combination. To the extent that our equity or debt is used, in whole or in part, as consideration to complete our initialuntil a business combination the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial business combination, we would repay such loaned amounts. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants of the post business combination entity at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the private placement warrants. The terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. Prior to the completion of our initial business combination, we do not expect to seek loans from parties other than our Sponsor or an affiliate of our Sponsor as we do not believe third parties will be willing to loanoccurs, where such funds and provide a waiver against any and all rightsare then used to seek accesspay consideration for the acquiree and/or to funds in our trust account.
Based on the foregoing, we believe that we will have sufficient working capital and borrowing capacity from the Sponsorpay stockholders who elect to meet our needs through the earlierredeem their shares of the consummation of an initial business combination or December 31, 2018. Over this time period, we will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial business combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business, and structuring, negotiating and consummating the initial business combination.
In February 2018, we entered into an expense reimbursement agreement (the “Reimbursement Agreement”) with the sellers of a potential business combination target (the “Sellers”). Discussions regarding the proposed transaction were terminated in February 2018. Pursuant to the terms of the Reimbursement Agreement, the Sellers agreed to reimburse us for fees incurred,common stock in connection with the transaction,business combination. The operations of a SPAC, until the closing of a business combination, other than income from December 19, 2017 and through the date of termination. During the first quarter of 2018, we received $1,275,067 from the Sellers as the final settlement of amounts owed under the Reimbursement Agreement. Any remaining unreimbursed expenses will be financed with Company proceeds held outside of the trust account or with a working capital loaninvestments and transaction expenses, are nominal. Accordingly, no other activity in the Company was reported for periods prior to December 6, 2018 besides CPH’s operations as Predecessor.
As Industrea’s historical financial information is excluded from the Sponsor.
Critical Accounting Policy
Class A Common Stock SubjectPredecessor financial information, the business, and thus financial results, of the Successor and Predecessor entities, are expected to Possible Redemption
We accountbe largely consistent, excluding the impact on certain financial statement line items that were impacted by the Business Combination. Management believes reviewing our operating results for the twelve-months ended October 31, 2019 by combining the results of the Predecessor and Successor periods (“S/P Combined”) is more useful in discussing our Class A common stock subjectoverall operating performance when compared to possible redemptionthe same period in the prior year. Accordingly, in addition to presenting our results of operations as reported in our consolidated financial statements in accordance with GAAP, the guidancetables below present the non-GAAP combined results for the year.
S/P Combined | ||||||||||||||||
Successor | Predecessor | (non-GAAP) | Predecessor | |||||||||||||
(dollars in thousands) | December 6, 2018 through October 31, 2019 | November 1, 2018 through December 5, 2018 | Year Ended October 31, 2019 | Year Ended October 31, 2018 | ||||||||||||
Revenue | $ | 258,565 | $ | 24,396 | $ | 282,961 | $ | 243,223 | ||||||||
Cost of operations | 143,512 | 14,027 | 157,539 | 136,876 | ||||||||||||
Gross profit | 115,053 | 10,369 | 125,422 | 106,347 | ||||||||||||
Gross margin | 44.5 | % | 42.5 | % | 44.3 | % | 43.7 | % | ||||||||
General and administrative expenses | 91,914 | 4,936 | 96,850 | 58,789 | ||||||||||||
Transaction costs | 1,521 | 14,167 | 15,688 | 7,590 | ||||||||||||
Income (loss) from operations | 21,618 | (8,734 | ) | 12,884 | 39,968 | |||||||||||
Other income (expense): | ||||||||||||||||
Interest expense, net | (34,880 | ) | (1,644 | ) | (36,524 | ) | (21,425 | ) | ||||||||
Loss on extinguishment of debt | - | (16,395 | ) | (16,395 | ) | - | ||||||||||
Other income, net | 47 | 6 | 53 | 55 | ||||||||||||
| (34,833 | ) | (18,033 | ) | (52,866 | ) | (21,370 | ) | |||||||||
Income (loss) before income taxes | (13,215 | ) | (26,767 | ) | (39,982 | ) | 18,598 | |||||||||
Income tax expense (benefit) | (3,303 | ) | (4,192 | ) | (7,495 | ) | (9,784 | ) | ||||||||
Net income (loss) | (9,912 | ) | (22,575 | ) | (32,487 | ) | 28,382 | |||||||||
Less preferred shares dividends | (1,623 | ) | (126 | ) | (1,749 | ) | (1,428 | ) | ||||||||
Less undistributed earnings allocated to preferred shares | - | - | - | (6,365 | ) | |||||||||||
Income (loss) available to common shareholders | $ | (11,535 | ) | $ | (22,701 | ) | $ | (34,236 | ) | $ | 20,589 | |||||
For the S/P Combined twelve months ended October 31, 2019, our net loss was $32.5 million, a decrease of $60.9 million compared to net income of $28.4 million in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) are classifiedthe same period a year ago, primarily as liability instrumentsa result of higher depreciation expense, amortization expense, interest expense, transaction costs, and are measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that feature redemption rights that are either withindebt extinguishment costs, all of which were predominantly the controlresult of the holder or subjectBusiness Combination. We had a 16.3% improvement in revenue year-over-year, driven mostly by the acquisition of Capital. Net income in the S/P Combined twelve months ended October 31, 2019 was negatively impacted by higher depreciation expense of $4.6 million, amortization expense of $25.1 million, interest expense, net of $15.1 million, transaction costs of $8.1 million, and debt extinguishment costs of $16.4 million, all of which were predominantly the result of the Business Combination. In addition to redemption upon the occurrenceimpact from the Business Combination, we incurred an additional $4.1 million in general and administrative ("G&A") expenses on a year-over-year basis resulting from various costs related to being a newly public company, which included legal, accounting, and director-related costs. Approximately $1.6 million of uncertain events not solely within our control)such expenses are classified as temporary equity. At all other times, Class A common stock are classified as stockholders’ equity. Our Class A common stock feature certain redemption rights that are consideredexpected to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, at December 31, 2017, 21,815,963 shares of Class A common stock subject to possible redemption at the redemption amount are presentednon-recurring. Furthermore, as temporary equity, outsidea result of the stockholders’ equity sectionenactment of the Tax Cuts and Jobs Act in December 2017 (the “2017 Tax Act”), we revalued our deferred tax assets and liabilities in the fiscal 2018 first quarter, resulting in the realization of a $14.6 million tax benefit whereas no such benefit was realized in fiscal 2019. These amounts were slightly offset by positive contributions to net income from the acquisition of Capital, which occurred in May 2019.
Total Assets
Total assets increased from $370.1 million as of October 31, 2018 to $871.4 million as of October 31, 2019. The primary driver of the increase in assets for all segments was the Business Combination, which resulted in a step-up in the value of certain assets, primarily goodwill and intangibles, coupled with the Capital acquisition in May 2019, which added $129.2 million in net assets to the balance sheet.
Successor | Predecessor | |||||||
October 31, | October 31, | |||||||
(in thousands) | 2019 | 2018 | ||||||
Total Assets | ||||||||
U.S. Concrete Pumping | $ | 637,384 | $ | 277,936 | ||||
U.K. Operations | 138,435 | 39,167 | ||||||
U.S. Concrete Waste Management Services | 137,646 | 32,782 | ||||||
Corporate | 24,223 | 20,259 | ||||||
Intersegment | (66,323 | ) | - | |||||
| $ | 871,365 | $ | 370,144 | |||||
Results of Operations
Revenue
Successor | Predecessor | S/P Combined (non-GAAP) | Predecessor | Change | ||||||||||||||||||||
(in thousands) | December 6, 2018 through October 31, 2019 | November 1, 2018 through December 5, 2018 | Year Ended October 31, 2019 | Year Ended October 31, 2018 | $ | % | ||||||||||||||||||
Revenue | ||||||||||||||||||||||||
U.S. Concrete Pumping | $ | 187,031 | $ | 16,659 | $ | 203,690 | $ | 164,306 | $ | 39,384 | 24.0 | % | ||||||||||||
U.K. Operations | 44,021 | 5,143 | 49,164 | 50,448 | (1,284 | ) | -2.5 | % | ||||||||||||||||
U.S. Concrete Waste Management Services | 27,779 | 2,628 | 30,407 | 28,469 | 1,938 | 6.8 | % | |||||||||||||||||
Corporate | 2,258 | 242 | 2,500 | - | 2,500 | 0.0 | % | |||||||||||||||||
Intersegment | (2,524 | ) | (276 | ) | (2,800 | ) | - | (2,800 | ) | 0.0 | % | |||||||||||||
| $ | 258,565 | $ | 24,396 | $ | 282,961 | $ | 243,223 | $ | 39,738 | 16.3 | % | |||||||||||||
U.S. Concrete Pumping
Our entire activity from April 7, 2017 (date of inception) to DecemberFor the S/P Combined twelve months ended October 31, 2017 was in preparation2019 for our initial public offeringU.S. Concrete Pumping segment, revenue was up 24.0%, or $39.4 million, year-over-year to $203.7 million. The incremental benefits from (1) the O’Brien acquisition in April 2018, which strengthened our presence in the Colorado and sinceArizona markets, and (2) the closingCapital acquisition in May 2019, which added additional pumping capacity in our Texas market, drove $7.3 million and $25.2 million of the initial public offering,increase in revenue, respectively. We also had notable improvements in revenue in our Oklahoma market, where we worked on several special projects utilizing placing booms, and in our Idaho market, where we experienced an increase in billable hours. These amounts were slightly offset by approximately $1.5 million of delayed revenue due to a search for initial business combination candidates. We will not be generating any operating revenues until the closingsevere, early winter storm that delivered snow and completionrain from Idaho to Texas that caused nearly 40% of our initialoperations to be shut down for the final week of the fourth fiscal quarter of 2019.
U.K. Operations
For the S/P Combined twelve months ended October 31, 2019, revenue was down 2.5% year-over-year to $49.2 million. Excluding any impact from foreign exchange rates, revenue for this segment was up 2.4% year-over-year as a result of more favorable weather conditions in the U.K. for most of the fiscal year, which resulted in improved equipment utilization rates of our operating assets. This includes the revenue from the Eco-Pan business combination. We expectthat began in the third fiscal quarter of 2019, which amounted to incur increased$0.1 million and was immaterial overall to the segment.
U.S. Concrete Waste Management Services
For the S/P Combined twelve months ended October 31, 2019, revenue was up $1.9 million or 6.8% year-over-year to $30.4 million. Improved volume in many of our markets was offset by slight declines in certain of our West Coast operations due to adverse weather conditions experienced during the first two quarters of fiscal 2019. Specifically, aggregate revenue from operations in the West Coast was down $0.8 million for the S/P combined twelve months ended October 31, 2019 as compared to the prior year period.
Corporate
There was limited movement in revenue for our Corporate segment for the periods presented. Any year-over-year changes for our Corporate segment was primarily related to the leasing of real estate to the different U.S Concrete Pumping facilities.
Gross Margin
Gross margin for the S/P Combined twelve months ended October 31, 2019 was 44.3%, up 60 basis points from the prior fiscal year. The increase in gross margin was primarily due to the post-acquisition contribution from the Capital acquisition, more favorable fuel pricing and improvement in the Company’s procurement costs. The gross margin improvement was partially offset by the step-up in depreciation related to the Business Combination, as depreciation expense related to pumping equipment is included in the Company’s cost of operations.
General and Administrative Expenses
G&A expenses for the S/P Combined twelve months ended October 31, 2019 were $96.9 million, up $38.1 million as compared to $58.8 million in the fiscal year ended October 31, 2018. As a percentage of revenue, G&A expenses were 34.2% as compared to 24.2% in the prior fiscal year. The increase was largely due to $25.1 million of higher amortization expense caused by the step-up in fair value of certain intangible assets mostly related to the Business Combination, a $4.1 million increase in legal, accounting, and director-related costs as a result of being a publicpublicly traded company (for(approximately $1.6 million of these expenses are expected to be non-recurring) and a $3.3 million increase in stock-based compensation expense as a result of a stock grant made by the Company in April of 2019. The remaining increase is largely attributable to incremental G&A expenses from both the O'Brien and Capital acquisitions.
Transaction Costs & Debt Extinguishment Costs
Transaction costs include expenses for legal, financial reporting, accounting, and auditing compliance), as well asother professionals that were engaged in connection with an acquisition. Transaction costs and debt extinguishment costs for due diligence expenses. We expect our expenses to increase substantially after this period.
For the period from April 7, 2017 (date of inception) to DecemberS/P Combined twelve months ended October 31, 2017, we had a net loss of approximately $318,000, which consisted of approximately $935,000 in interest income, offset by approximately $837,000 in general2019 were $15.7 million and administrative costs, approximately $147,000 in state franchise taxes and $268,000 in income tax expense.
Related Party Transactions
Founder Shares
On April 10, 2017, we issued 5,750,000 shares of Class B common stock to$16.4 million, respectively. Of those amounts, the Sponsor in exchange for a capital contribution of $25,000. In April and May 2017, the Sponsor transferred a total of 28,750 founder shares to each of our independent director nominees at the same per-share purchase price paid by the Sponsor. The foregoing transfers of founder shares were made in reliance upon an exemption from the registration requirementsPredecessor incurred $14.2 million of the Securities Act pursuant to the so-called 4(a)(1)-½ exemption. The founder shares will automatically convert into shares of Class A common stock upon the consummation of an initial business combination on a one-for-one basis, subject to adjustments. In the case that additional shares of Class A common stock, or equity-linked securities convertible or exercisable for shares of Class A common stock, are issued or deemed issued in excessS&P Combined transaction costs and all of the amounts offered in our final prospectus andS&P Combined debt extinguishment costs, all of which were related to the closing of our initial business combination, including pursuant to a specified future issuance,Business Combination. The remaining transaction costs incurred during the ratio at which founder shares will convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding founder shares agree to waive such adjustment with respect to any such issuance or deemed issuance, including a specified future issuance) so that the number of shares of Class A common stock issuable upon conversion of all founder shares will equal in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the initial public offering plus all shares of Class A common stock and equity-linked shares issued or deemed issued in connection with the initial business combination (excluding any shares of Class A common stock or equity-linked securities issued, or to be issued, to any seller in the initial business combination and any private placement-equivalent warrants issued to the Sponsor or its affiliates upon conversion of loans made to us).
The initial stockholders have agreed not to transfer, assign or sell any of the founder shares (except to certain permitted transferees) until the earlier to occur of: (A) one year after the completion of the initial business combination; or (B) subsequent to the initial business combination, (x) if the last sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading daySuccessor period commencing at least 150 days after the completion of an initial business combination or (y) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Private Placement Warrants
Concurrently with the closing of the initial public offering, the Sponsor purchased an aggregate of 11,100,000 private placement warrants at $1.00 per private placement warrant, generating gross proceeds of $11.1 million in the aggregate. Each private placement warrant is exercisable to purchase one share of Class A common stock at $11.50 per share. A portion of the proceeds from the sale of the private placement warrants was added to the proceeds from the initial public offering to be held in the trust account. If we do not complete an initial business combination within the Combination Period, the private placement warrants will expire worthless.
Related Party Loans
On August 1, 2017, we repaid in full an aggregate of $224,403 loaned to us by the Sponsor pursuant to a promissory note to cover the payment of costswere predominantly related to the initial public offering. The loanacquisition of Capital in May 2019. Transaction costs incurred during the fiscal year ended October 31, 2018 were primarily related to the O’Brien acquisition.
Interest Expense, Net
Interest expense, net for the S/P Combined twelve-months ended October 31, 2019 was non-interest bearing, unsecured and due upon the closing$36.5 million up $15.1 million from fiscal 2018. As part of the initial public offering.
Business Combination, the Company extinguished all previous outstanding debt and entered into a new Term Loan Agreement (as defined below) and ABL Credit Agreement (as defined below). In addition, in order to finance the acquisition of Capital, the Company added $60.0 million of incremental term loans under the Term Loan Agreement in May 2019. The increased interest expense, net, was the result of higher average debt amounts outstanding during the twelve months ended October 31, 2019 when compared to fiscal year ended October 31, 2018, coupled with interest rates on both new financial instruments being higher than the previous debt instruments.
Income Tax (Benefit) Provision
For the S/P Combined twelve months ended October 31, 2019, the Company recorded an income tax benefit of $7.5 million on a pretax loss of $40.0 million, resulting in an effective tax rate of 18.7%. Our income tax benefit was negatively impacted mostly by $1.4 million of transaction costsexpenses that were not deductible and $0.3 million in connectiondeferred taxes on undistributed foreign earnings.
For the fiscal year ended October 31, 2018, we had an income tax benefit of $9.8 million on pretax income of $18.6 million. In December 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted. The 2017 Tax Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate tax rate from 35 percent to 21 percent effective January 1, 2018. In accordance with an initial business combination, our Sponsor or an affiliateStaff Accounting Bulletin No. 118, which provides SEC staff guidance for the application of ASC Topic 740, the Company recognized the income tax effects of the Sponsor,2017 Tax Act in its consolidated financial statements in the period the 2017 Tax Act was signed into law. As such, the Company’s consolidated financial statements for the period ended October 31, 2018 reflect the income tax effects of the 2017 Tax Act for which the accounting is complete and provisional amounts for those specific income tax effects for which the accounting is incomplete but a reasonable estimate could be determined. All provisional amounts have been finalized for the October 31, 2019 financial statements as required by Staff Accounting Bulletin No. 118. Such finalization had no impact on the tax provision for 2018.
Adjusted EBITDA1
S/P Combined | ||||||||||||||||||||||||
Successor | Predecessor | (non-GAAP) | Predecessor | Change | ||||||||||||||||||||
(in thousands, except percentages) | December 6, 2018 through October 31, 2019 | November 1, 2018 through December 5, 2018 | Year Ended October 31, 2019 | Year Ended October 31, 2018 | $ | % | ||||||||||||||||||
U.S. Concrete Pumping | $ | 56,069 | $ | 6,752 | $ | 62,821 | $ | 46,793 | $ | 16,028 | 34.3 | % | ||||||||||||
U.K. Operations | 14,034 | 1,660 | 15,694 | 16,752 | (1,058 | ) | -6.3 | % | ||||||||||||||||
U.S. Concrete Waste Management Services | 13,178 | 999 | 14,177 | 13,238 | 939 | 7.1 | % | |||||||||||||||||
Corporate | 2,625 | 177 | 2,802 | 2,367 | 435 | 18.4 | % | |||||||||||||||||
| $ | 85,906 | $ | 9,588 | $ | 95,494 | $ | 79,150 | $ | 16,344 | 20.6 | % | |||||||||||||
1Please see “Non-GAAP Measures (EBITDA and Adjusted EBITDA)” below
U.S. Concrete Pumping
Adjusted EBITDA for our U.S. Concrete Pumping segment was $62.8 million for the S/P Combined twelve months ended October 31, 2019 as compared to $46.8 million for the fiscal year ended October 31, 2018. The 34.3% year-over-year increase was primarily attributable to the Capital acquisition, improved gross margins, and volume growth across the majority of the U.S. markets.
U.K. Operations
Adjusted EBITDA for our U.K. Operations segment was $15.7 million for the S/P Combined twelve months ended October 31, 2019 as compared to $16.8 million for the fiscal year ended October 31, 2018. The 6.3% decline was primarily attributable to the reduced revenue previously discussed.
U.S. Concrete Waste Management Services
Adjusted EBITDA for our U.S. Concrete Waste Management Services segment was $14.2 million for the S/P Combined twelve months ended October 31, 2019 as compared to $13.2 million for the fiscal year ended October 31, 2018. The 7.1% year-over-year increase was due primarily to the year-over-year change in revenue discussed previously.
Corporate
There was limited movement in Adjusted EBITDA for our Corporate segment for the periods presented. Any year-over-year changes for our Corporate segment was primarily related to the allocation of overhead costs.
Liquidity and Capital Resources
Overview
We use our liquidity and capital resources to: (1) finance working capital requirements; (2) service our indebtedness; (3) purchase property, plant and equipment; and (4) finance strategic acquisitions, such as the acquisition of Capital. Our primary sources of liquidity are cash generated from operations, available cash and cash equivalents and access to our revolving credit facility under our Asset-Based Lending Credit Agreement (the “ABL Credit Agreement”), which provides for aggregate borrowings of up to $60.0 million, subject to a borrowing base limitation. As of October 31, 2019, we had $7.5 million of cash and cash equivalents and $29.2 million of available borrowing capacity under the ABL Credit Agreement, providing total available liquidity of $36.7 million.
Capital Resources
Our capital structure is primarily a combination of (1) permanent financing, represented by stockholders’ equity; (2) zero-dividend convertible perpetual preferred stock; (3) long-term financing represented by our Term Loan Agreement (defined below) and (4) short-term financing under our ABL Credit Agreement. We may from time to time seek to retire or certainpay down borrowings on the outstanding balance of our officersABL Credit Agreement or Term Loan Agreement using cash on hand. Such repayments, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and directorsother factors.
We believe our existing cash and cash equivalent balances, cash flow from operations and borrowing capacity under our ABL Credit Agreement will be sufficient to meet our working capital and capital expenditure needs for the next 12 months. Our future capital requirements may butvary materially from those currently planned and will depend on many factors, including our rate of revenue growth, potential acquisitions and overall economic conditions. To the extent that current and anticipated future sources of liquidity are not obligatedinsufficient to loan us funds asfund our future business activities and requirements, we may be required (“Working Capital Loans”). If we complete an initial business combination,to seek additional equity or debt financing. The sale of additional equity could result in dilution to our stockholders. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations.
Term Loan Agreement and ABL Credit Agreement
As part of the Business Combination, the Company would repayentered into (i) a Term Loan Agreement, dated December 6, 2018, among the Working Capital Loans outCompany, certain subsidiaries of the proceedsCompany, Credit Suisse AG, Cayman Islands Branch as administrative agent and Credit Suisse Loan Funding LLC, Jefferies Finance LLC and Stifel Nicolaus & Company Incorporated LLC as joint lead arrangers and joint bookrunners, and the other Lenders party thereto (as amended, the “Term Loan Agreement”) and (ii) a Credit Agreement, dated December 6, 2018, among the Company, certain subsidiaries of the trust account released toCompany, Wells Fargo Bank, National Association, as agent, sole lead arranger and sole bookrunner, the Company. Inother Lenders party thereto and the event that an initial business combination does not close, we may use a portion of proceeds held outside the trust account to repay the Working Capital Loans but no proceeds held in the trust account would be used to repay the Working Capital Loans. Except for the foregoing, theother parties thereto (“ABL Credit Agreement”). Summarized terms of such Working Capital Loans, if any, have not been determined and no writtenthose debt agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of an initial business combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post business combination entity at a price of $1.00 per warrant. The warrants would be identical to the private placement warrants.are included below.
Administrative SupportTerm Loan Agreement
Summarized terms of the Term Loan Agreement are as follows:
● | Provides for an original aggregate principal amount of $357.0 million. This amount was increased in May 2019 by $60.0 million in connection with the acquisition of Capital; |
● | The initial term loans advanced will mature and be due and payable in full seven years after the issuance, with principal amortization payments in an annual amount equal to 5.00% of the original principal amount; |
● | Borrowings under the Term Loan Agreement, will bear interest at either (1) an adjusted LIBOR rate or (2) an alternate base rate, plus an applicable margin of 6.00% or 5.00%, respectively; |
● | The Term Loan Agreement is secured by (i) a first priority perfected lien on substantially all of the assets of the Company and certain of its subsidiaries that are loan parties thereunder to the extent not constituting ABL Credit Agreement priority collateral and (ii) a second priority perfected lien on substantially all ABL Credit Agreement priority collateral, in each case subject to customary exceptions and limitations; |
● | The Term Loan Agreement includes certain non-financial covenants. |
The outstanding balance under the Term Loan Agreement as of October 31, 2019 was $402.1 million and Officer and Director Compensationthe Company was in compliance with all debt covenants. The Company’s interest on borrowings under the Term Loan Agreement bear interest using the London Inter-bank Offered Rate (LIBOR) as the base rate plus an applicable margin in line with the summarized terms of the Term Loan Agreement as described above.
Asset Based Revolving Lending Credit Agreement
We have agreedSummarized terms of the ABL Credit Agreement are as follows:
● | Borrowing availability in U.S. Dollars and GBP up to a maximum of $60.0 million; |
● | Borrowing capacity available for standby letters of credit of up to $7.5 million and for swingline loan borrowings of up to $7.5 million. Any issuance of letters of credit or making of a swingline loan will reduce the amount available under the ABL Facility; |
● | All loans advanced will mature and be due and payable in full five years after the issuance; |
● | Amounts borrowed may be repaid at any time, subject to the terms and conditions of the agreement; |
● | Interest on borrowings in U.S. Dollars and GBP under the ABL Credit Agreement, will bear interest at either (1) an adjusted LIBOR rate or (2) a base rate, in each case plus an applicable margin currently set at 2.25% and 1.25%, respectively. The ABL Credit Agreement is subject to two step-downs of 0.25% and 0.50% based on excess availability levels; |
● | U.S. ABL Credit Agreement obligations are secured by (i) a perfected first priority security interest in substantially all personal property of the Company and certain of its subsidiaries that are loan parties thereunder consisting of all accounts receivable, inventory, cash, intercompany notes, books and records, chattel paper, deposit, securities and operating accounts and all other working capital assets and all documents, instruments and general intangibles related to the foregoing (the “U.S. ABL Priority Collateral”) and (ii) a perfected second priority security interest in substantially all Term Loan Agreement priority collateral, in each case subject to customary exceptions and limitations; |
● | U.K. ABL Credit Agreement obligations are secured by (i) a perfected first-priority security interest in (A) the U.S. ABL Priority Collateral, (B) all of the stock (or other ownership interests) in, and held by, the U.K. borrower subsidiaries of the Company, and (C) all of the current and future assets and property of the U.K. subsidiaries of the Company that are loan parties thereunder, including a first-ranking floating charge over all current and future assets and property of each U.K. subsidiary of the Company that is a loan party thereunder; and (ii) a perfected, second-priority security interest in substantially all Term Loan Agreement priority collateral, in each case subject to customary exceptions and limitations; and |
● | The ABL Credit Agreement also includes (i) a springing financial covenant (fixed charge coverage ratio) based on excess availability levels that the Company must comply with on a quarterly basis during required compliance periods and (ii) certain non-financial covenants. |
The outstanding balance under the ABL Credit Agreement as of October 31, 2019 was $23.6 million and the Company was in compliance with all debt covenants thereunder.
Cash Flows
Cash generated from operating activities typically reflects net income, as adjusted for non-cash expense items such as depreciation, amortization and stock-based compensation, and changes in our operating assets and liabilities. Generally, we believe our business requires a relatively low level of working capital investment due to reimburselow inventory requirements and customers paying the Sponsor in an amount not to exceed $10,000 per monthCompany as invoices are submitted daily for office space, and secretarial and administrative services, commencing on July 27, 2017 through the earliermany of our consummation of an initial business combination or our liquidation.services.
InSuccessor
Net cash provided by (used in) operating activities generally reflects the cash effects of transactions and other events used in the determination of net income or loss. Net cash provided by operating activities during the period from December 6, 2018 through October 31, 2019 (the “Successor Period”) was $22.8 million. The Company had a net loss of $9.9 million that included significant non-cash charges totaling $60.0 million as follows: (1) depreciation of $20.3 million, (2) amortization of intangible assets of $32.4 million, (3) amortization of deferred financing costs of $3.7 million and (4) stock-based compensation expense of $3.6 million. These amounts were partially offset by net cash outflows related to the following activity: (1) an increase of $5.9 million in trade receivables, (2) a $0.5 million increase in inventory, (3) a $1.0 million increase in prepaid expenses and other current assets, (4) an increase of $2.4 million in our net deferred income taxes, (5) a decrease in income taxes payable of $1.4 million, (6) a $7.3 million decrease in accounts payable, and (7) a decrease of $8.3 million in accrued payroll, accrued expenses and other current liabilities.
We used $374.9 million to fund investing activities during the Successor Period. The Company paid $449.2 million to fund the Business Combination, $129.2 million to fund the acquisition of Capital and $2.3 million to fund other business combinations. Additionally, $35.7 million was used to purchase machinery, equipment and other vehicles to service our business. These cash outflows were partially offset by $238.5 million in cash withdrawn from Industrea trust account in addition we have agreed to pay eachproceeds from the sale of property, plant and equipment of $3.1 million.
Net cash used in financing activities was $361.6 million for the five independent directors $50,000 perSuccessor Period. Financing activities during the Successor Period included cash inflows from $402.1 million in net borrowings from our new Term Loan Agreement, $23.3 million in net borrowings under the Company’s new ABL Credit Agreement, $174.3 million from the issuance of common shares, $1.4 million in proceeds from the exercise of stock options and an additional $25.0 million from the issuance of preferred stock. All of these cash inflows were used to fund business combinations and other operational activity such as equipment purchases. These cash inflows were offset by payments for redemptions of common stock totaling $231.4 million, $24.9 million for the payment of debt issuance costs (which are inclusive of any original issuance discounts) that were associated with the Term Loan Agreement and new ABL Credit Agreement, and $8.1 million in payments for underwriting fees.
Predecessor
Net cash provided by operating activities during the period from November 1, 2018 through December 5, 2018 was $7.9 million. The Company had a net loss of $22.6 million that included significant non-cash charges totaling $18.5 million as follows: (1) depreciation of $2.1 million, (2) prepayment penalty on early extinguishment of debt of $13.0 million, and (3) write off deferred debt issuance costs of $3.4 million. These amounts were partially offset by net cash outflows related to the following activity: (1) an increase of $0.3 million in inventory, (2) a $1.3 million increase in prepaid expenses and other current assets, (3) an increase of $4.4 million in our net deferred income taxes, (4) an increase of $17.3 million in accrued payroll, accrued expenses and other current liabilities, and (5) a $0.7 million decrease in accounts payable.
Net cash provided by operating activities for the fiscal year commencing July 26, 2017 throughended October 31, 2018 was $39.6 million. The Company had net income of $28.4 million that included significant non-cash charges totaling $27.3 million as follows: (1) depreciation of $17.7 million, (2) amortization of intangible assets of $7.9 million, and (3) amortization of deferred financing costs of $1.7 million. These amounts were partially offset by net cash outflows related to the earlierfollowing activity: (1) an increase of $7.5 million in trade receivables, (2) a $0.7 million increase in inventory, (3) a $1.4 million increase in prepaid expenses and other current assets, (4) an increase of $11.1 million in our consummationnet deferred income taxes, (6) an increase of $8.7 million in accrued payroll, accrued expenses and other current liabilities, (7) a business combination or liquidation.decrease in income taxes payable of $0.4 million, and (8) a $1.8 million decrease in accounts payable.
We recognized an aggregate of $159,140 in expenses incurred in connection with the aforementioned arrangements with the related parties on our Statements of Operationsused $0.1 million to fund investing activities for the period from April 7, 2017 (date of inception)November 1, 2018 through December 31, 2017.
Contractual Obligations
Registration Rights
The holders5, 2018. We used $0.5 million to fund purchases of machinery, equipment and other vehicles to service our business. This was offset by $0.4 million in proceeds received from the founder sharessale of property, plant and private placement warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A common stock issuable upon the exercise of the private placement warrants and warrants that may be issued upon conversion of Working Capital Loans) are entitled to registration rights pursuant to a registration rights agreement entered into concurrently with the initial public offering. The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a business combination. However, the registration rights agreement provides that we will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period, which occurs (i) in the case of the founder shares, on the earlier of (A) one year after the completion of our initial business combination or (B) subsequent to our initial business combination, (x) if the last sale price of our Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property and (ii) in the case of the private placement warrants and the respective Class A common stock underlying such warrants, 30 days after the completion of our initial business combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreementequipment.
We grantedused $49.5 million to fund investing activities for the underwriters a 45-day optionfiscal year ended October 31, 2018. We used $31.7 million to fund purchases of machinery, equipment and other vehicles to service our business. We also used $21.0 million as part of the O'Brien acquisition completed in April of 2018. These were offset by $3.2 million in proceeds received from July 26, 2017 to purchase up to 3,000,000 additional units to cover over-allotments, if any, at the initial public offering price less the underwriting discountssale of property, plant and commissions, which was fully exercised on August 1, 2017.equipment.
We paid an underwriting discountused $15.4 million to fund financing activities during the period from November 1, 2018 through December 5, 2018, all of $0.20 per unit, or $4.6which was from net payment activity under our revolving credit facility.
Net cash used in financing activities was $13.0 million for the fiscal year ended October 31, 2018. Financing activities for this period included a $15.6 million cash inflow from a bond offering to finance the O’Brien asset purchase. This was offset by net payments of $2.4 million on our revolving credit facility and $0.2 million in the aggregate, upon the consummationpayments on our capital lease obligations.
Off-Balance Sheet Arrangements
As of December 31, 2017, we didWe do not currently have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii)that have had or are reasonably likely to have a material current or future effect on our financial condition, revenue or expenses, results of Regulation S- K and didoperations, liquidity, capital expenditures, or capital resources. From time to time, we enter into non-cancellable operating leases that are not have any commitments or contractual obligations.reflected on our balance sheet. At October 31, 2019, we had $1.5 million of undrawn letters of credit outstanding.
JOBSNon-GAAP Measures (EBITDA and Adjusted EBITDA)
We calculate EBITDA by taking GAAP net income and adding back interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is calculated by taking EBITDA and adding back transaction expenses, loss on debt extinguishment, stock-based compensation, other income, net, and other adjustments. We believe these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends related to our financial condition and results of operations, as a tool for investors to use in evaluating our ongoing operating results and trends and in comparing our financial measures with competitors who also present similar non-GAAP financial measures. In addition, these measures (1) are used in quarterly and annual financial reports prepared for management and our board of directors and (2) help management to determine incentive compensation. EBITDA and Adjusted EBITDA have limitations and should not be considered in isolation or as a substitute for performance measures calculated under GAAP. These non-GAAP measures exclude certain cash expenses that we are obligated to make. In addition, other companies in our industry may calculate EBITDA and Adjusted EBITDA differently or may not calculate it at all, which limits the usefulness of EBITDA and Adjusted EBITDA as comparative measures. Transaction expenses represent expenses for legal, accounting, and other professionals that were engaged in the completion of various acquisitions. Transaction expenses can be volatile as they are primarily driven by the size of a specific acquisition. As such, we exclude these amounts from adjusted EBITDA for comparability across periods. Other adjustments include severance expenses, director fees, expenses related to being a newly publicly-traded company and other non-recurring costs.
S/P Combined | ||||||||||||||||
Successor | Predecessor | (non-GAAP) | Predecessor | |||||||||||||
(in thousands) | December 6, 2018 through October 31, 2019 | November 1, 2018 through December 5, 2018 | Year Ended October 31, 2019 | Year Ended October 31, 2018 | ||||||||||||
Consolidated | ||||||||||||||||
Net income (loss) | $ | (9,912 | ) | $ | (22,575 | ) | $ | (32,487 | ) | $ | 28,382 | |||||
Interest expense, net | 34,880 | 1,644 | 36,524 | 21,425 | ||||||||||||
Income tax expense (benefit) | (3,303 | ) | (4,192 | ) | �� | (7,495 | ) | (9,784 | ) | |||||||
Depreciation and amortization | 52,652 | 2,713 | 55,365 | 25,623 | ||||||||||||
EBITDA | 74,317 | (22,410 | ) | 51,907 | 65,646 | |||||||||||
Transaction expenses | 1,521 | 14,167 | 15,688 | 7,590 | ||||||||||||
Loss on debt extinguishment | - | 16,395 | 16,395 | - | ||||||||||||
Stock-based compensation | 3,619 | - | 3,619 | 281 | ||||||||||||
Other income, net | (47 | ) | (6 | ) | (53 | ) | (55 | ) | ||||||||
Other adjustments | 6,496 | 1,442 | 7,938 | 5,688 | ||||||||||||
Adjusted EBITDA | $ | 85,906 | $ | 9,588 | $ | 95,494 | $ | 79,150 | ||||||||
Successor | Predecessor | S/P Combined (non-GAAP) | Predecessor | |||||||||||||
(in thousands) | December 6, 2018 through October 31, 2019 | November 1, 2018 through December 5, 2018 | Year Ended October 31, 2019 | Year Ended October 31, 2018 | ||||||||||||
U.S. Concrete Pumping | ||||||||||||||||
Net income (loss) | $ | (11,031 | ) | $ | (25,252 | ) | $ | (36,283 | ) | $ | 13,955 | |||||
Interest expense, net | 32,173 | 1,154 | 33,327 | 17,247 | ||||||||||||
Income tax expense (benefit) | (6,658 | ) | (2,102 | ) | (8,760 | ) | (11,473 | ) | ||||||||
Depreciation and amortization | 32,245 | 1,635 | 33,880 | 15,237 | ||||||||||||
EBITDA | 46,729 | (24,565 | ) | 22,164 | 34,966 | |||||||||||
Transaction expenses | 1,521 | 14,167 | 15,688 | 7,590 | ||||||||||||
Loss on debt extinguishment | - | 16,395 | 16,395 | - | ||||||||||||
Stock-based compensation | 3,619 | - | 3,619 | 281 | ||||||||||||
Other income, net | (45 | ) | (6 | ) | (51 | ) | (55 | ) | ||||||||
Other adjustments | 4,245 | 761 | 5,006 | 4,011 | ||||||||||||
Adjusted EBITDA | $ | 56,069 | $ | 6,752 | $ | 62,821 | $ | 46,793 | ||||||||
Successor | Predecessor | S/P Combined (non-GAAP) | Predecessor | |||||||||||||
(in thousands) | December 6, 2018 through October 31, 2019 | November 1, 2018 through December 5, 2018 | Year Ended October 31, 2019 | Year Ended October 31, 2018 | ||||||||||||
U.K. Operations | ||||||||||||||||
Net income (loss) | $ | 1,123 | $ | 158 | $ | 1,281 | $ | 3,018 | ||||||||
Interest expense, net | 2,705 | 490 | 3,195 | 4,173 | ||||||||||||
Income tax expense (benefit) | 538 | 49 | 587 | 503 | ||||||||||||
Depreciation and amortization | 8,807 | 890 | 9,697 | 8,060 | ||||||||||||
EBITDA | 13,173 | 1,587 | 14,760 | 15,754 | ||||||||||||
Transaction expenses | - | - | - | - | ||||||||||||
Loss on debt extinguishment | - | - | - | - | ||||||||||||
Stock-based compensation | - | - | - | - | ||||||||||||
Other income, net | - | - | - | - | ||||||||||||
Other adjustments | 861 | 73 | 934 | 998 | ||||||||||||
Adjusted EBITDA | $ | 14,034 | $ | 1,660 | $ | 15,694 | $ | 16,752 | ||||||||
Successor | Predecessor | S/P Combined (non-GAAP) | Predecessor | |||||||||||||
(in thousands) | December 6, 2018 through October 31, 2019 | November 1, 2018 through December 5, 2018 | Year Ended October 31, 2019 | Year Ended October 31, 2018 | ||||||||||||
U.S. Concrete Waste Management Services | ||||||||||||||||
Net income (loss) | $ | (1,520 | ) | $ | 2,009 | $ | 489 | $ | 9,634 | |||||||
Interest expense, net | 2 | - | 2 | 1 | ||||||||||||
Income tax expense (benefit) | 2,485 | (1,784 | ) | 701 | 846 | |||||||||||
Depreciation and amortization | 10,871 | 163 | 11,034 | 2,078 | ||||||||||||
EBITDA | 11,838 | 388 | 12,226 | 12,559 | ||||||||||||
Transaction expenses | - | - | - | - | ||||||||||||
Loss on debt extinguishment | - | - | - | - | ||||||||||||
Stock-based compensation | - | - | - | - | ||||||||||||
Other income, net | (2 | ) | - | (2 | ) | - | ||||||||||
Other adjustments | 1,342 | 611 | 1,953 | 679 | ||||||||||||
Adjusted EBITDA | $ | 13,178 | $ | 999 | $ | 14,177 | $ | 13,238 | ||||||||
Successor | Predecessor | S/P Combined (non-GAAP) | Predecessor | |||||||||||||
(in thousands) | December 6, 2018 through October 31, 2019 | November 1, 2018 through December 5, 2018 | Year Ended October 31, 2019 | Year Ended October 31, 2018 | ||||||||||||
Corporate | ||||||||||||||||
Net income (loss) | $ | 1,516 | $ | 510 | $ | 2,026 | $ | 1,775 | ||||||||
Interest expense, net | - | - | - | 4 | ||||||||||||
Income tax expense (benefit) | 332 | (355 | ) | (23 | ) | 340 | ||||||||||
Depreciation and amortization | 729 | 25 | 754 | 248 | ||||||||||||
EBITDA | 2,577 | 180 | 2,757 | 2,367 | ||||||||||||
Transaction expenses | - | - | - | - | ||||||||||||
Loss on debt extinguishment | - | - | - | - | ||||||||||||
Stock-based compensation | - | - | - | - | ||||||||||||
Other income, net | - | - | - | - | ||||||||||||
Other adjustments | 48 | (3 | ) | 45 | - | |||||||||||
Adjusted EBITDA | $ | 2,625 | $ | 177 | $ | 2,802 | $ | 2,367 | ||||||||
Jobs Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electinghave previously elected to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As such,a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. If we were to subsequently elect instead to comply with these public company effective dates, such election would be irrevocable pursuant to Section 107 of the JOBS Act.
To date, our efforts have been limited to organizational activitiesCritical Accounting Policies and activities relating to the initial public offering and the identification and evaluation of prospective acquisition targets for a business combination. We have neither engaged in any operations nor generated any revenues. Following our initial public offering, we invested the funds held in the trust account invested in U.S. government treasury bills, notes or bonds with a maturity of 180 days or less or in certain money market funds that invest solely in US treasuries. Due to the short-term nature of these investments, we do not believe that there will be an associated material exposure to interest rate risk.Estimates
At December 31, 2017, approximately $235 million was heldIn presenting our financial statements in conformity with U.S. GAAP, we are required to make estimates and assumptions that affect the trust account foramounts reported therein. Several of the purposes of consummating a business combination. Ifestimates and assumptions we complete a business combination within 24 months after the closingare required to make relate to matters that are inherently uncertain as they pertain to future events. However, events that are outside of our initial public offering,control cannot be predicted and, as such, they cannot be contemplated in evaluating such estimates and assumptions. If there is a significant unfavorable change to current conditions, it could result in a material impact to our consolidated and combined results of operations, financial position and liquidity. We believe that the funds inestimates and assumptions we used when preparing our financial statements were the trust account will be used to pay formost appropriate at that time. Presented below are those accounting policies that we believe require subjective and complex judgments that could potentially affect reported results. However, the business combination, redemptionsmajority of our public shares, if any, deferred underwriting compensationbusiness activities are in environments where we are paid a fee for a service performed, and therefore the results of $8.05 millionthe majority of our recurring operations are recorded in our financial statements using accounting policies that are not particularly subjective, nor complex.
Listed below are those estimates that we believe are critical and accrued expenses related torequire the business combination. Any funds remaining will be made available to us to provide working capital to finance our operations.use of complex judgment in their application.
Goodwill and Intangible Assets
We haveassess potential impairment of our goodwill at least annually, generally as of August 31st. However, as a result of our stock price declining substantially during the fiscal 2019 third quarter, we concluded this qualified as a triggering event and thus performed a step one goodwill impairment analysis as of July 31, 2019. The results of our analysis indicated no impairment. The fair value of our U.S. Concrete Pumping, U.K. Operations and U.S. Concrete Waste Management Services reporting units exceeded their July 31, 2019 carrying values by approximately 4%, 3% and 4%, respectively. The fact that the fair values of these reporting units were largely in-line with their carrying values was consistent with expectations given the short period of time that had passed since goodwill was initially recorded on the Company’s balance sheet, primarily resulting from the Business Combination in December 2018 and the Capital acquisition in May 2019.
Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates and market factors. Estimating fair value of individual reporting units and indefinite-lived intangible assets requires us to make assumptions and estimates regarding out future plans, as well as industry and economic conditions. These assumptions and estimates include projected revenue, royalty rate, discount rate, tax amortization benefit and other market factors outside of our control.
Due to the interim quantitative test performed as of July 31, 2019, a quantitative test on our annual testing date of August 31, 2019 was not engagedconsidered necessary. As there were no additional impairment indicators present as of year-end, the Company elected to perform a qualitative analysis for the three-month period ending October 31, 2019 instead and no triggering events were identified. For further information, refer to Note 8 to the Company’s audited financial statements included elsewhere in any hedging activities sincethis Annual Report.
Income Taxes
We are subject to income taxes in the U.S., U.K. and other jurisdictions. Significant judgment is required in determining our inceptionprovision for income tax, including evaluating uncertainties in the application of accounting principles and complex tax laws.
Income taxes include federal, state and foreign taxes currently payable and deferred taxes arising from temporary differences between income for financial reporting and income tax purposes. Deferred tax assets and liabilities are determined based on April 7, 2017. We do not expectthe differences between the financial statement balances and the tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to engagereverse. The effect on deferred tax assets and liabilities of a change in any hedging activities with respecttax rates is recognized in income in the year that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to amounts expected to be realized.
Stock-Based Compensation.
ASC Topic 718, Compensation—Stock Compensation (“ASC 718”) requires that share-based compensation expense be measured and recognized at an amount equal to the fair value of share-based payments granted under compensation arrangements. The fair value of each restricted stock award or stock option awards (with an exercise price of $0.01) that only contains a time-based vesting condition is equal to the market riskvalue of our common stock on the date of grant. A substantial portion of the Company's stock awards contain a market condition. For those awards, we estimate the fair value using a Monte Carlo simulation model whereby the fair value of the awards is fixed at grant date and amortized over the longer of the remaining performance or service period. The Monte Carlo Simulation valuation model incorporates the following assumptions: expected stock price volatility, the expected life of the awards, a risk-free interest rate and expected dividend yield. Significant judgment is required in determining the expected volatility of our common stock. Due to which we are exposed.the limited history of trading of the Company’s common stock, the Company determined expected volatility based on a peer group of publicly traded companies.
The Company accounts for forfeitures as they occur.
Recently Issued Accounting Standards
For a detailed description of recently adopted and new accounting pronouncements refer to Note 2 to the Company’s audited financial statements included elsewhere in this Annual Report.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
Item 8. Consolidated Financial Statements
Index to Financial StatementsTABLE OF CONTENTS
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors and Stockholders of
Industrea Acquisition Corp.Concrete Pumping Holdings, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of Industrea Acquisition Corp.Concrete Pumping Holdings, Inc. (the “Company”), as of DecemberOctober 31, 2017,2019 (Successor) and October 31, 2018 (Predecessor), the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity and cash flows for the period from April 7, 2017 (date of inception)December 6, 2018 through October 31, 2019 (Successor), for the period from November 1, 2018 through December 5, 2018 (Predecessor) and for the year ended October 31, 20172018 (Predecessor), and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 2017,October 31, 2019 (Successor) and October 31, 2018 (Predecessor), and the results of its operations and its cash flows for the period from April 7, 2017 (date of inception) through December 6, 2018 to October 31, 2017,2019 (Successor), for the period from November 1, 2018 to December 5, 2018 (Predecessor) and for the year ended October 31, 2018 (Predecessor), in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on the Company'sthese consolidated financial statements based on our audit.audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB"(“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our auditaudits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company was not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our auditaudits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our auditaudits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit providesaudits provide a reasonable basis for our opinion.
/s/ WithumSmith+Brown, PC BDO USA, LLP
We have served as the Company's auditor since 2017.2018.
Whippany, New JerseyDallas, Texas
March 28, 2018January 14, 2020
Concrete Pumping Holdings, Inc.
Consolidated Balance Sheets
Successor | Predecessor | |||||||
October 31, | October 31, | |||||||
(in thousands, except per share amounts) | 2019 | 2018 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 7,473 | $ | 8,621 | ||||
Trade receivables, net | 45,957 | 40,118 | ||||||
Inventory | 5,254 | 3,810 | ||||||
| Income taxes receivable | 697 | - | ||||||
Prepaid expenses and other current assets | 3,378 | 3,947 | ||||||
Total current assets | 62,759 | 56,496 | ||||||
Property, plant and equipment, net | 307,415 | 201,915 | ||||||
Intangible assets, net | 222,293 | 36,429 | ||||||
Goodwill | 276,088 | 74,656 | ||||||
Other non-current assets | 1,813 | - | ||||||
Deferred financing costs | 997 | 648 | ||||||
Total assets | $ | 871,365 | $ | 370,144 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Revolving loan | $ | 23,555 | $ | 62,987 | ||||
Term loans, current portion | 20,888 | - | ||||||
Current portion of capital lease obligations | 91 | 85 | ||||||
Accounts payable | 7,408 | 5,192 | ||||||
Accrued payroll and payroll expenses | 9,177 | 6,705 | ||||||
Accrued expenses and other current liabilities | 28,106 | 18,830 | ||||||
Income taxes payable | 1,153 | 1,152 | ||||||
Deferred consideration | 1,708 | 1,458 | ||||||
Total current liabilities | 92,086 | 96,409 | ||||||
Long term debt, net of discount for deferred financing costs | 360,938 | 173,470 | ||||||
Capital lease obligations, less current portion | 477 | 568 | ||||||
Deferred income taxes | 69,049 | 39,005 | ||||||
Total liabilities | 522,550 | 309,452 | ||||||
Redeemable preferred stock, $0.001 par value, 2,342,264 shares issued and outstanding as of October 31, 2018 (liquidation preference of $11,239,060) | - | 14,672 | ||||||
Zero-dividend convertible perpetual preferred stock, $0.0001 par value, 2,450,980 shares issued and outstanding as of October 31, 2019 | 25,000 | - | ||||||
Stockholders' equity | ||||||||
Common stock, $0.001 par value, 15,000,000 shares authorized, 7,576,289 shares issued and outstanding as of October 31, 2018 | - | 8 | ||||||
Common stock, $0.0001 par value, 500,000,000 shares authorized, 58,253,220 shares issued and outstanding as of October 31, 2019 | 6 | - | ||||||
Additional paid-in capital | 350,489 | 18,724 | ||||||
Accumulated other comprehensive income (loss) | (599 | ) | 584 | |||||
(Accumulated deficit) retained earnings | (26,081 | ) | 26,704 | |||||
Total stockholders' equity | 323,815 | 46,020 | ||||||
Total liabilities and stockholders' equity | $ | 871,365 | $ | 370,144 | ||||
See accompanying notes to consolidated financial statements.
INDUSTREA ACQUISITION CORP.Concrete Pumping Holdings, Inc.
Consolidated Statements of Operations
Successor | Predecessor | |||||||||||
(in thousands, except share and per share amounts) | December 6, 2018 through October 31, 2019 | November 1, 2018 through December 5, 2018 | Year Ended October 31, 2018 | |||||||||
Revenue | $ | 258,565 | $ | 24,396 | $ | 243,223 | ||||||
Cost of operations | 143,512 | 14,027 | 136,876 | |||||||||
Gross profit | 115,053 | 10,369 | 106,347 | |||||||||
General and administrative expenses | 91,914 | 4,936 | 58,789 | |||||||||
Transaction costs | 1,521 | 14,167 | 7,590 | |||||||||
Income (loss) from operations | 21,618 | (8,734 | ) | 39,968 | ||||||||
Other income (expense): | ||||||||||||
Interest expense, net | (34,880 | ) | (1,644 | ) | (21,425 | ) | ||||||
Loss on extinguishment of debt | - | (16,395 | ) | - | ||||||||
Other income, net | 47 | 6 | 55 | |||||||||
Total other income (expense) | (34,833 | ) | (18,033 | ) | (21,370 | ) | ||||||
Income (loss) before income taxes | (13,215 | ) | (26,767 | ) | 18,598 | |||||||
Income tax expense (benefit) | (3,303 | ) | (4,192 | ) | (9,784 | ) | ||||||
Net income (loss) | (9,912 | ) | (22,575 | ) | 28,382 | |||||||
Less preferred shares dividends | (1,623 | ) | (126 | ) | (1,428 | ) | ||||||
Less undistributed earnings allocated to preferred shares | - | - | (6,365 | ) | ||||||||
Income (loss) available to common shareholders | $ | (11,535 | ) | $ | (22,701 | ) | $ | 20,589 | ||||
Weighted average common shares outstanding | ||||||||||||
Basic | 41,445,508 | 7,576,289 | 7,576,289 | |||||||||
Diluted | 41,445,508 | 7,576,289 | 8,325,890 | |||||||||
Net income (loss) per common share | ||||||||||||
Basic | $ | (0.28 | ) | $ | (3.00 | ) | $ | 2.72 | ||||
Diluted | $ | (0.28 | ) | $ | (3.00 | ) | $ | 2.47 | ||||
See accompanying notes to consolidated financial statements.
Concrete Pumping Holdings, Inc.
Consolidated Statements of Comprehensive Income
Successor | Predecessor | |||||||||||
(in thousands) | December 6, 2018 through October 31, 2019 | November 1, 2018 through December 5, 2018 | Year Ended October 31, 2018 | |||||||||
Net income (loss) | $ | (9,912 | ) | $ | (22,575 | ) | $ | 28,382 | ||||
Other comprehensive income: | ||||||||||||
Foreign currency translation adjustment | (599 | ) | (674 | ) | (1,797 | ) | ||||||
Total comprehensive income (loss) | $ | (10,511 | ) | $ | (23,249 | ) | $ | 26,585 | ||||
See accompanying notes to consolidated financial statements.
Concrete Pumping Holdings, Inc.
Consolidated Statements of Changes in Stockholders' Equity
Predecessor | ||||||||||||||||||||
(in thousands) | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income | Retained Earnings (Accumulated Deficit) | Total | |||||||||||||||
Balance at October 31, 2017 | $ | 8 | $ | 18,443 | $ | 2,381 | $ | (1,678 | ) | $ | 19,154 | |||||||||
Stock-based compensation | - | 281 | - | - | 281 | |||||||||||||||
Net income | - | - | - | 28,382 | 28,382 | |||||||||||||||
Foreign currency translation adjustment | - | - | (1,797 | ) | - | (1,797 | ) | |||||||||||||
Balance at October 31, 2018 | $ | 8 | $ | 18,724 | $ | 584 | $ | 26,704 | $ | 46,020 | ||||||||||
Net loss | - | - | - | (22,575 | ) | (22,575 | ) | |||||||||||||
Stock-based compensation | - | 27 | - | - | 27 | |||||||||||||||
Foreign currency translation adjustment | - | - | (674 | ) | - | (674 | ) | |||||||||||||
Balance at December 5, 2018 | $ | 8 | $ | 18,751 | $ | (90 | ) | $ | 4,129 | $ | 22,798 | |||||||||
Successor | ||||||||||||||||||||||||
(in thousands) | Common Stock | Additional Paid-In | Accumulated Other Comprehensive | Retained Earnings (Accumulated | ||||||||||||||||||||
Class A | Class B | Capital | Income | Deficit) | Total | |||||||||||||||||||
Balance at December 6, 2018 | $ | 0 | $ | 1 | $ | 12,433 | $ | - | $ | (7,434 | ) | $ | 5,000 | |||||||||||
Redemption of Class A common stock | (0 | ) | - | (12,433 | ) | - | (3,577 | ) | (16,010 | ) | ||||||||||||||
Issuance of Class A common stock | 1 | - | 96,900 | - | - | 96,901 | ||||||||||||||||||
Rollover of Class A common stock as a result of the Business Combination | 1 | - | 164,908 | - | - | 164,909 | ||||||||||||||||||
Conversion of Class B common stock | 1 | (1 | ) | - | - | - | - | |||||||||||||||||
Net income (loss) | - | - | - | - | (9,912 | ) | (9,912 | ) | ||||||||||||||||
Foreign currency translation adjustment | - | - | - | (599 | ) | - | (599 | ) | ||||||||||||||||
Shares issued to acquire business | - | - | 1,150 | - | - | 1,150 | ||||||||||||||||||
Stock-based compensation expense | - | - | 3,619 | - | - | 3,619 | ||||||||||||||||||
Shares issued upon exercise of stock options and warrants | - | - | 1,370 | - | - | 1,370 | ||||||||||||||||||
Shares issued upon awards of restricted stock | 1 | - | (1 | ) | - | - | - | |||||||||||||||||
Issuance of shares in exchange for warrants | - | - | 5,158 | - | (5,158 | ) | - | |||||||||||||||||
Shares issued upon public offering of Class A common stock | 2 | - | 77,385 | - | - | 77,387 | ||||||||||||||||||
Balance at October 31, 2019 | $ | 6 | $ | - | $ | 350,489 | $ | (599 | ) | $ | (26,081 | ) | $ | 323,815 | ||||||||||
See accompanying notes to consolidated financial statements.
Concrete Pumping Holdings, Inc.
Consolidated Statements of Cash Flows
Successor | Predecessor | |||||||||||
(in thousands) | December 6, 2018 through October 31, 2019 | November 1, 2018 through December 5, 2018 | Year Ended October 31, 2018 | |||||||||
Net income (loss) | $ | (9,912 | ) | $ | (22,575 | ) | $ | 28,382 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation | 20,279 | 2,060 | 17,719 | |||||||||
Deferred income taxes | (2,446 | ) | (4,355 | ) | (11,106 | ) | ||||||
Amortization of deferred financing costs | 3,664 | 152 | 1,690 | |||||||||
Write off deferred debt issuance costs | - | 3,390 | - | |||||||||
Amortization of debt premium | - | (11 | ) | (60 | ) | |||||||
Amortization of intangible assets | 32,366 | 653 | 7,904 | |||||||||
Stock-based compensation expense | 3,619 | 27 | 281 | |||||||||
Prepayment penalty on early extinguishment of debt | - | 13,004 | - | |||||||||
Gains, net of losses, on the sale of property, plant and equipment | (611 | ) | (166 | ) | (2,623 | ) | ||||||
Accretion of contingent consideration | 207 | - | 527 | |||||||||
Net changes in operating assets and liabilities (net of acquisitions): | ||||||||||||
Trade receivables, net | (5,861 | ) | 485 | (7,469 | ) | |||||||
Inventory | (466 | ) | (294 | ) | (707 | ) | ||||||
Prepaid expenses and other current assets | (1,001 | ) | (1,283 | ) | (1,408 | ) | ||||||
Income taxes payable, net | (1,428 | ) | 203 | (381 | ) | |||||||
Accounts payable | (7,303 | ) | (654 | ) | (1,832 | ) | ||||||
Accrued payroll, accrued expenses and other current liabilities | (8,330 | ) | 17,280 | 8,702 | ||||||||
Net cash provided by operating activities | 22,777 | 7,916 | 39,619 | |||||||||
Cash flows from investing activities: | ||||||||||||
Purchases of property, plant and equipment | (35,736 | ) | (503 | ) | (31,738 | ) | ||||||
Proceeds from sale of property, plant and equipment | 3,073 | 364 | 3,239 | |||||||||
Cash withdrawn from Industrea Trust Account | 238,474 | - | - | |||||||||
Acquisition of net assets, net of cash acquired - CPH acquisition | (449,436 | ) | - | - | ||||||||
Acquisition of net assets, net of cash acquired - Capital acquisition | (129,218 | ) | - | - | ||||||||
Acquisition of net assets, net of cash acquired - Other business combinations | (2,257 | ) | - | (21,000 | ) | |||||||
Net cash (used in) investing activities | (375,100 | ) | (139 | ) | (49,499 | ) | ||||||
See accompanying notes to consolidated financial statements.
Concrete Pumping Holdings, Inc.
Consolidated Statements of Cash Flows (Continued)
Successor | Predecessor | |||||||||||
December 6, 2018 through October 31, 2019 | November 1, 2018 through December 5, 2018 | Year Ended October 31, 2018 | ||||||||||
Cash flows from financing activities: | ||||||||||||
Premium proceeds on long term debt | - | - | 600 | |||||||||
Proceeds on long term debt | 417,000 | - | 15,000 | |||||||||
Payments on long term debt | (14,906 | ) | - | - | ||||||||
Proceeds on revolving loan | 222,213 | 4,693 | 237,195 | |||||||||
Payments on revolving loan | (198,863 | ) | (20,056 | ) | (239,588 | ) | ||||||
Payment of debt issuance costs | (24,929 | ) | - | - | ||||||||
Redemption of common shares | (231,415 | ) | - | - | ||||||||
Payments on capital lease obligations | (78 | ) | (7 | ) | (194 | ) | ||||||
Issuance of preferred shares | 25,000 | - | - | |||||||||
Payment of underwriting fees | (8,050 | ) | - | - | ||||||||
Issuance of common shares - Dec 2018 | 96,900 | - | - | |||||||||
Issuance of common shares - May 2019 | 77,387 | - | - | |||||||||
Proceeds on exercise of rollover incentive options | 1,370 | - | - | |||||||||
Net cash provided by (used in) financing activities | 361,629 | (15,370 | ) | 13,013 | ||||||||
Effect of foreign currency exchange rate on cash | (1,837 | ) | (70 | ) | (1,437 | ) | ||||||
Net increase (decrease) in cash | 7,469 | (7,663 | ) | 1,696 | ||||||||
Cash: | ||||||||||||
Beginning of period | 4 | 8,621 | 6,925 | |||||||||
End of period | $ | 7,473 | $ | 958 | $ | 8,621 | ||||||
See accompanying notes to consolidated financial statements.
Concrete Pumping Holdings, Inc.
Consolidated Statements of Cash Flows (Continued)
Successor | Predecessor | |||||||||||
(in thousands) | December 6, 2018 through October 31, 2019 | November 1, 2018 through December 5, 2018 | Year Ended October 31, 2018 | |||||||||
Supplemental cash flow information: | ||||||||||||
Cash paid for interest | $ | 29,472 | $ | 201 | $ | 22,168 | ||||||
Cash paid for income taxes | $ | 1,984 | $ | - | $ | 1,073 | ||||||
Non-cash investing and financing activities: | ||||||||||||
Fair value of rollover equity for Business Combination | $ | 164,909 | $ | - | $ | - | ||||||
Equipment purchases included in accrued expenses and accounts payable | $ | 16,417 | $ | - | $ | 355 | ||||||
Shares issued to acquire a business | $ | 1,150 | $ | - | $ | - | ||||||
Holdbacks related to the acquisition of a business | $ | 181 | $ | - | $ | - | ||||||
See accompanying notes to consolidated financial statements.
Note 1. Organization and Description of Business
BALANCE SHEET
As of December 31, 2017
| Assets | ||||
| Current assets: | ||||
| Cash | $ | 828,555 | ||
| Prepaid expenses | 272,165 | |||
| Total current assets | 1,100,720 | |||
| Cash and marketable securities held in Trust Account | 235,195,034 | |||
| Total assets | $ | 236,295,754 | ||
| Liabilities and Stockholders' Equity | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 205,249 | ||
| Accrued expenses | 425,181 | |||
| Accrued expenses - related parties | 92,500 | |||
| Total current liabilities | 722,930 | |||
| Deferred underwriting commissions | 8,050,000 | |||
| Total liabilities | 8,772,930 | |||
| Commitments | ||||
| Class A common stock, $0.0001 par value; 21,815,963 shares subject to possible redemption (at $10.20 per share) | 222,522,823 | |||
| Stockholders' Equity: | ||||
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | - | |||
| Class A common stock, $0.0001 par value; 200,000,000 shares authorized; 1,184,037 shares issued and outstanding (excluding 21,815,963 shares subject to possible redemption) | 118 | |||
| Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 5,750,000 shares issued and outstanding | 575 | |||
| Additional paid-in capital | 5,316,974 | |||
| Accumulated deficit | (317,666 | ) | ||
| Total stockholders' equity | 5,000,001 | |||
| Total Liabilities and Stockholders' Equity | $ | 236,295,754 | ||
The accompanying notes are an integral part of these financial statements.
INDUSTREA ACQUISITION CORP.Organization
STATEMENT OF OPERATIONS
| For the period from April 7, 2017 | ||||
| (date of inception) through | ||||
| December 31, 2017 | ||||
| General and administrative costs | $ | 837,473 | ||
| State franchise taxes | 147,447 | |||
| Loss from operations | (984,920 | ) | ||
| Interest income | 935,034 | |||
| Loss before income tax expense | (49,886 | ) | ||
| Income tax expense | 267,780 | |||
| Net loss | $ | (317,666 | ) | |
| Basic and diluted net loss per ordinary share | $ | (0.05 | ) | |
| Weighted average shares outstanding, basic and diluted(1) | 6,416,126 | |||
(1) This number excludes an aggregate of up to 21,815,963 shares subject to redemption at December 31, 2017.
Concrete Pumping Holdings, Inc. (the “Company” or “Successor”) is a Delaware corporation headquartered in Denver, Colorado. The accompanying notes are an integral partConsolidated Financial Statements include the accounts of these financial statements.
INDUSTREA ACQUISITION CORP.Concrete Pumping Holdings, Inc. and its wholly owned subsidiaries including Brundage-Bone Concrete Pumping, Inc. (“Brundage-Bone”), Capital Pumping (“Capital”), Camfaud Group Limited (“Camfaud”), and Eco-Pan, Inc. (“Eco-Pan”).
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
| Common Stock | Total | |||||||||||||||||||||||||||
| Class A | Class B | Additional Paid-In | Accumulated | Stockholders' | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance - April 7, 2017 (date of inception) | - | $ | - | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
| Issuance of Class B common stock to Sponsor | - | - | 5,750,000 | 575 | 24,425 | - | 25,000 | |||||||||||||||||||||
| Sale of units in initial public offering, net of offering costs | 23,000,000 | 2,300 | - | 216,713,190 | - | 216,715,490 | ||||||||||||||||||||||
| Sale of private placement warrants to Sponsor in private placement | - | - | - | - | 11,100,000 | - | 11,100,000 | |||||||||||||||||||||
| Common stock subject to possible redemption | (21,815,963 | ) | (2,182 | ) | - | - | (222,520,641 | ) | - | (222,522,823 | ) | |||||||||||||||||
| Net loss | - | - | - | - | - | (317,666 | ) | (317,666 | ) | |||||||||||||||||||
| Balance - December 31, 2017 | 1,184,037 | $ | 118 | 5,750,000 | $ | 575 | $ | 5,316,974 | $ | (317,666 | ) | $ | 5,000,001 | |||||||||||||||
The accompanying notes are an integral part of these financial statements.
STATEMENT OF CASH FLOWS
| For the period from April 7, 2017 | ||||
| (date of inception) through | ||||
| December 31, 2017 | ||||
| Cash Flows from Operating Activities: | ||||
| Net loss | $ | (317,666 | ) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||
| Interest earned on investments and marketable securities held in Trust Account | (935,034 | ) | ||
| Changes in operating assets and liabilities: | ||||
| Prepaid expenses | (272,165 | ) | ||
| Accounts payable | 205,249 | |||
| Accrued expenses | 425,181 | |||
| Accrued expenses - related parties | 92,500 | |||
| Net cash used in operating activities | (801,935 | ) | ||
| Cash Flows from Investing Activities | ||||
| Principal deposited in Trust Account | (234,600,000 | ) | ||
| Interest released from Trust Account | 340,000 | |||
| Net cash used in investing activities | (234,260,000 | ) | ||
| Cash Flows from Financing Activities: | ||||
| Proceeds from issuance of Class B common stock to Sponsor | 25,000 | |||
| Proceeds received under loan from related parties | 224,403 | |||
| Repayment of loan from related parties | (224,403 | ) | ||
| Proceeds received from initial public offering, net of offering costs | 224,765,490 | |||
| Proceeds received from private placement | 11,100,000 | |||
| Net cash provided by financing activities | 235,890,490 | |||
| Net increase in cash | 828,555 | |||
| Cash - beginning of the period | - | |||
| Cash - end of the period | $ | 828,555 | ||
| Supplemental disclosure of noncash investing and financing activities: | ||||
| Deferred underwriting commissions in connection with the initial public offering | $ | 8,050,000 | ||
| Value of Class A ordinary shares subject to possible redemption | $ | 222,522,823 | ||
The accompanying notes are an integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS
Note 1 — Description of Organization and Business Operations
IndustreaOn December 6, 2018 (the "Closing Date"), the Company, formerly known as Concrete Pumping Holdings Acquisition Corp. (the “Company”) was incorporated in Delaware on April 7, 2017. The Company was formed for the purpose of effecting, consummated a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businessestransaction (the “Business Combination”) pursuant to which it acquired (i) the private operating company formerly called Concrete Pumping Holdings, Inc. (“CPH”) and (ii) the former special purpose acquisition company called Industrea Acquisition Corp (“Industrea”). Although the Company is not limited to a particular industry or sector for purposes of consummating a Business Combination, the Company intends to focus its search on manufacturing and service companies in the industrial sector. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of December 31, 2017, the Company had not commenced any operations. All activity for the period from April 7, 2017 (date of inception) through December 31, 2017 relates to the Company’s formation, the Initial Public Offering (as defined below), and search for a Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and marketable securities from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The registration statement for the Company’s Initial Public Offering was declared effective on July 26, 2017. On August 1, 2017, the Company consummated its initial public offering (the “Initial Public Offering”) of 23,000,000 units (the “Units” and, with respect to the shares of Class A common stock included in the Units offered, the “Public Shares”), including the issuance of 3,000,000 Units as a result of the underwriters’ exercise of their over-allotment option in full, at $10.00 per Unit, generating gross proceeds of $230 million and incurring offering costs of approximately $13.3 million, inclusive of $8.05 million in deferred underwriting commissions (Note 6).
SimultaneouslyIn connection with the closing of the Initial Public Offering,Business Combination, the Company consummatedchanged its name to Concrete Pumping Holdings, Inc. The financial results described herein for the private placement (“Private Placement”)dates and periods prior to the Business Combination relate to the operations of 11,100,000 warrants (the “Private Placement Warrants”), at a price of $1.00 per Private Placement Warrant, withCPH prior to the Company’s sponsor, Industrea Alexandria LLC, a Delaware limited liability company (the “Sponsor”), generating gross proceeds of $11.1 million. On August 22, 2017, the Sponsor sold 55,500 Private Placement Warrants at their original purchase price to eachconsummation of the Company’s five independent directors, or an aggregate of 277,500 private placement warrantsBusiness Combination. See Note 4 – Business Combinations for $277,500 (Note 4).further discussion.
Upon the closingNature of the Initial Public Offeringbusiness
Brundage-Bone and Private Placement, $234.6 million ($10.20 per Unit) of the net proceeds of the sale of the UnitsCapital are concrete pumping service providers in the Initial Public OfferingUnited States ("U.S.") and the Private Placement was placed inCamfaud is a U.S.-based trust account at J.P. Morgan Chase Bank, N.A, maintained by Continental Stock Transfer & Trust Company, acting as trustee (“Trust Account”). The funds heldconcrete pumping service provider in the Trust Account wereUnited Kingdom (“U.K.”). Their core business is the provision of concrete pumping services to general contractors and remain investedconcrete finishing companies in U.S. government securities, within the meaning set forthcommercial, infrastructure and residential sectors. Most often equipment returns to a “home base” nightly and neither company contracts to purchase, mix, or deliver concrete. Brundage-Bone and Capital collectively have approximately 90 branch locations across 22 states, with its corporate headquarters in Section 2(a)(16) ofThornton (near Denver), Colorado. Camfaud has 29 branch locations throughout the Investment Company Act 1940, as amended (the “Investment Company Act”)U.K., with maturities of 180 days or less orits corporate headquarters in any open-ended investment company that holds itself out as a money market fund selected byEpping (near London), England.
Eco-Pan provides industrial cleanup and containment services, primarily to customers in the Company meetingconstruction industry. Eco-Pan uses containment pans specifically designed to hold waste products from concrete and other industrial cleanup operations. Eco-Pan has 16 operating locations across the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.U.S. with its corporate headquarters in Thornton, Colorado.
Seasonality
The Company’s management has broad discretionsales are historically seasonal, with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination. A potential initial Business Combinations must have an aggregate fair market value of at least 80% of the assets heldlower revenue in the Trust Account (as defined below) (excludingfirst quarter and higher revenue in the deferred underwriting commissionsfourth quarter of each year. Such seasonality also causes the Company’s working capital cash flow requirements to vary from quarter to quarter and taxes payable on income earnedprimarily depends on the Trust Account) at the timevariability of the agreement in order to be consummated. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
INDUSTREA ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
The Company will provide its holders of the outstanding shares of its Class A common stock, par value $0.0001 (“Class A common stock”), sold in the Initial Public Offering (the “public stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account. The per-share amount to be distributed to public stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters. These Public Shares will be recorded at a redemption value and classified as temporary equity upon the completion of the Initial Public Offering in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transactions is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction. If the Company seeks stockholder approval in connection with a Business Combination, the initial stockholders (as defined below) have agreed to vote its Founder Shares (as defined below in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. In addition, the initial stockholders have agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a Business Combination.
Notwithstanding the foregoing, the Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Class A common stock sold in the Initial Public Offering, without the prior consent of the Company.
The Company’s Sponsor, officers and directors (the “initial stockholders”) have agreed not to propose an amendment to the Amended and Restated Certificate of Incorporation to modify the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the public stockholders with the opportunity to redeem their shares of Class A common stock in conjunction with any such amendment.
If the Company is unable to complete a Business Combination within 24 months (by August 1, 2019) from the closing of the Initial Public Offering (the “Combination Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to us to pay the Company’s franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
INDUSTREA ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
The initial stockholders have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the initial stockholders should acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to its deferred underwriting commission held in the Trust Account in the event the Company does not complete a Business Combination within in the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only $10.20 per share initially held in the Trust Account. In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which the Company does business, execute agreementsweather patterns with the Company waiving any right, title, interest or claim of any kind in or to monies held ingenerally having lower sales volume during the Trust Account.winter and spring months.
Liquidity
As
Through December 31, 2017, the Company’s liquidity needs have been satisfied through receipt of a $25,000 capital contribution from the Sponsor in exchange for the issuance of the Founder Shares (Note 5) to the Sponsor, $224,403 in loans from the Sponsor, and the proceeds from the consummation of the Private Placement not held in Trust. The Company repaid the loans from the Sponsor in full on August 1, 2017.
In connection with the Company’s assessment of going concern considerations in accordance with ASU 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, as of December 31, 2017, the Company may not have sufficient liquidity to meet its future obligations. Management believes that the Company will have sufficient working capital and borrowing capacity from the Sponsor to meet the Company's needs through the earlier of the consummation of a Business Combination or one year from the date of issuance of these financial statements. Over this time period, the Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business, and structuring, negotiating and consummating the Business Combination.
Note 2 —2. Summary of Significant Accounting Policies
Basis of Presentationpresentation
The accompanying balance sheet is presentedConsolidated Financial Statements have been prepared in U.S. dollars in conformityaccordance with generally accepted accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC.Securities and Exchange Commission (“SEC”). The enclosed statements reflect all normal and recurring adjustments which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows of the Company at October 31, 2019 and for all periods presented. All intercompany balances and transactions have been eliminated in consolidation.
As a result of the Business Combination, the Company is the acquirer for accounting purposes and CPH is the acquiree and accounting predecessor. The Company’s financial statement presentation distinguishes the Company’s financial performance into two distinct periods, the period up to the Closing Date (labeled “Predecessor”) and the period including and after that date (labeled “Successor”).
INDUSTREA ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTSThe Business Combination was accounted for as a business combination using the acquisition method of accounting, and the Successor financial statements reflect a new basis of accounting that is based on the fair value of the net assets acquired.
Determining the fair value of certain assets and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions. See Note 4 – Business Combinations for a discussion of the estimated fair values of assets and liabilities recorded in connection with the Company’s acquisition of CPH.
As a result of the application of the acquisition method of accounting as of the Closing Date of the Business Combination, the accompanying Consolidated Financial Statements include a black line division which indicates that the Predecessor and Successor reporting entities shown are presented on a different basis and are therefore, not comparable.
The historical financial information of Industrea prior to the Business Combination (a special purpose acquisition company, or “SPAC”) has not been reflected in the Predecessor financial statements as these historical amounts have been determined to be not useful information to a user of the financial statements. SPACs deposit the proceeds from their initial public offerings into a segregated trust account until a business combination occurs, where such funds are then used to pay consideration for the acquiree and/or to pay stockholders who elect to redeem their shares of common stock in connection with the business combination. The operations of a SPAC, until the closing of a business combination, other than income from the trust account investments and transaction expenses, are nominal. Accordingly, no other activity in the Company was reported for periods prior to December 6, 2018 besides CPH’s operations as Predecessor.
Emerging Growth Company
Section 102(b)(1)Principles of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company’s financial statement with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. At December 31, 2017, the Company had not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Financial Instrumentsconsolidation
The fair valueSuccessor Consolidated Financial Statements include all amounts of the Company’s assetsCompany and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurementsits subsidiaries. The Predecessor Consolidated Financial Statements include all amounts of CPH and Disclosures,” approximates the carrying amounts represented in the balance sheet.its subsidiaries. All intercompany balances and transactions have been eliminated.
Use of Estimatesestimates
The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amountsamount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenuerevenues and expenses during the reporting period. Actual results could differ from those estimates.
Significant estimates include accrued sales and use taxes, the liability for incurred but unreported claims under various partially self-insured polices, allowance for doubtful accounts, goodwill impairment analysis, valuation of share-based compensation and accounting for business combinations. Actual results may differ from those estimates, and such differences may be material to the Company’s consolidated financial statements.
Offering CostsTrade receivables
Offering costs consistedTrade receivables are carried at the original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts. Generally, the Company does not require collateral for their accounts receivable; however, the Company may file statutory liens or take other appropriate legal accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly relatedaction when necessary on construction projects in which collection problems arise. A trade receivable is typically considered to the Initial Public Offering totaled approximately $13.3 million, inclusive of $8.05 million in deferred underwriting commissions. Offering costs were charged to stockholders’ equity upon the completionbe past due if any portion of the Initial Public Offering.receivable balance is outstanding for more than 30 days. The Company does not charge interest on past-due trade receivables.
Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. The allowance for doubtful accounts was $0.6 million and $0.7 million as of October 31, 2019, and 2018, respectively. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received.
Class A Common Stock SubjectInventory
Inventory consists primarily of replacement parts for concrete pumping equipment. Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. The Company evaluates inventory and records an allowance for obsolete and slow- moving inventory to Possible Redemptionaccount for cost adjustments to market. Based on management’s analysis, no allowance for obsolete and slow-moving inventory was required as of October 31, 2019 and 2018.
Fair Value Measurements
The Company accountsFASB’s standard on fair value measurements establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. This standard establishes three levels of inputs that may be used to measure fair value:
Level 1 – Quoted prices in active markets for its Class A common stock subjectidentical assets or liabilities.
Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities.
Level 3 – Unobservable inputs to possible redemptionthe valuation methodology that are significant to the measurement of fair value of assets or liabilities
Deferred financing costs
Deferred financing costs representing third-party, non-lender debt issuance costs are deferred and amortized using the effective interest rate method over the term of the related long-term-debt agreement, and the straight-line method for the revolving credit agreement.
Debt issuance costs, including any original issue discounts, related to term loans are reflected as a direct deduction from the carrying amount of the long-term debt liability that is included in long term debt, net of discount for deferred financing costs in the accompanying consolidated balance sheet. Debt issuance costs related to revolving credit facilities are capitalized and reflected in deferred financing in the accompanying consolidated balance sheet.
Goodwill
In accordance with ASC Topic 350, Intangibles–Goodwill and Other (“ASC 350”), the guidanceCompany evaluates goodwill for possible impairment annually or more frequently if events or changes in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subjectcircumstances indicate that the carrying amount of such assets may not be recoverable. The Company uses a two-step process to mandatory redemption (if any)assess the realizability of goodwill. The first step is a qualitative assessment that analyzes current economic indicators associated with a particular reporting unit. For example, the Company analyzes changes in economic, market and industry conditions, business strategy, cost factors, and financial performance, among others, to determine if there are classified as liability instrumentsindicators of a significant decline in the fair value of a particular reporting unit. If the qualitative assessment indicates a stable or improved fair value, no further testing is required. If a qualitative assessment indicates it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company will proceed to the quantitative second step where the fair value of a reporting unit is calculated based on weighted income and are measured atmarket-based approaches. If the fair value. Conditionally redeemable Class A common stock (including Class A common stock that feature redemption rights that are either withinvalue of a reporting unit is lower than its carrying value, an impairment to goodwill is recorded, not to exceed the controlcarrying amount of goodwill in the reporting unit.
As a result of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Class A common stock are classified as stockholders’ equity. The Company’s Class A common stock feature certain redemption rights that are considered to be outsideprice of the Company’s controlCompany declining substantially during the fiscal 2019 third quarter, management concluded this qualified as a triggering event that required a step one goodwill impairment analysis. The test was performed as of July 31, 2019 and subjectindicated no impairment.
Due to the occurrenceinterim quantitative test performed as of uncertain future events. Accordingly,July 31, 2019, a quantitative test on our annual testing date of August 31, 2019 was not considered necessary. As there were no additional impairment indicators present as of year-end, the Company elected to perform a qualitative analysis for the three-month period ending October 31, 2019 instead and no triggering events were identified. For further information, refer to Note 8.
Property, plant and equipment
Property, plant and equipment are recorded at December 31, 2017, 21,815,963 sharescost. Expenditures for additions and betterments are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred; however, maintenance and repairs that improve or extend the life of Class A common stock subject to possible redemption atexisting assets are capitalized. The carrying amount of assets disposed of and the redemption amountrelated accumulated depreciation are presented as temporary equity, outsideeliminated from the accounts in the year of disposal. Gains or losses from property and equipment disposals are recognized in the stockholders’ equity sectionyear of disposal. Property, plant and equipment is depreciated using the Company’s balance sheet.straight-line method over the following estimated useful lives:
Buildings and improvements | 15 to 40 years | ||
Capital lease assets—buildings | 40 years | ||
Furniture and office equipment | 2 to 7 years | ||
Machinery and equipment | 3 to 25 years | ||
Transportation equipment | 3 to 7 years |
INDUSTREA ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTSCapital lease assets are being amortized over the estimated useful life of the asset (see Note 13).
Net Loss per ShareIntangible Assets
Intangible assets are recorded at cost or their estimated fair value (when acquired through a business combination) less accumulated amortization (if finite-lived).
Intangible assets with finite lives, except for customer relationships, are amortized on a straight-line basis over their estimated useful lives. Customer relationships are amortized on an accelerated basis over their estimated useful lives. Intangible assets with indefinite lives are not amortized but are subject to annual reviews for impairment.
Impairment of long-lived assets
ASC 360, Property, Plant and Equipment (ASC 360) requires other long-lived assets to be evaluated for impairment when indicators of impairment are present. If indicators are present, assets are grouped to the lowest level for which identifiable cash flows are largely independent of other asset groups and cash flows are estimated for each asset group over the remaining estimated life of each asset group. If the undiscounted cash flows estimated to be generated by those assets are less than the asset’s carrying amount, impairment is recognized in the amount of the excess of the carrying value over the fair value. No indicators of impairment were identified as of October 31, 2019.
Revenue recognition
The Company compliesgenerates revenues primarily from concrete pumping services in both the U.S. and U.K. Additionally, revenues are generated from the Company’s waste management business which consists of service fees charged to customers for the delivery of our pans and containers and the disposal of the concrete waste material.
The Company recognizes revenue from these businesses when all of the following criteria are met: (a) persuasive evidence of an arrangement exists, (b) the service has been performed or delivery has occurred, (c) the price is fixed or determinable, and (d) collectability is reasonably assured. The Company’s delivery terms for replacement part sales are FOB shipping point.
The Company imposes and collects sales taxes concurrent with accountingour revenue-producing transactions with customers and disclosure requirementsremits those taxes to the various governmental authorities as prescribed by the taxing jurisdictions in which we operate. We present such taxes in our consolidated statements of FASBincome on a net basis.
Stock-based compensation
The Company follows ASC 718, Compensation—Stock Compensation (ASC 718), which requires the measurement and recognition of compensation expense, based on estimated fair values, for all share-based awards made to employees and directors. The Company expenses the grant date fair value of the award in the consolidated statements of income over the requisite service periods on a straight-line basis. The Company accounts for forfeitures as they occur in accordance with the adoption of ASU No. 2016-09, Compensation—Stock Compensation (ASC 718): Improvements to Employee Share-Based Payment Accounting.
Earnings per share
The Company calculates earnings per share in accordance with ASC 260, “Earnings Perper Share.” Net loss The two-class method of computing earnings per share is required for entities that have participating securities. The two-class method is an earnings allocation formula that determines earnings per share for participating securities according to dividends declared (or accumulated) and participation rights in undistributed earnings. The Company has two classes of stock: (1) Common Stock and (2) Participating Preferred Stock (“Preferred Stock”).
Basic earnings (loss) per common share is computedcalculated by dividing net loss applicableincome (loss) attributable to common shareholders by the weighted average number of common shares of Common Stock outstanding for theeach period. The Company has not considered the effect of the warrants sold in the initial public offering (including the consummation of the over-allotment) and Private Placement to purchase an aggregate of 34,100,000 Class A ordinary shares in the calculation of diluted loss per share, since their inclusion would be anti-dilutive. As a result, diluted lossDiluted earnings (loss) per common share is the same as basic loss per common share for the period.
The Company’s statement of operations includes a presentation of loss per share for common shares subject to redemption in a manner similar to the two-class method of income per share. Net loss per common share, basic and diluted for Class A common stock is calculated by dividing the interest income earnedbased on the Trust Account, net of applicable income taxes, franchise taxes and funds available to be withdrawn from Trust for working capital purposes, by the weighted average number of Class Ashares outstanding during the period plus the common stock equivalents which would arise from the exercise of stock options outstanding using the treasury stock method and the average market price per share during the period. Common stock equivalents are not included in the diluted earnings (loss) per share calculation when their effect is antidilutive.
An anti-dilutive impact is an increase in earnings per share or a reduction in net loss per share resulting from the conversion, exercise, or contingent issuance of certain securities.
Foreign currency translation
The functional currency of Camfaud is the Great British Pound (GBP). The assets and liabilities of the foreign subsidiaries are translated into U.S. Dollars using the year-end exchange rates, and the consolidated statements of income are translated at the average rate for the period. Net loss per common stock, basicyear. The resulting translation adjustments are recorded as a component of comprehensive income on the consolidated statements of comprehensive income and diluted for Class B common stockaccumulated in other comprehensive income. The functional currency of our other subsidiaries is calculated by dividing the net loss, less income attributable to Class A common stock, by the weighted average numberUnited States Dollar.
Income Taxestaxes
The Company follows the asset andcomplies with ASC 740, Income Taxes, which requires a liability method of accountingapproach to financial reporting for income taxes under FASB ASC 740, “Income Taxes.” Deferredtaxes.
The Company computes deferred income tax assets and liabilities are recognizedannually for the estimated future tax consequences attributable to differences between the financial statements carrying amountsand tax basis of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured usingthat will result in taxable or deductible amounts in the future based on enacted tax laws and rates expectedapplicable to apply to taxable income in the yearsperiods in which those temporarythe differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date.affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of December 31, 2017. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties for the period from April 7, 2017 (date of inception) to December 31, 2017. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
Recent Accounting Pronouncements
The Company’s management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
Note 3 — Initial Public Offering
On August 1, 2017, the Company sold 23,000,000 Units, including the issuance of 3,000,000 Units as a result of the underwriters’ exercise of their over-allotment option in full, at a price of $10.00 per Unit in the Initial Public Offering. Each Unit consists of one share of Class A common stock and one Public Warrant. Each Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment.
INDUSTREA ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
Note 4 — Private Placement
Concurrently with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 11,100,000 Private Placement Warrants at $1.00 per Private Placement Warrant, generating gross proceeds of $11.1 million in the aggregate in a Private Placement. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at $11.50 per share. A portion of the proceeds from the sale of the Private Placement Warrants were added to the proceeds from the Initial Public Offering to be held in the Trust Account. On August 22, 2017, the Sponsor sold 55,500 Private Placement Warrants at their original purchase price to each of the Company’s five independent directors, or an aggregate of 277,500 private placement warrants for $277,500.
If the Company does not complete a Business Combination within the Combination Period, the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees.
The Sponsor and the Company’s officers and directors have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination.
Note 5 — Related Party Transactions
Founder Shares
On April 10, 2017, the Company issued 5,750,000 shares (the “Founder Shares”) of the Company’s Class B common stock, par value $0.0001 (“Class B common stock”) for an aggregate price of $25,000. In April and May 2017, the Sponsor transferred 28,750 Founder Shares to each of the Company’s independent director nominees at their original purchase price. The Founder Shares will automatically convert into shares of Class A common stock at the time of the Company’s initial Business Combination and are subject to certain transfer restrictions. Holders of Founder Shares may also elect to convert their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment, at any time. The initial stockholders agreed to forfeit up to 750,000 Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriters. On August 1, 2017, to the underwriters fully exercised their over-allotment option. As a result, 750,000 Founder Shares were no longer subject to forfeiture.
The initial stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Related Party Loans
Prior to the consummation of the Initial Public Offering, the Sponsor loaned the Company an aggregate of $224,403 to cover expenses related to such offering pursuant to a promissory note (the “Note”). This loan was non-interest bearing. The Company fully repaid the Note on August 1, 2017.
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants.
INDUSTREA ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
Administrative Support Agreement and Officer and Director Compensation
The Company has agreed, commencing on the effective date of the Initial Public Offering through the earlier of the Company’s consummation of a Business Combination and its liquidation, to pay the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support.
In addition, the Company will pay each of the five independent directors $50,000 per year commencing on the effective date of the Initial Public Offering through the earlier of the Company’s consummation of a Business Combination or its liquidation.
The Company recognized an aggregate of $159,140 in expenses incurred in connection with the aforementioned arrangements with the related parties on the accompanying Statements of Operations for the period from April 7, 2017 (date of inception) through December 31, 2017.
Note 6 — Commitments & Contingencies
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any, will be entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A common stock) pursuant to a registration rights agreement to be signed on or before the date of the prospectus for the Initial Public Offering. These holders will be entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters a 45-day option from the date of this prospectus to purchase up to 3,000,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. The underwriters exercised this over-allotment in full concurrently with the closing of the Initial Public Offering.
The underwriters were entitled to an underwriting discount of $0.20 per Unit, or $4.6 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per Unit, or $8.05 million in the aggregate of deferred underwriting commissions will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Note 7 — Stockholders’ Equity
Class A Common Stock — The Company is authorized to issue 200,000,000 shares of Class A common stock with a par value of $0.0001 per share. As of December 31, 2017, there were 23,000,000 shares of Class A common stock issued and outstanding, including 21,815,963 shares of Class A common stock subject to possible redemption.
Class B Common Stock — The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of Class B common stock are entitled to one vote for each share. As of December 31, 2017, there were 5,750,000 shares of Class B common stock outstanding.
INDUSTREA ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
Holders of Class A common stock and Class B common stock will vote together as a single class on all other matters submitted to a vote of stockholders except as required by law.
The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of the initial Business Combination on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in the Initial Public Offering and related to the closing of the initial Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the initial Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the initial Business Combination and any private placement-equivalent warrants issued to the Sponsor or its affiliates upon conversion of loans made to the Company). Holders of Founder Shares may also elect to convert their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment as provided above, at any time.
Preferred Stock — The Company is authorized to issue 1,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of December 31, 2017, there were no shares of preferred stock issued or outstanding.
Note 8 — Fair Value Measurements
The following table presents information about the Company’s assets that are measured on a recurring basis as of December 31, 2017 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
| Quoted Prices | Significant Other | Significant Other | ||||||||||
| in Active Markets | Observable Inputs | Unobservable Inputs | ||||||||||
| Description | (Level 1) | (Level 2) | (Level 3) | |||||||||
| Cash and marketable securities held in Trust Account | $ | 235,195,034 | ||||||||||
Approximately $15,600 of the balance in the Trust Account was held in cash as of December 31, 2017.
Note 9 — Income Taxes
The income tax provision (benefit) consists of the following:
| December 31, 2017 | ||||
| Current | ||||
| Federal | $ | 267,780 | ||
| State | - | |||
| Deferred | ||||
| Federal | - | |||
| State | - | |||
| Income tax provision expense | $ | 267,780 | ||
INDUSTREA ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
The Company’s net deferred tax assets are as follows:
In assessing the realizationrealizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax assets,liabilities, projected future taxable income, carryback opportunities, and tax planning strategies in making thisthe assessment. After consideration of all ofIncome tax expense includes both the information available, Management believes that significant uncertainty exists with respect to future realization ofcurrent income taxes payable or refundable and the change during the period in the deferred tax assets and has therefore establishedliabilities. The tax benefit from an uncertain tax position is only recognized in the consolidated balance sheet if the tax position is more likely than not to be sustained upon an examination.
Camfaud files income tax returns in the U.K. Camfaud’s national statutes are generally open for one year following the statutory filing period.
Business combinations
The Company applies the principles provided in ASC 805, Business Combinations, when a business is acquired. Tangible and intangible assets acquired and liabilities assumed are recorded at fair value and goodwill is recognized for any differences between the fair value of consideration transferred and the fair value of net assets acquired. Transaction costs for business combinations are expensed as incurred in accordance with ASC 805.
Concentrations
As of October 31, 2019, and October 31, 2018, there were two significant vendors that the Company relied upon to purchase concrete pumping boom equipment. However, should the need arise, there are alternate vendors who can provide concrete pumping boom equipment.
Cash balances held at financial institutions may, at times, be in excess of federally insured limits. The Company places its temporary cash balances in high-credit quality financial institutions.
The Company’s customer base is dispersed across the U.S. and U.K. The Company performs ongoing evaluations of its customers’ financial condition and requires no collateral to support credit sales. During the Predecessor and Successor periods described above, no customer represented 10 percent or more of sales or trade receivables.
Note 3. New Accounting Pronouncements
We have opted to take advantage of the extended transition period available to emerging growth companies pursuant to the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) for new accounting standards.
Newly adopted accounting pronouncements
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The new guidance is intended to eliminate diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance requires application using a retrospective transition method. The Company adopted this ASU in the first quarter of fiscal 2019. The adoption of this ASU did not have a material effect on the Company’s consolidated financial statements.
Recently issued accounting pronouncements not yet effective
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (ASC 606) (“ASU 2014-09”), which is a comprehensive new revenue recognition model.
Under ASU 2014-09 and the related clarifying ASUs, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. ASU 2014-09 is effective for entities other than public business entities in annual reporting periods beginning after December 15, 2018 and interim reporting periods within annual reporting periods beginning after December 15, 2019 and is to be adopted using either a full valuation allowance. Forretrospective or modified retrospective transition method. The Company expects to adopt the guidance under the modified retrospective approach for the fiscal year ending October 31, 2020. The Company is currently evaluating the impact of the pending adoption of the new standard on the consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (ASC 805): Clarifying the Definition of a Business (“ASU 2017-01”), which provides guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 requires entities to use a screen test to determine when an integrated set of assets and activities is not a business or if the integrated set of assets and activities needs to be further evaluated against the framework. The new standard will be applied prospectively to any transactions occurring within the period endedof adoption and is effective for entities other than public business entities for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company plans to adopt this standard in the first quarter of the fiscal year ending October 31, 2017, the valuation allowance was approximately $176,000.2020.
AIn February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”), which is codified in ASC 842, Leases (“ASC 842”) and supersedes current lease guidance in ASC 840, Leases. ASC 842 requires a lessee to recognize a right-of-use asset and a corresponding lease liability for substantially all leases. The lease liability will be equal to the present value of the remaining lease payments while the right-of-use asset will be similarly calculated and then adjusted for initial direct costs. In addition, ASC 842 expands the disclosure requirements to increase the transparency and comparability of the amount, timing and uncertainty of cash flows arising from leases. In July 2018, the FASB issued ASU 2018-11, Leases ASC 842: Targeted Improvements, which allows entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.
The new standard is effective for emerging growth companies for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. The Company plans to adopt the new standard effective for the year ending October 31, 2022. The Company is currently evaluating the impact of the pending adoption of the new standard on the consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326), This ASU, along with subsequently issued related ASUs, requires financial assets (or groups of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected, among other provisions. This ASU is effective for annual and interim periods beginning after December 15, 2022, with early adoption permitted. The Company plans to adopt the new standard effective for the year ending October 31, 2023. The amendments of this ASU should be applied on a modified retrospective basis to all periods presented. The Company is currently evaluating the effects adoption of this guidance will have on the consolidated financial statements.
Note 4. Business Combinations
May 2019 Acquisition of Capital Pumping
On May 15, 2019, the Company acquired Capital Pumping LP and its affiliates (“Capital”), a concrete pumping provider based in Texas for a purchase price of $129.2 million, which was paid using proceeds from the Company’s public offering of common stock and additional borrowings on its term loan facility. This acquisition qualified as a business combination under ASC 805. Accordingly, the Company recorded all assets acquired and liabilities assumed at their acquisition-date fair values, with any excess recognized as goodwill. Goodwill recorded from the transaction represents expected synergies from combining operations and the assembled workforce.
The following table represents the preliminary allocation of consideration to the assets acquired and liabilities assumed at their estimated acquisition-date fair values with any measurement-period adjustments included:
Consideration paid: | $ | 129,218 | ||
Net assets acquired: | ||||
Current assets | $ | 748 | ||
Intangible assets | 45,500 | |||
Property and equipment | 56,467 | |||
Liabilities assumed | (63 | ) | ||
Total net assets acquired | 102,652 | |||
Goodwill | $ | 26,566 |
Identifiable intangible assets acquired consist of customer relationships of $40.0 million, which was originally valued at $39.5 million, and a trade name valued at $5.5 million. The customer relationships were valued using the multi-period excess earnings method. The Company determined the useful life of the customer relationships to be 15 years. The trade name was valued using the relief-from-royalty method and the Company determined the trade name associated with Capital to be indefinite.
December 2018 Acquisition of CPH
On December 6, 2018, the Company consummated the Business Combination. This acquisition qualified as a business combination under ASC 805. Accordingly, the Company recorded all assets acquired and liabilities assumed at their acquisition-date fair values, with any excess recognized as goodwill. Goodwill recorded from the transaction represents the value provided by the Company’s leading market share in a highly-fragmented industry.
The following table represents the final allocation of consideration to the assets acquired and liabilities assumed at their estimated acquisition-date fair values with any measurement-period adjustments included (see paragraph below for any measurement-period adjustments included):
Consideration paid: | ||||
Cash | $ | 445,386 | ||
Fair value of rollover equity | 164,908 | |||
Net working capital adjustment | 4,050 | |||
Total consideration paid | $ | 614,344 | ||
Net assets acquired: | ||||
Current assets | $ | 49,112 | ||
Intangible assets | 208,063 | |||
Property and equipment | 219,467 | |||
Liabilities assumed | (110,245 | ) | ||
Total net assets acquired | 366,397 | |||
Goodwill | $ | 247,947 |
Note: Cash in table above is net of $1.0 million in cash acquired
Identifiable intangible assets acquired consist of customer relationships of $152.7 million and trade names of $55.4 million. The customer relationships were valued using the multi-period excess earnings method. The Company determined the useful life of the customer relationships to be 15 years. The trade names were valued using the relief-from-royalty method. The Company determined the useful life of the trade name associated with Camfaud to be 10 years. The Company determined the trade names associated with Brundage-Bone and Eco-Pan to be indefinite.
During the successor period from December 6, 2018 through October 31, 2019, the Company recorded an out of period adjustment related to the reduction of sales tax accrual of $3.4 million that resulted in changes to goodwill and liabilities assumed in the transaction. The impact of the adjustment was not considered material to the Company's previously issued financial statements.
CPH incurred transaction costs of $14.2 million and debt extinguishment costs of $16.4 million independently prior to the Business Combination.
Additional costs consisting of stock option and other compensation related expenses were recorded in connection with the Business Combination. These costs were solely contingent upon the completion of the business combination and did not include any future service requirements. As such, these costs will be presented “on the line” and are not reflected in either Predecessor or Successor financial statements. “On the line” describes those expenses triggered by the consummation of a business combination that were incurred by the acquiree, i.e. CPH, that are not recognized in the Statement of Operations of either the Predecessor or Successor as they are not directly attributable to either period but instead were contingent on the Business Combination.
In conjunction with the Business Combination, there were $15.6 million of transaction bonuses and, as a result of a change in control provision for stock-based awards, certain unvested stock-based awards immediately vested, resulting in the recognition of compensation expense of approximately $0.6 million. These expenses were not reflected in either the Predecessor or Successor consolidated statement of operations and comprehensive income (loss) periods.
April 2018 acquisition of O’Brien (Predecessor)
In April 2018, Brundage-Bone entered into an asset purchase agreement to acquire substantially all of the assets of Richard O’Brien Companies, Inc., O’Brien Concrete Pumping-Arizona, Inc., O’Brien Concrete Pumping-Colorado, Inc. and O’Brien Concrete Pumping, LLC (collectively, “O’Brien” or the "O’Brien Companies”) for cash.
This acquisition qualified as a business combination under ASC 805. Accordingly, the Predecessor recorded all assets acquired and liabilities assumed at their acquisition-date fair values, with any excess recognized as goodwill. Goodwill represents expected synergies from combining operations and the assembled workforce. The acquisition was part of the Predecessor’s strategic plan to expand their presence in the Colorado and Arizona markets.
The following table represents the total consideration transferred and its allocation to the assets acquired and liabilities assumed at their acquisition-date fair values:
Consideration paid: | $ | 21,000 | ||
Net assets acquired: | ||||
Inventory | $ | 140 | ||
Property, plant and equipment | 16,163 | |||
Intangible assets | 2,810 | |||
Total net assets acquired | 19,113 | |||
Goodwill | $ | 1,887 |
Acquisition-related expenses incurred by the Predecessor amounted to $1.1 million, all of which were recognized in the consolidated statement of income during the nine months ended July 31, 2018 (Predecessor).
Unaudited Pro Forma Financial Information
The following unaudited pro forma financial information presents the combined results of operations for the Company and gives effect to the CPH and Capital business combinations discussed above as if they had occurred on November 1, 2017 and the O’Brien business combination discussed above as if it had occurred on November 1, 2016. The pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the results of operations that would have been realized if the CPH and Capital business combinations had been completed on November 1, 2017 or if the O’Brien business combination had been completed on November 1, 2016, nor does it purport to project the results of operations of the combined company in future periods. The pro forma financial information does not give effect to any anticipated integration costs related to the acquired company.
The unaudited pro forma financial information is as follows:
(in thousands) | Year Ended October 31, 2019 | Year Ended October 31, 2018 | ||||||
Revenue | $ | 24,396 | $ | 243,223 | ||||
Pro forma revenue adjustments by Business Combination | ||||||||
O'Brien | - | 6,990 | ||||||
Capital | 26,829 | 49,530 | ||||||
CPH | 258,565 | - | ||||||
Total pro forma revenue | $ | 309,790 | $ | 299,743 | ||||
Year Ended October 31, 2019 | Year Ended October 31, 2018 | |||||||
Net (loss) income | $ | (22,575 | ) | $ | 28,382 | |||
Pro forma net income adjustments by Business Combination | ||||||||
O'Brien | - | (1,013 | ) | |||||
Capital | 2,868 | 4,480 | ||||||
CPH | (9,912 | ) | - | |||||
Total pro forma net (loss) income | $ | (29,619 | ) | $ | 31,849 | |||
Capital's contribution to the Company's fiscal 2019 revenue was $25.2 million while O'Brien's contribution to the Company's fiscal 2019 and fiscal 2018 revenue was $15.0 million and $7.6 million, respectively.
Note 5. Fair Value Measurement
The carrying amounts of the Company's cash and cash equivalents, accounts receivable, accounts payable and current accrued liabilities approximate their fair value as recorded due to the short-term maturity of these instruments, which approximates fair value. The Company’s outstanding obligations on its ABL credit facility are deemed to be at fair value as the interest rates on these debt obligations are variable and consistent with prevailing rates. The Company believes the carrying values of its capital lease obligations represent fair value.
The Company's long-term debt instruments are recorded at their carrying values in the consolidated balance sheet, which may differ from their respective fair values. The fair values of the long-term debt instruments are derived from Level 2 inputs. The fair value amount of the Long-term debt instruments at October 31, 2019 for the Successor and at October 31, 2018 for the Predecessor is presented in the table below based on the prevailing interest rates and trading activity of the Notes.
Successor | Predecessor | |||||||||||||||
October 31, | October 31, | |||||||||||||||
2019 | 2018 | |||||||||||||||
(in thousands) | Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||
Senior secured notes | $ | - | $ | - | $ | 167,553 | $ | 178,025 | ||||||||
Seller notes | - | - | 8,292 | 8,292 | ||||||||||||
Term loans | 402,094 | 394,052 | - | - | ||||||||||||
Capital lease obligations | 568 | 568 | 653 | 653 | ||||||||||||
In connection with the acquisition of Camfaud in November 2016, former Camfaud shareholders were eligible to receive earnout payments (“deferred consideration”) of up to $3.1 million if certain Earnings before interest, taxes, depreciation, and amortization ("EBITDA") targets were met. In accordance with ASC 805, the Company reviewed the deferred consideration on a quarterly basis in order to determine its fair value. Changes in the fair value of the liability are recorded within general and administrative expenses in the consolidated statement of income in the period in which the change was made. The Company estimated the fair value of the deferred consideration based on its probability assessment of Camfaud’s EBITDA achievements during the 3-year earnout period. In developing these estimates, the Company considered its revenue and EBITDA projections, its historical results, and general macro-economic environment and industry trends. This fair value measurement was based on significant revenue and EBITDA inputs not observed in the market, which represents a Level 3 measurement. The 3-year earnout period concluded October 31, 2019 and was paid during the fiscal 2020 first quarter. As such, the liability as of October 31, 2019 was no longer a Level 3 measurement.
The table below represents a reconciliation of the statutory federal income tax rate (benefit)change in the fair value measurement of the contingent earn-out liability at October 31, 2019 for the Successor and at October 31, 2018 for the Predecessor:
Successor | Predecessor | |||||||||||
(in thousands) | December 6, 2018 through October 31, 2019 | November 1, 2018 through December 5, 2018 | Year Ended October 31, 2018 | |||||||||
| Beginning balance | $ | 1,475 | $ | 1,458 | $ | 969 | ||||||
| Change in fair value of contingent earnout liability included in operating expenses | 207 | - | 527 | |||||||||
| Change in fair value due to foreign currency | 26 | 17 | (38 | ) | ||||||||
| Ending balance | $ | 1,708 | $ | 1,475 | $ | 1,458 | ||||||
The Company's non-financial assets, which primarily consist of property and equipment, goodwill and other intangible assets, are not required to be carried at fair value on a recurring basis and are reported at carrying value. However, on a periodic basis or whenever events or changes in circumstances indicate that their carrying value may not be fully recoverable (and at least annually for goodwill and indefinite lived intangibles), non-financial instruments are assessed for impairment and, if applicable, written down to and recorded at fair value.
Note 6. Prepaid Expenses and Other Current Assets
The significant components of prepaid expenses and other current assets at October 31, 2019 for the Successor and at October 31, 2018 for the Predecessor are comprised of the following:
Successor | Predecessor | |||||||
October 31, | October 31, | |||||||
(in thousands) | 2019 | 2018 | ||||||
Prepaid insurance | $ | 1,416 | $ | 348 | ||||
Prepaid licenses and deposits | 528 | 236 | ||||||
Prepaid rent | 485 | 326 | ||||||
Prepaid sponsor fees | - | 667 | ||||||
Other prepaids | 949 | 2,370 | ||||||
Total prepaid expenses and other current assets | $ | 3,378 | $ | 3,947 | ||||
Note 7. Property, Plant and Equipment
The significant components of property, plant and equipment at October 31, 2019 for the Successor and at October 31, 2018 for the Predecessor are comprised of the following:
Successor | Predecessor | |||||||
October 31, | October 31, | |||||||
(in thousands) | 2019 | 2018 | ||||||
Land, building and improvements | $ | 26,085 | $ | 22,244 | ||||
Capital leases—land and buildings | 828 | 909 | ||||||
Machinery and equipment | 295,741 | 237,094 | ||||||
Transportation equipment | 2,223 | 3,297 | ||||||
Furniture and office equipment | 1,209 | 1,486 | ||||||
| 326,086 | 265,030 | |||||||
Less accumulated depreciation | (18,671 | ) | (63,115 | ) | ||||
Property, plant and equipment, net | $ | 307,415 | $ | 201,915 | ||||
Depreciation expense for the Successor period from December 6, 2018 to October 31, 2019 was $20.3 million. Depreciation expense for the Predecessor period from November 1, 2018 to December 5, 2018 and for the twelve-month period ended October 31, 2018 was $2.1 million and $17.7 million, respectively. Depreciation expense related to revenue producing machinery and equipment is recorded in cost of operations and an immaterial amount of depreciation expense related to our capital leases and furniture and fixtures is included in general and administrative expenses. In conjunction with the Business Combination, the basis of all property, plant and equipment was recognized at fair value in purchase accounting and as such, there is a significant decline in the accumulated depreciation balances as of October 31, 2019 when compared to October 31, 2018.
Note 8. Goodwill and Intangible Assets
The Company recognized goodwill and certain intangible assets in connection with business combinations (see Note 4 - Business Combinations). The following table summarizes the composition of intangible assets at October 31, 2019 for the Successor and at October 31, 2018 for the Predecessor:
Successor | Predecessor | |||||||||||||||||||||||||||
October 31, | October 31, | |||||||||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Gross | Foreign Currency | Net | Gross | Net | ||||||||||||||||||||||||
Carrying | Accumulated | Translation | Carrying | Carrying | Accumulated | Carrying | ||||||||||||||||||||||
(in thousands) | Value | Amortization | Adjustment | Amount | Value | Amortization | Amount | |||||||||||||||||||||
Customer relationship | $ | 193,594 | $ | (31,861 | ) | $ | (62 | ) | $ | 161,671 | $ | 47,641 | $ | (23,093 | ) | $ | 24,548 | |||||||||||
Trade name | 5,434 | (483 | ) | (7 | ) | 4,944 | 15,412 | (3,540 | ) | 11,872 | ||||||||||||||||||
Trade name (indefinite life) | 55,500 | - | - | 55,500 | - | - | - | |||||||||||||||||||||
Noncompete agreements | 200 | (22 | ) | - | 178 | 495 | (486 | ) | 9 | |||||||||||||||||||
| Total intangibles | $ | 254,728 | $ | (32,366 | ) | $ | (69 | ) | $ | 222,293 | $ | 63,548 | $ | (27,119 | ) | $ | 36,429 | |||||||||||
Amortization expense for the Successor period from December 6, 2018 to October 31, 2019 was $32.4 million. Amortization expense for the Predecessor period from November 1, 2018 to December 5, 2018 and for the twelve-month period ended October 31, 2018 was $0.7 million and $7.9 million, respectively. The estimated aggregate amortization expense for intangible assets over the next five fiscal years ending October 31 and thereafter is as follows:
(in thousands) | ||||
2020 | $ | 33,384 | ||
2021 | 26,845 | |||
2022 | 21,600 | |||
2023 | 17,169 | |||
| 2024 | 13,788 | |||
Thereafter | 54,007 | |||
| Total | $ | 166,793 |
The changes in the carrying value of goodwill by reportable segment for the quarter ended October 31, 2019 are as follows:
(in thousands) | U.S. Concrete Pumping | U.K. Concrete Pumping | Eco-Pan | Corporate | Total | |||||||||||||||
| Balance at October 31, 2017 (Predecessor) | $ | 47,487 | $ | 19,108 | $ | 6,914 | $ | - | $ | 73,509 | ||||||||||
Acquired goodwill | 1,887 | - | - | - | 1,887 | |||||||||||||||
| Foreign currency translation | - | (740 | ) | - | - | (740 | ) | |||||||||||||
| Balance at October 31, 2018 (Predecessor) | $ | 49,374 | $ | 18,368 | $ | 6,914 | $ | - | $ | 74,656 | ||||||||||
Foreign currency translation | - | (12 | ) | - | - | (12 | ) | |||||||||||||
Balance at December 5, 2018 (Predecessor) | $ | 49,374 | $ | 18,356 | $ | 6,914 | $ | - | $ | 74,644 | ||||||||||
| Balance at December 6, 2018 (Successor) | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
| Acquired goodwill | 185,782 | 40,554 | 49,133 | - | 275,469 | |||||||||||||||
| Foreign currency translation | - | 619 | - | - | 619 | |||||||||||||||
| Balance at October 31, 2019 (Successor) | $ | 185,782 | $ | 41,173 | $ | 49,133 | $ | - | $ | 276,088 | ||||||||||
As discussed in Note 4 – Business Combinations, the Company recorded an out of period adjustment related to the reduction of sales tax accrual of $3.4 million that resulted in changes to goodwill and liabilities assumed in the transaction. The impact of the adjustment was not considered material to the Company's previously issued financial statements.
The Company assesses potential impairment of our goodwill at least annually, generally as of August 31st. However, as a result of our stock price declining substantially during the fiscal 2019 third quarter, the Company concluded this qualified as a triggering event and thus performed a step one goodwill impairment analysis as of July 31, 2019. The results of this test indicated no impairment. The fair value of our U.S. Concrete Pumping, U.K. Operations and U.S. Concrete Waste Management Services reporting units exceeded their July 31, 2019 carrying values by approximately 4%, 3% and 4%, respectively. Given the short period of time that has passed since goodwill was recorded on the Company’s effective tax rate (benefit) isbalance sheet, primarily resulting from the Business Combination and Capital acquisition, the fair values of these reporting units are largely in-line with their carrying values.
Due to the quantitative test performed as of July 31, 2019, a quantitative test on our annual testing date of August 31, 2019 was not considered necessary. Instead, the Company performed a qualitative analysis as of October 31, 2019 and concluded no impairment indicators were present.
Note 9. Long-Term Debt and Revolving Lines of Credit
Successor
As part of the Business Combination, the Predecessor’s Revolver, U.K. Revolver, Senior secured notes, and Seller notes (see Predecessor section below for a discussion of these agreements) were all extinguished and the Company entered into (i) a term loan agreement, dated December 6, 2018, among the Company, certain subsidiaries of the Company, Credit Suisse AG, Cayman Islands Branch as administrative agent and Credit Suisse Loan Funding LLC, Jefferies Finance LLC and Stifel Nicolaus & Company Incorporated LLC as joint lead arrangers and joint bookrunners, and the other Lenders party thereto and (the “Term Loan Agreement”) (ii) a Credit Agreement, dated December 6, 2018, among the Company, certain subsidiaries of the Company, Wells Fargo Bank, National Association, as agent, sole lead arranger and sole bookrunner, the other Lenders party thereto, and the other parties thereto (“ABL Credit Agreement”). In addition, in order to finance the acquisition of Capital, the Company added $60.0 million of incremental term loans under the Term Loan Agreement in May 2019. Summarized terms of these facilities are included below.
Term Loan Agreement
Summarized terms of the Term Loan Agreement are as follows:
● | Provides for an original aggregate principal amount of $357.0 million. This amount was increased in May 2019 by $60.0 million in connection with the acquisition of Capital; |
● | The initial term loans advanced will mature and be due and payable in full seven years after the Closing Date, with principal amortization payments in an annual amount equal to 5.00% of the original principal amount; |
● | Borrowings under the Term Loan Agreement, will bear interest at either (1) an adjusted LIBOR rate or (2) an alternate base rate, plus an applicable margin of 6.00% or 5.00%, respectively; |
● | The Term Loan Agreement is secured by (i) a first priority perfected lien in substantially all of the assets of the Company and certain of its subsidiaries that are loan parties thereunder to the extent not constituting ABL Credit Agreement priority collateral and (ii) a second priority perfected lien on substantially all ABL Credit Agreement priority collateral, in each case subject to customary exceptions and limitations; |
● | ||||
The Term Loan Agreement includes certain non-financial covenants. |
On December 22,The outstanding balance under the Term Loan Agreement as of October 31, 2019 was $402.1 million and as of that date, the Company was in compliance with all debt covenants. The Company’s interest on borrowings under the Term Loan Agreement bear interest using the London Inter-bank Offered Rate (LIBOR) as the base rate plus an applicable margin in line with the summarized terms of the Term Loan Agreement as described above.
Future maturities of the term loans for fiscal years ending October 31 and thereafter is as follows:
(in thousands) | ||||
2020 | $ | 20,888 | ||
2021 | 20,888 | |||
2022 | 20,888 | |||
2023 | 20,888 | |||
| 2024 | 20,888 | |||
Thereafter | 297,654 | |||
| Total | $ | 402,094 |
ABL Credit Agreement
Summarized terms of the ABL Credit Agreement are as follows:
● | Borrowing availability in U.S. Dollars and GBP up to a maximum of $60.0 million; |
● | Borrowing capacity available for standby letters of credit of up to $7.5 million and for swingline loan borrowings of up to $7.5 million. Any issuance of letters of credit or making of a swingline loan will reduce the amount available under the ABL Facility; |
● | All loans advanced will mature and be due and payable in full five years after the Closing Date; |
● | Amounts borrowed may be repaid at any time, subject to the terms and conditions of the agreement; |
● | Borrowings in U.S. Dollars and GBP under the ABL Credit Agreement bear interest at either (1) an adjusted LIBOR rate or (2) a base rate, in each case plus an applicable margin currently set at 2.25% and 1.25%, respectively. The ABLE Credit Agreement is subject to two step-downs of 0.25% and 0.50% based on excess availability levels; |
● | U.S. ABL Credit Agreement obligations are secured by (i) a perfected first priority security interest in substantially all personal property of the Company and certain of its subsidiaries that are loan parties thereunder consisting of all accounts receivable, inventory, cash, intercompany notes, books and records, chattel paper, deposit, securities and operating accounts and all other working capital assets and all documents, instruments and general intangibles related to the foregoing (the “U.S. ABL Priority Collateral”) and (ii) a perfected second priority security interest in substantially all Term Loan Agreement priority collateral, in each case subject to customary exceptions and limitations; |
● | U.K. ABL Credit Agreement obligations are secured by (i) a perfected first-priority security interest in (A) the U.S. ABL Priority Collateral, (B) all of the stock (or other ownership interests) in, and held by, the U.K. borrower subsidiaries of the Company, and (C) all of the current and future assets and property of the U.K. subsidiaries of the Company that are loan parties thereunder, including a first-ranking floating charge over all current and future assets and property of each U.K. subsidiary of the Company that is a loan party thereunder; and (ii) a perfected, second-priority security interest in substantially all Term Loan Agreement priority collateral, in each case subject to customary exceptions and limitations; and |
● | The ABL Credit Agreement also includes (i) a springing financial covenant (fixed charges coverage ratio) based on excess availability levels that the Company must comply with on a quarterly basis during required compliance periods and (ii) certain non-financial covenants. |
The outstanding balance under the ABL Credit Agreement as of October 31, 2019 was $23.6 million and as of that date, the Company was in compliance with all debt covenants.
Predecessor
Revolving line of credit
The Predecessor had a revolving loan agreement (the "Revolver"). Summarized terms of the Revolver were as follows:
● | Maximum borrowing capacity of $65.0 million with a maturity date of September 8, 2022; |
● | Borrowings bear interest at the LIBOR rate plus an applicable margin that resets quarterly and is (a) 2.00%, (b) 2.25% or (c) 2.50% if the quarterly average excess availability is (a) at least 66.67%, (b) less than 66.67% and at least 33.33% and (c) less than 33.33%, respectively; |
● | Interest is due monthly and the outstanding principal balance was due upon maturity; |
● | On October 2, 2017, $35.0 million of the Revolver balance was transferred to a 3-month line of credit with a separate LIBOR interest rate; and |
● | Required Predecessor to maintain a maximum ratio of total fixed charges. |
As of October 31, 2018, the outstanding balance of the Revolver was $48.7 million and the Predecessor was in compliance with all debt covenants.
U.K. Revolver
The Predecessor had a revolving loan agreement (the “U.K. Revolver”) associated with the acquisition of Camfaud in November 2016. The U.K. Revolver had a maximum borrowing capacity of approximately $28.0 million and bore interest at LIBOR plus 2.00%. The U.K. Revolver required the Predecessor maintain a maximum ratio of total fixed charges.
As of October 31, 2018, the outstanding balance of the U.K. Revolver was $14.3 million and the Predecessor was in compliance with all debt covenants.
Senior secured notes
In August 2014, the Predecessor issued $140.0 million in senior secured notes through a high-yield bond offering under SEC Rule 144A (“Senior Notes”). In November 2016, the Predecessor issued additional senior secured notes of $40.0 million as an incremental borrowing with the same terms and form as the original Senior Notes.
Summarized terms of the Senior Notes were as follows:
● | Maturity date on September 1, 2021. Principal due upon maturity. |
● | Interest rate of 10.375% per annum, payments due every March 1 and September 1 commencing March 1, 2015 |
● | The Senior Notes were secured by substantially all of the assets of the Company and contain various non-financial covenants. |
Over the period of January 2016 through September 2017, the United States enactedPredecessor repurchased and retired approximately $26.0 million, in the aggregate, of principal of the Senior Notes.
In September 2017, the Predecessor completed an exchange of substantially all outstanding existing Senior Notes for newly issued senior secured notes (“New Senior Notes”). The terms of the New Senior Notes were identical to the Senior Notes except that the maturity date was extended to September 1, 2023.
In conjunction with the acquisition of the O’Brien Companies (See Note 4 - Business Combinations) in April 2018, the Predecessor issued additional New Senior Notes with a principal amount of $15.0 million at a 104 percent premium for a total purchase price of $15.6 million. The $0.6 million has been recorded by the Company as a debt premium and will be amortized over the life of the New Senior Notes using the effective interest method.
The outstanding balance of the original Senior Notes outstanding as of October 31, 2018 was nil. The outstanding balance of the New Senior Notes as of October 31, 2018 was $167.6 million.
Seller notes
In connection with the acquisitions of the Camfaud and Reilly in November 2016 and July 2017, respectively, the Predecessor entered into separate loan agreements with the former owners of the Camfaud and Reilly for $6.2 million and $1.9 million, respectively (collectively, the “Seller Notes”). The Seller Note with respect to Camfaud bore interest at 5.0% per annum and all principal plus accrued interest was due upon the earlier of; (1) 6 months after the U.K. Revolver is repaid in full, (2) 42 months after the acquisition date (May 2020) or (3) the date on which the Predecessor suffers an insolvency event. The Seller Note with respect to Reilly bore interest at 5.0% per annum and all principal plus accrued interest are due three years after the acquisition date (July 2020). The Seller Notes were unsecured.
In connection with the Business Combination, the Company repaid its existing credit facilities and the Seller Notes in full and replaced them with the Term Loan Agreement and the ABL Credit Agreement. The Company also incurred an aggregate of $16.4 million of costs related to the extinguishment of its existing debts, including the write-off of unamortized borrowing costs and an early extinguishment fee paid to its lenders. The amount has been reflected as debt extinguishment costs in the Predecessor’s consolidated statement of income for the period ended December 5, 2018.
The table below is a summary of the composition of the Company’s long-term debt balances at October 31, 2019 for the Successor and at October 31, 2018 for the Predecessor. Note that the term loan is combined for short term and long term balances.
Successor | Predecessor | |||||||
October 31, | October 31, | |||||||
(in thousands) | 2019 | 2018 | ||||||
| Short term portion of term loan | $ | 20,888 | $ | - | ||||
Long term portion of term loan | 381,206 | - | ||||||
Senior secured notes | - | 167,553 | ||||||
Seller notes | - | 8,292 | ||||||
| 402,094 | 175,845 | |||||||
Plus unamortized premium on debt | - | 540 | ||||||
Less unamortized deferred financing costs | (20,268 | ) | (2,915 | ) | ||||
Total debt | $ | 381,826 | $ | 173,470 | ||||
Note 10. Accrued Payroll and Payroll Expenses
The following table summarizes accrued payroll and expenses at October 31, 2019 for the Successor and at October 31, 2018 for the Predecessor:
Successor | Predecessor | |||||||
October 31, | October 31, | |||||||
(in thousands) | 2019 | 2018 | ||||||
Accrued vacation | $ | 4,638 | $ | 3,482 | ||||
Accrued bonus | 3,177 | 1,766 | ||||||
Other accrued | 1,362 | 1,457 | ||||||
Total accrued payroll and payroll expenses | $ | 9,177 | $ | 6,705 | ||||
Note 11. Accrued Expenses and Other Current Liabilities
The following table summarizes accrued expenses and other current liabilities at October 31, 2019 for the Successor and at October 31, 2018 for the Predecessor:
Successor | Predecessor | |||||||
October 31, | October 31, | |||||||
(in thousands) | 2019 | 2018 | ||||||
Accrued insurance | $ | 6,105 | $ | 4,743 | ||||
Accrued interest | 3,049 | 3,092 | ||||||
Accrued equipment purchases | 15,343 | - | ||||||
Accrued sales and use tax | 311 | 4,145 | ||||||
Accrued property taxes | 915 | 865 | ||||||
Accrued professional fees | 1,729 | 3,579 | ||||||
Other | 654 | 2,406 | ||||||
Total accrued expenses and other liabilities | $ | 28,106 | $ | 18,830 | ||||
Note 12. Income Taxes
In December 2017, the Tax Cuts and Jobs Act ("(the “2017 Tax Reform Legislation"Act”), which made significant changes was enacted. The 2017 Tax Act significantly revised the U.S. corporate income tax regime by, among other things, the following items:
● | Lowering the U.S. corporate tax rate from 35% to 21% effective January 1, 2018. In accordance with ASC Topic 740, Income Taxes, the Predecessor recognized the income tax effects of the 2017 Tax Act in its financial statements in the period the 2017 Tax Act was signed into law; | |
● | Provides for a 100 percent deduction for foreign-source portion of dividends received from specified 10 percent owned foreign corporations by U.S. corporate shareholders. The deduction is unavailable for hybrid dividends; | |
● | Creates a requirement that certain income earned by controlled foreign corporations (“CFCs”) must be included currently in the gross income of the CFC's U.S. shareholder; and | |
● | The Global Intangible Low Tax Income (“GILTI”) provisions are effective for tax years beginning on or after January 1, 2018. In FASB staff Q&A Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, the FASB staff noted that ASC 740 was not clear with respect to the appropriate accounting for GILTI, and accordingly, an entity may either: (1) elect to treat taxes on GILTI as period costs similar to special deductions, or (2) recognize deferred tax assets and liabilities when basis differences exist that are expected to affect the amount of GILTI inclusion upon reversal (the deferred method). The Company has not yet adopted an accounting policy related to GILTI. |
The sources of income before income taxes for the Successor period from December 6, 2018 through October 31, 2019, the predecessor period from November 1, 2018 through December 5, 2018, and for the fiscal year ended October 31, 2018 are as follows:
Successor | Predecessor | |||||||||||
(in thousands) | December 6, 2018 through October 31, 2019 | November 1, 2018 through December 5, 2018 | Year Ended October 31, 2018 | |||||||||
United States | $ | (14,875 | ) | $ | (26,975 | ) | $ | 15,077 | ||||
Foreign | 1,660 | 207 | 3,521 | |||||||||
Total | $ | (13,215 | ) | $ | (26,768 | ) | $ | 18,598 | ||||
The components of the provision for income taxes for the Successor period from December 6, 2018 through October 31, 2019, the predecessor period from November 1, 2018 through December 5, 2018, and for the fiscal year ended October 31, 2018 are as follows:
Successor | Predecessor | |||||||||||
(in thousands) | December 6, 2018 through October 31, 2019 | November 1, 2018 through December 5, 2018 | Year Ended October 31, 2018 | |||||||||
Current tax provision: | ||||||||||||
Federal | $ | - | $ | - | $ | (366 | ) | |||||
Foreign | 1,108 | 134 | 1,232 | |||||||||
State and local | 409 | 31 | 456 | |||||||||
Total current tax provision | 1,517 | 165 | 1,322 | |||||||||
Deferred tax provision (benefit): | ||||||||||||
Federal | (3,317 | ) | (3,474 | ) | (10,649 | ) | ||||||
Foreign | (571 | ) | (86 | ) | (730 | ) | ||||||
State and local | (932 | ) | (797 | ) | 273 | |||||||
Total deferred tax (benefit) provision | (4,820 | ) | (4,357 | ) | (11,106 | ) | ||||||
Net provision (benefit) for income taxes | $ | (3,303 | ) | $ | (4,192 | ) | $ | (9,784 | ) | |||
For the Successor period from December 6, 2018 through October 31, 2019, the predecessor period from November 1, 2018 through December 5, 2018, and for the fiscal year ended October 31, 2018 the income tax provision differs from the expected tax provision computed by applying the U.S. federal statutory rate to income tax law. The Corporation expects that certain aspectsbefore taxes as a result of the Tax Reform Legislation will positively impactfollowing:
Successor | Predecessor | |||||||||||
(in thousands) | December 6, 2018 through October 31, 2019 | November 1, 2018 through December 5, 2018 | Year Ended October 31, 2018 | |||||||||
Income tax provision per federal statutory rate of 21%, 21% and 23% | $ | (2,777 | ) | $ | (5,622 | ) | $ | 4,310 | ||||
State income taxes, net of federal deduction | (468 | ) | (635 | ) | 560 | |||||||
Foreign rate differential | (48 | ) | (6 | ) | (179 | ) | ||||||
Meals and entertainment | 187 | 24 | 220 | |||||||||
Transaction costs | 18 | 1,414 | 44 | |||||||||
Change in deferred tax rate | (95 | ) | 30 | - | ||||||||
Stock-based compensation | - | 6 | 65 | |||||||||
Contingent consideration fair value adjustment | - | - | 122 | |||||||||
Equity contribution | 127 | - | - | |||||||||
Nontaxable interest income net of foreign income inclusions | (257 | ) | (62 | ) | 40 | |||||||
Deferred tax on undistributed foreign earnings | 236 | 68 | (142 | ) | ||||||||
Impact of tax reform | - | - | (14,645 | ) | ||||||||
Deferred finance costs | - | 586 | - | |||||||||
Fuel tax credit | 103 | - | - | |||||||||
Return to prior year provision | (323 | ) | - | (173 | ) | |||||||
Other | (6 | ) | 5 | (6 | ) | |||||||
Income tax provision | $ | (3,303 | ) | $ | (4,192 | ) | $ | (9,784 | ) | |||
The tax effects of the Corporation's future after-tax earnings primarily duetemporary differences giving rise to the lowerCompany’s net deferred tax liabilities for the Successor at October 31, 2019 and the Predecessor at October 31, 2018, are summarized as follows:
Successor | Predecessor | |||||||
| (in thousands) | Year Ended October 31, 2019 | Year Ended October 31, 2018 | ||||||
Deferred tax assets: | ||||||||
Accrued insurance reserve | $ | 1,334 | $ | 942 | ||||
Accrued sales and use tax | 77 | 962 | ||||||
Accrued payroll | 353 | 368 | ||||||
Foreign tax credit carryforward | 80 | 80 | ||||||
| Interest expense carryforward | 9,181 | - | ||||||
| Stock-based compensation | 893 | - | ||||||
| Prepaid expenses | 4 | - | ||||||
Other | 435 | 1,931 | ||||||
Net operating loss carryforward | 17,385 | 255 | ||||||
Total deferred tax assets | $ | 29,742 | $ | 4,538 | ||||
Valuation allowance | (63 | ) | (63 | ) | ||||
Net deferred tax assets | 29,679 | 4,475 | ||||||
Deferred tax liabilities: | ||||||||
Intangible assets | (36,593 | ) | (6,219 | ) | ||||
Property and equipment | (61,608 | ) | (36,394 | ) | ||||
Prepaid expenses | - | (120 | ) | |||||
Unremitted foreign earnings | (527 | ) | (747 | ) | ||||
Total net deferred tax liabilities | (98,728 | ) | (43,480 | ) | ||||
Net deferred tax liabilities | $ | (69,049 | ) | $ | (39,005 | ) | ||
The Company has federal statutorynet operating loss carry forwards of $72.5 million, $29.2 million, and $8.1 million as of October 31, 2019, December 5, 2018, and October 31, 2018, respectively, that begin to expire in 2037. The Company has state net operating loss carry forwards of approximately $86.9 million, $29.5 million, and $5.3 million as of October 31, 2019, December 5, 2018, and October 31, 2018, respectively, that begin to expire in 2022.
The Company has foreign tax rate. Beginning January 1,credit carryforwards of approximately $0.1 million as of October 31, 2019, December 5, 2018, and October 31, 2018, respectively, that begin to expire in 2026.
The Company has provided U.S. deferred taxes on cumulative earnings of all of its non-U.S. subsidiaries.
In assessing the Corporation's U.S.realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, carryback opportunities, and tax planning strategies in making the assessment. The Company believes it is more likely than not that it will be taxed atrealize the benefits of these deductible differences, net of the valuation allowance provided. The valuation allowance provided by the Company relates to foreign tax credit carry forwards.
As a 21 percent federal corporate rate. Further, we are requiredresult of the 2017 Tax Act, the Company recorded a tax benefit of $15.1 million for the period ended October 31, 2018 related to recognize the effectremeasurement of this rate change on our deferred tax assets and liabilities and deferred tax asset valuation allowancesto reflect the reduction in the period theU.S. corporate income tax rate change is enacted. We do not expect any material non-cashfrom 35 percent to 21 percent. The Company also recorded a tax expense of $0.5 million for the period ended October 31, 2018 related to the deemed repatriation of earnings from its foreign subsidiaries, also known as the “Transition Tax”. The net of these two adjustments related to the 2017 Tax Act reflect the total impact from this rate change, with adjustments to deferredof tax balances offset by adjustments to deferred tax valuation allowances.reform for the period ended October 31, 2018.
The Tax Act limits, for certain entities, the deduction for net interest expense to the sum of business interest income plus 30% of adjusted taxable income. Adjusted taxable income is defined in the Tax Act Reform Legislation similar to earnings before interest, taxes, depreciation and amortization for taxable years beginning after December 31, 2017 and before January 1, 2022, and is defined similar to earnings before interest and taxes for taxable years beginning after December 31, 2021. The Company has non-deductible interest for tax purposes of $23.2 million and $15.8 million for the year ended October 31, 2019 and the period ended December 5, 2018, respectively. The disallowed interest expense can be carried forward indefinitely, but will continue to be subject to limitation.
The following table summarizes the changes in the Company's unrecognized tax benefits during the Successor period from December 6, 2018 through October 31, 2019, the Predecessor period from November 1, 2018 through December 5, 2018, and the fiscal year ended October 31, 2018. The Company expects no material changes to unrecognized tax positions within the next twelve months. If recognized, none of these benefits would favorably impact the Company's income tax expense, before consideration of any related valuation allowance:
Successor | Predecessor | |||||||||||
(in thousands) | December 6, 2018 through October 31, 2019 | November 1, 2018 through December 5, 2018 | Year Ended October 31, 2018 | |||||||||
Balance, beginning of year | $ | - | $ | - | $ | - | ||||||
Increase in current year position | 1,726 | - | - | |||||||||
Increase in prior year position | - | - | - | |||||||||
Decrease in prior year position | - | - | - | |||||||||
Lapse in statute of limitations | - | - | - | |||||||||
Balance, end of year | $ | 1,726 | $ | - | $ | - | ||||||
For the Successor period from December 6, 2018 through October 31, 2019, the Predecessor period from November 1, 2018 through December 5, 2018, and the fiscal year ended October 31, 2018 the Company has recognized no interest or penalties.
Note 10 — Subsequent Events13. Commitments and Contingencies
Operating Leases
The Company leases facilities, equipment and vehicles under non-cancelable operating leases with various expiration dates through April 2029. Monthly lease payments range from $100 to $19,004. Total rental expense for Successor period from December 6, 2018 through October 31, 2019, the Predecessor period from November 1, 2018 through December 5, 2018, the fiscal year ended October 31, 2018, was $4.4 million, $0.7 million, $4.8 million, respectively, which also includes the Company’s month-to-month leases.
The following is a summary of future minimum lease payments for the years ended October 31:
(in thousands) | Future Payments | |||
2020 | $ | 2,997 | ||
2021 | 2,262 | |||
2022 | 1,928 | |||
2023 | 1,268 | |||
| 2024 | 727 | |||
Thereafter | 1,165 | |||
| Total | $ | 10,347 | ||
Capital Leases
The Company has a limited number of capital leases related to land and buildings. The capital lease obligation recorded as of October 31, 2019 was $0.6 million while the net book value of the leased assets as of October 31, 2018 was $0.8 million.
The following is a summary of future minimum lease payments together with the present value of those payments for the years ended October 31:
(in thousands) | Future Payments | |||
2020 | $ | 105 | ||
2021 | 113 | |||
2022 | 115 | |||
2023 | 118 | |||
2024 | 120 | |||
Thereafter | 60 | |||
Total minimum lease payments | 631 | |||
Less the amount representing interest | (63 | ) | ||
Present value of minimum lease payments | $ | 568 | ||
Insurance
As of October 31, 2019, and October 31, 2018, the Company was partially insured for automobile, general and worker's compensation liability with the following deductibles (per occurrence):
Deductible | ||||
General liability | $ | 250,000 | ||
General liability (in the case of accident and driver has completed NBIS driver training) | $ | 125,000 | ||
Automobile | $ | 100,000 | ||
Workers' compensation | $ | 250,000 | ||
The Successor and Predecessor had accrued $5.0 million and $3.2 million, as of October 31, 2019 and October 31, 2018, respectively, for claims incurred but not reported and estimated losses reported, which is included in accrued expenses and other current liabilities in the accompanying consolidated balance sheet.
The Company offers employee health benefits via a partially self-insured medical benefit plan. Participant claims exceeding certain limits are covered by a stop-loss insurance policy. As of October 31, 2019, and October 31, 2018, the Company had accrued $1.1 million and $1.0 million, respectively, for health claims incurred but not reported based on historical claims amounts and average lag time. These accruals are included in accrued expenses and other current liabilities in the accompanying consolidated balance sheet. The Company contracts with a third-party administrator to process claims, remit benefits, etc. The third-party administrator requires the Company to maintain a bank account to facilitate the administration of claims. The account balance was $0.3 million and $0.3 million, as of October 31, 2019 and October 31, 2018, respectively, and is included in cash and cash equivalents in the accompanying consolidated balance sheet.
Litigation
The Company is currently involved in certain legal proceedings and other disputes with third parties that have arisen in the ordinary course of business. Management believes that the outcomes of these matters will not have a material impact on the Company’s financial statements and does not believe that any amounts need to be recorded for contingent liabilities in the Company’s consolidated balance sheet.
Letters of credit
The ABL Credit Agreement provides for up to $7.5 million of standby letters of credit. As of October 31, 2019, total outstanding letters of credit totaled $1.5 million, the vast majority of which had been committed to the Company’s general liability insurance provider.
Note 14. Stockholders’ Equity
In February 2018, the Company entered into an expense reimbursement agreement (the “Reimbursement Agreement”)conjunction with the sellersBusiness Combination, all common and preferred shares that were in existence for the Predecessor were settled and no longer outstanding subsequent to December 5, 2018. On December 6, 2018, in connection with the closing of the Business Combination, we redeemed a potential business combination target (the “Sellers”). Discussions regarding the proposed transaction were terminated in February 2018. Pursuanttotal of 22,337,322 shares of our Class A common stock pursuant to the terms of our certificate of incorporation, resulting in a total cash payment from the ReimbursementCompany’s trust account to redeeming stockholders of $231.4 million.
Successor
The Company’s amended and restated certificate of incorporation authorizes the issuance of 500,000,000 shares of common stock, par value $0.0001, and 10,000,000 shares of preferred stock, par value $0.0001. Immediately following the Business Combination, there were:
● | 28,847,707 shares of common stock issued and outstanding; |
● | 34,100,000 warrants outstanding, each exercisable for one share of common stock at an exercise price of $11.50 per share; and |
● | 2,450,980 shares of zero-dividend convertible perpetual preferred stock (“Series A Preferred Stock”) outstanding, as further discussed below |
On May 14, 2019, in order to finance a portion of the purchase price for the acquisition of Capital, the Company completed a public offering of 18,098,166 of its common stock at a price of $4.50 per share, receiving net proceeds of approximately $77.4 million, after deducting underwriting discounts, commissions, and other offering expenses. In connection with the offering, certain of the Company’s directors, officers and significant stockholders, and certain other related investors purchased an aggregate of 3,980,166 shares of its common stock from the underwriters at the public offering price of $4.50, representing approximately 25% of the total shares issued (without giving effect to the underwriters’ option to purchase additional shares).
As discussed below, on April 29, 2019, 2,101,213 shares of common stock were issued in exchange for the Company's public warrants and 1,707,175 shares of common stock were issued in exchange for the Company's private warrants. After the completion of the warrant exchange and as of October 31, 2019, there were 13,017,777 public warrants and no private warrants outstanding.
The Company’s Series A Preferred Stock does not pay dividends and is convertible (effective June 6, 2019) into shares of the Company’s common stock at a 1:1 ratio (subject to customary adjustments). The Company has the right to elect to redeem all or a portion of the Series A Preferred Stock at its election after December 6, 2022 for cash at a redemption price equal to the amount of the principal investment plus an additional cumulative amount that will accrue at an annual rate of 7.0% thereon. In addition, if the volume weighted average price of shares of the Company’s common stock equals or exceeds $13.00 for 30 consecutive days, then the Company will have the right to require the holder of the Series A Preferred Stock to convert its Series A Preferred Stock into Company common stock, at a ratio of 1:1 (subject to customary adjustments).
Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. The preferred stock contains a redemption feature contingent upon a change in control which is not solely within the control of the Company, and as such, the preferred stock is presented outside of permanent equity.
Warrant Exchange
On April 1, 2019, the Company commenced an offer to each holder of its publicly traded warrants (the “public warrants”) and private placement warrants that were issued in connection with Industrea’s initial public offering on April 17, 2017 (the “private warrants”) the opportunity to receive 0.2105 shares of common stock in exchange for each outstanding public warrant tendered and 0.1538 shares of common stock in exchange for each private warrant tendered pursuant to the offer (the “Offer” or “Warrant Exchange”).
On April 26, 2019, a total of 9,982,123 public warrants and 11,100,000 private warrants were tendered for exchange pursuant to the Offer. On April 29, 2019, 2,101,213 shares of common stock were issued in exchange for the tendered public warrants and 1,707,175 shares of common stock were issued in exchange for the tendered private warrants. A negligible amount of cash was paid for fractional shares. As no agreement was modified as a result of the exchange, we concluded that the exchange of Company common stock for the warrants was analogous to a share repurchase. The Company recorded a loss on repurchase of the warrants of $5.2 million in the 2019 second quarter, all of which was included as an adjustment to retained earnings. The $5.2 million loss reflects the par value of the warrants in APIC of $21.1 million less the fair value of the common stock that was issued in exchange for the warrants of $26.3 million. After the completion of the Warrant Exchange and as of October 31, 2019, 13,017,777 public warrants and no private warrants were outstanding.
Predecessor
Pursuant to the Predecessor’s articles of incorporation, as amended, the Predecessor was authorized to issue 15,000,000 shares of $0.001 par value common stock and 2,423,711 shares of $0.001 par value preferred stock.
As of October 31, 2018, the Predecessor had 7,576,289 shares of common stock issued and outstanding and 2,342,264 preferred shares issued and outstanding. The preferred shares had a liquidation preference of $11.2 million.
Preferred stock holders are entitled to participating dividends, distributions declared or paid, or set aside for payment on the common stock whether payments consist of cash, securities, property, or other assets. To the extent that dividend or distributions are made in the form of securities, preferred stock holders are only entitled to receive the same class securities provided to the common stock holders.
Upon liquidation, dissolution or winding up of the Company, before any distributions are made to holders of common stock, holders of preferred stock are entitled to receive an amount equal to the Liquidation Preference plus all accrued but unpaid dividends.
The holders of preferred stock are entitled to vote together with the holders of common stock as a single class on all matters submitted to a vote of the holders of common stock. Each share of preferred stock is entitled to one vote.
Note 15. Stock-Based Compensation
Successor
The Company rolled forward certain vested options from the Predecessor (see discussion below) to 2,783,479 equivalent vested options in the Successor. No incremental compensation costs were recognized on conversion as the fair value of the options issued were equivalent to the fair value of the vested options of the Predecessor. Exercise prices for those options range from $0.87 to $6.09.
During 2019, pursuant to the Concrete Pumping Holdings, Inc. 2018 Omnibus Incentive Plan, the Company granted stock-based awards to certain employees in the U.S. and U.K. All awards in the U.S. are restricted stock awards while awards granted to employees in the U.K. are stock options with exercise prices of $0.01. Regardless of where the awards were granted, the awards vest pursuant to one of the following four conditions:
(1) | Time-based only – Awards vest in equal installments over a five-year period. |
(2) | $13 market-based and time-based vesting – Awards will vest as to first condition once the Company’s stock reaches a closing price of $13.00 for 30 consecutive days. Once the first vesting condition is achieved, the stock award will then vest 1/3 annually over a three-year period. |
(3) | $16 market-based and time-based vesting – Awards will vest as to first condition once the Company’s stock reaches a closing price of $16.00 for 30 consecutive days. Once the first vesting condition is achieved, the stock award will then vest 1/3 annually over a three-year period. |
(4) | $19 market-based and time-based vesting – Awards will vest as to first condition once the Company’s stock reaches a closing price of $19.00 for 30 consecutive days. Once the first vesting condition is achieved, the stock award will then vest 1/3 annually over a three-year period. |
Included in the table below is a summary of the awards granted, including the location, type of award, fair value of awards, and the date that expense will be recognized through. In accordance with ASC 718, the market-based awards were assigned the fair values in the table below using a Monte Carlo simulation model. In addition, while the table below provides a date through which expense will be recognized on a straight-line basis, if at such time these market-based stock awards vest under both vesting conditions, expense recognition will be accelerated. Stock-based compensation expense for Successor period from December 6, 2018 to October 31, 2019 was $3.6 million.
Location | Type of Award | Shares Awarded | Fair Value of Awards Per Share | Total Fair Value of Awards | Date Expense will be Recognized Through (Straight-Line Basis) | ||||||||||
U.S. | Time Based Only | 1,156,630 | $ | 6.67 | $ | 7,714,722 | 12/6/2023 | ||||||||
U.S. | $13 Market/Time- Based | 1,543,044 | $ | 4.47 | $ | 6,904,032 | 5/4/2024 | ||||||||
U.S. | $16 Market/Time- Based | 1,543,044 | $ | 3.85 | $ | 5,940,038 | 8/27/2024 | ||||||||
U.S. | $19 Market/Time- Based | 1,543,091 | $ | 3.34 | $ | 5,149,194 | 11/19/2024 | ||||||||
U.S. | Time Based Only | 25,000 | $ | 4.05 | $ | 101,250 | 12/6/2023 | ||||||||
U.S. | $13 Market/Time- Based | 25,000 | $ | 2.72 | $ | 67,919 | 5/4/2024 | ||||||||
U.S. | $16 Market/Time- Based | 25,000 | $ | 2.34 | $ | 58,436 | 8/27/2024 | ||||||||
U.S. | $19 Market/Time- Based | 25,000 | $ | 2.03 | $ | 50,654 | 11/19/2024 | ||||||||
U.K. | Time Based Only | 164,744 | $ | 6.67 | $ | 1,098,842 | 12/6/2023 | ||||||||
U.K. | $13 Market/Time- Based | 238,808 | $ | 4.46 | $ | 1,066,272 | 5/4/2024 | ||||||||
U.K. | $16 Market/Time- Based | 238,808 | $ | 3.84 | $ | 917,096 | 8/27/2024 | ||||||||
U.K. | $19 Market/Time- Based | 238,833 | $ | 3.33 | $ | 794,772 | 11/19/2024 | ||||||||
Total | 6,767,002 | $ | 29,863,227 | ||||||||||||
Share-based compensation is recognized on a straight-line basis over the requisite service period of the award based on their grant-date fair value.
Stock Options
The following tables summarize stock option activity for the Successor period from December 6, 2018 to October 31, 2019:
Options | Weighted average exercise price | |||||||
Outstanding stock options, December 6, 2018 | 2,783,479 | $ | 1.48 | |||||
Granted | 881,193 | $ | 0.01 | |||||
Forfeited | (22,250 | ) | $ | 0.01 | ||||
Exercised | (1,573,024 | ) | $ | 0.87 | ||||
Expired | - | $ | - | |||||
Outstanding stock options, October 31, 2019 | 2,069,398 | $ | 1.33 | |||||
The total intrinsic value of stock options exercised for the Successor period from December 6, 2018 through October 31, 2019 was $9.1 million.
The following table summarizes information about stock options outstanding at October 31, 2019:
Options Outstanding | Options Exercisable | |||||||||||||||||||||||||||||||||
Exercise price | Number of options | Weighted average exercise price | Weighted average remaining contractual life (yrs) | Aggregate Intrinsic Value | Number of options | Weighted average exercise price | Weighted average remaining contractual life (yrs) | Aggregate Intrinsic Value | ||||||||||||||||||||||||||
| $ | 0.01 | 858,943 | $ | 0.01 | 9.4 | $ | 2,946 | - | $ | - | n/a | $ | - | |||||||||||||||||||||
| $ | 0.87 | 886,382 | $ | 0.87 | 5.3 | 2,278 | 886,382 | $ | 0.87 | 5.3 | 2,278 | |||||||||||||||||||||||
| $ | 6.09 | 324,073 | $ | 6.09 | 6.4 | - | 324,073 | $ | 6.09 | 6.4 | - | |||||||||||||||||||||||
Total | 2,069,398 | $ | 1.33 | 7.2 | $ | 5,224 | 1,210,455 | $ | 2.27 | 5.6 | $ | 2,278 | ||||||||||||||||||||||
As of October 31, 2019, there was $3.4 million of total unrecognized compensation cost related to stock options that is expected to be recognized as an expense by the Company in the future.
The Company did not recognize any tax benefit for the Successor period from December 6, 2018 through October 31, 2019.
Restricted Stock Awards
The following table is a summary of Restricted Stock Awards activity for year ended October 31, 2019:
Units | Weighted average grant-date fair value | |||||||
Unvested as of December 6, 2018 | - | $ | - | |||||
Granted | 5,885,809 | $ | 4.42 | |||||
Vested | - | $ | - | |||||
Forfeited | (130,350 | ) | $ | 4.58 | ||||
Unvested as of October 31, 2019 | 5,755,459 | $ | 4.44 | |||||
As of October 31, 2019, there was $22.8 million of unrecognized compensation expense related to non-vested restricted stock awards that is expected to be recognized as an expense by the Company in the future.
Predecessor
The Predecessor accounted for share-based awards in accordance with ASC Topic 718 Compensation–Stock Compensation (“ASC 718”), which requires the fair value of stock-based compensation awards to be amortized as an expense over the vesting period. Stock-based compensation awards are valued at fair value on the date of grant. As a result of the Business Combination, the acceleration clause within the original award agreements was triggered and all unvested awards immediately vested, resulting in an amount of $0.6 million of stock-based compensation expense presented “on the line” (see Note 4 - Business Combinations). Stock-based compensation for the Predecessor period from November 1, 2018 to December 5, 2018 and the fiscal year ended October 31, 2018 totaled $0.1 million and $0.3 million, respectively, and has been included in general and administrative expenses on the accompanying consolidated statement of income.
Note 16. Earnings Per Share
The Company calculates earnings per share in accordance with ASC 260, Earnings Per Share. For purposes of calculating earnings (loss) per share (“EPS”), a company that has participating security holders (for example, holders of unvested restricted stock that have non-forfeitable dividend rights and the Company’s Series A Preferred Stock) is required to utilize the two-class method for calculating EPS unless the treasury stock method results in lower EPS. The two-class method is an allocation of earnings/(loss) between the holders of common stock and a company’s participating security holders. Under the two-class method, earnings/(loss) for the reporting period is calculated by taking the net income (loss) for the period, less both the dividends declared in the period on participating securities (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) for the period. Our common shares outstanding are comprised of shareholder owned common stock and shares of unvested restricted stock held by participating security holders. Basic EPS is calculated by dividing income or loss attributable to common stockholders by the weighted average number of shares of common stock outstanding, excluding participating shares. To calculate diluted EPS, basic EPS is further adjusted to include the effect of potentially dilutive stock options outstanding and Series A Preferred Stock outstanding as of the beginning of the period.
Successor
At October 31, 2019 (Successor), the Company had outstanding (1) 13,017,777 million warrants to purchase shares of common stock, (2) 6.6 million outstanding unvested stock awards, (3) 1.2 million outstanding vested stock options, (4) 0.9 million outstanding unvested stock options and (5) 2.5 million shares of Series A Preferred Stock, all of which could potentially be dilutive. For the Successor period presented, the weighted-average dilutive impact, if any, of these shares was excluded from the calculation of diluted earnings (loss) per common share because their inclusion would have been anti-dilutive. As a result, dilutive earnings (loss) per share is equal to basic earnings (loss) per share.
The table below shows our basic and diluted EPS calculations for the period from December 6, 2018 through October 31, 2019 (Successor):
Successor | ||||
(in thousands, except share and per share amounts) | December 6, 2018 through October 31, 2019 | |||
| Net loss attributable to Concrete Pumping Holdings, Inc. | $ | (9,912 | ) | |
Less: Undistributed earnings allocated to participating securities | - | |||
Less: Preferred stock - cumulative dividends | (1,623 | ) | ||
| Net income (loss) attributable to common stockholders (numerator for basic earnings per share) | $ | (11,535 | ) | |
Add back: Undistributed earnings allocated to participating securities | - | |||
Less: Undistributed earnings reallocated to participating securities | - | |||
Add back: Preferred stock - cumulative dividends | - | |||
| Numerator for diluted earnings per share | $ | (11,535 | ) | |
Weighted average shares (denominator): | ||||
Weighted average shares - basic | 41,445,508 | |||
Weighted average shares - diluted | 41,445,508 | |||
| Basic loss per share | $ | (0.28 | ) | |
| Diluted loss per share | $ | (0.28 | ) | |
Predecessor
Under the terms and conditions of the Company’s Participating Preferred Stock Agreement, the Sellers agreedholders of the preferred stock had the right to reimbursereceive dividends or dividend equivalents should the Company declare dividends on its common stock on a one-for-one per-share basis. Under the two-class method, undistributed earnings were calculated by the earnings for fees incurred,the period less the cumulative preferred stock dividends earned for the period. The undistributed earnings were then allocated on a pro-rata basis to the common and preferred stockholders on a one-for-one per-share basis. The weighted-average number of common and preferred shares outstanding during the period was then used to calculate basic EPS for each class of shares. As a result, the undistributed earnings available to common shareholders was calculated by earnings (loss) for the period less the cumulative preferred stock dividends earned for the period less undistributed earnings allocated to the holders of the preferred stock.
In periods in which the Company had a net loss or undistributed net loss, basic loss per share was calculated by dividing the loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. The two-class method was not used, because the holders of the preferred stock did not participate in losses.
The table below shows our basic and diluted EPS calculations for the Predecessor periods from November 1, 2018 through December 5, 2018 and the fiscal year ended October 31, 2018:
Predecessor | ||||||||
(in thousands) | November 1, 2018 through December 5, 2018 | Year ended October 31, 2018 | ||||||
Net loss (numerator): | ||||||||
Net (loss) income attributable to Concrete Pumping Holdings, Inc. | $ | (22,575 | ) | $ | 28,382 | |||
Less: Preferred stock - cumulative dividends | (126 | ) | (1,428 | ) | ||||
Less: Undistributed earnings allocated to preferred shares | - | (6,365 | ) | |||||
Net (loss) income available to common shareholders | $ | (22,701 | ) | $ | 20,589 | |||
Weighted average shares (denominator): | ||||||||
Weighted average shares - basic | 7,576,289 | 7,576,289 | ||||||
Dilutive effect of stock options | - | 749,601 | ||||||
Weighted average shares - diluted | $ | 7,576,289 | $ | 8,325,890 | ||||
Antidilutive stock options | 932,746 | - | ||||||
Basic income (loss) per share | $ | (3.00 | ) | $ | 2.72 | |||
Diluted income (loss) per share | $ | (3.00 | ) | $ | 2.47 | |||
Note 17. Employee Benefits Plan
Retirement plans
The Company offers a 401(k) plan, which covers substantially all employees in the U.S., with the exception of certain union employees. Participating employees may elect to contribute, on a tax-deferred basis, a portion of their compensation, in accordance with Section 401(k) of the Internal Revenue Code. The Company generally provides some form of a matching contribution for most employees in the U.S. Retirement plan contributions for the Successor period from December 6, 2018 through October 31, 2019 were $0.8 million. For the Predecessor period from November 1, 2018 through December 5, 2018 and the fiscal year ended October 31, 2018, retirement plan contributions were $0.1 million and $0.6 million, respectively.
Camfaud operates a Small Self-Administered Scheme (SSAS), which is the equivalent of a U.S. defined contribution pension plan. The assets of the plan are held separately from those of Camfaud in an independently administered fund. Contributions by Camfaud to the SSAS amounted to $0.2 million for the Successor period from December 6, 2018 through October 31, 2019. For the Predecessor period from November 1, 2018 through December 5, 2018 and the fiscal year ended October 31, 2018 contributions amounted to $0.1 million and $0.2 million, respectively.
Multiemployer plans
Our U.S. Concrete Pumping segment contributes to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining agreements (CBAs) that cover its union-represented employees. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects: (a) Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers; (b) If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers; and (c) If we choose to stop participating in some of its multiemployer plans, we may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability. We have no intention of stopping our participation in any multiemployer plan.
The following is a summary of our contributions to each multiemployer pension plan for the years ended October 31, 2019 and 2018:
Successor and Predecessor | Predecessor | |||||||
(in thousands) | Year Ended October 31, 2019 | Year Ended October 31, 2018 | ||||||
California | $ | 581 | $ | 492 | ||||
Oregon | 288 | 233 | ||||||
Washington | 242 | 217 | ||||||
Total contributions | $ | 1,111 | $ | 942 | ||||
No plan was determined to be individually significant. There have been no significant changes that affect the comparability of the contributions. The Company reviews the funded status of each multiemployer defined benefit pension plan at each reporting period to monitor the certified zone status for each of the multiemployer defined benefit pension plans. The zone status for the multiemployer defined benefit pension plans for Oregon and Washington was Green (greater than 80 percent funded) and for California it was Yellow (less than 80 percent funded but greater than 65 percent funded). The funding status for the Oregon and Washington multiemployer defined benefit pension plans is at January 1, 2019 and for the California multiemployer defined benefit pension plan is at July 1, 2019.
Government regulations impose certain requirements relative to multiemployer plans. In the event of plan termination or employer withdrawal, an employer may be liable for a portion of the plan’s unfunded vested benefits. We have not received information from the plans’ administrators to determine its share of unfunded vested benefits. We do not anticipate withdrawal from the plans, nor are we aware of any expected plan terminations.
If the construction industry exception applies, then it would delay the imposition of a withdrawal liability. The “construction industry” exception generally delays the imposition of withdrawal liability in connection with an employer’s withdrawal from a “construction industry” multiemployer plan unless and until that employer resumes covered operations in the relevant geographic region without a corresponding resumption of contributions to the multiemployer plan. The Company has no intention of withdrawing, in either a complete or partial withdrawal, from any of the multiemployer plans to which the Company currently contributes; however, it has been assessed a withdrawal liability in the past.
Note 18. Segment Reporting
The Company conducts business through the following reportable segments based on geography and the nature of services sold:
● | U.S. Concrete Pumping – Consists of concrete pumping services sold to customers in the U.S. Business in this segment is primarily performed under the Brundage-Bone and Capital tradenames. |
● | U.K. Operations – Consists of concrete pumping services and leasing of concrete pumping equipment to customers in the U.K. Business in this segment is primarily performed under the Camfaud Concrete Pumps and Premier Concrete Pumping tradenames. In addition to concrete pumping, we recently started operations of Waste Management Services in the U.K. At this time, the results of this business are included in this segment. This represents the Company’s foreign operations. |
● | U.S. Concrete Waste Management Services – Consists of pans and containers rented to customers in the U.S. and the disposal of the concrete waste material services sold to customers in the U.S. Business in this segment is performed under the Eco-Pan tradename. |
Any differences between segment reporting and consolidated results are reflected in Corporate and/or Intersegment below.
The accounting policies of the reportable segments are the same as those described in Note 2. The Company’s Chief Operating Decision Maker (“CODM”) evaluates the performance of each segment based on revenue, and measures segment performance based upon EBITDA (earnings before interest, taxes, depreciation and amortization). Non-allocated interest expense and various other administrative costs are reflected in Corporate. Corporate assets primarily include cash and cash equivalents, prepaid expenses and other current assets, and real property. The following provides operating information about the Company’s reportable segments for the periods presented:
Successor | Predecessor | |||||||||||
(in thousands) | December 6, 2018 through October 31, 2019 | November 1, 2018 through December 5, 2018 | Year Ended October 31, 2018 | |||||||||
Revenue | ||||||||||||
U.S. Concrete Pumping | $ | 187,031 | $ | 16,659 | $ | 164,306 | ||||||
U.K. Operations | 44,021 | 5,143 | 50,448 | |||||||||
U.S. Concrete Waste Management Services | 27,779 | 2,628 | 28,469 | |||||||||
Corporate | 2,258 | 242 | - | |||||||||
Intersegment | (2,524 | ) | (276 | ) | - | |||||||
| $ | 258,565 | $ | 24,396 | $ | 243,223 | |||||||
(Loss) income before income taxes | ||||||||||||
U.S. Concrete Pumping | $ | (17,689 | ) | $ | (27,354 | ) | $ | 2,482 | ||||
U.K. Operations | 1,661 | 207 | 3,521 | |||||||||
U.S. Concrete Waste Management Services | 965 | 225 | 10,480 | |||||||||
Corporate | 1,848 | 155 | 2,114 | |||||||||
| $ | (13,215 | ) | $ | (26,767 | ) | $ | 18,597 | |||||
Successor | Predecessor | |||||||||||
(in thousands) | December 6, 2018 through October 31, 2019 | November 1, 2018 through December 5, 2018 | Year Ended October 31, 2018 | |||||||||
| EBITDA | ||||||||||||
U.S. Concrete Pumping | $ | 46,729 | $ | (24,565 | ) | $ | 34,966 | |||||
U.K. Operations | 13,173 | 1,587 | 15,754 | |||||||||
U.S. Concrete Waste Management Services | 11,838 | 388 | 12,559 | |||||||||
Corporate | 2,577 | 180 | 2,366 | |||||||||
| $ | 74,317 | $ | (22,410 | ) | $ | 65,645 | ||||||
Consolidated EBITDA reconciliation | ||||||||||||
Net income (loss) | $ | (9,912 | ) | $ | (22,575 | ) | $ | 28,381 | ||||
Interest expense, net | 34,880 | 1,644 | 21,425 | |||||||||
Income tax expense (benefit) | (3,303 | ) | (4,192 | ) | (9,784 | ) | ||||||
Depreciation and amortization | 52,652 | 2,713 | 25,623 | |||||||||
EBITDA | $ | 74,317 | $ | (22,410 | ) | $ | 65,645 | |||||
Successor | Predecessor | |||||||||||
(in thousands) | December 6, 2018 through October 31, 2019 | November 1, 2018 through December 5, 2018 | Year Ended October 31, 2018 | |||||||||
Depreciation and amortization | ||||||||||||
U.S. Concrete Pumping | $ | 32,245 | $ | 1,635 | $ | 15,237 | ||||||
U.K. Operations | 8,807 | 890 | 8,060 | |||||||||
U.S. Concrete Waste Management Services | 10,871 | 163 | 2,078 | |||||||||
Corporate | 729 | 25 | 248 | |||||||||
| $ | 52,652 | $ | 2,713 | $ | 25,623 | |||||||
Interest expense, net | ||||||||||||
U.S. Concrete Pumping | $ | (32,173 | ) | $ | (1,154 | ) | $ | (17,247 | ) | |||
U.K. Operations | (2,705 | ) | (490 | ) | (4,173 | ) | ||||||
U.S. Concrete Waste Management Services | (2 | ) | - | (1 | ) | |||||||
Corporate | - | - | (4 | ) | ||||||||
| $ | (34,880 | ) | $ | (1,644 | ) | $ | (21,425 | ) | ||||
Transaction costs including transaction-related debt extinguishment | ||||||||||||
U.S. Concrete Pumping | $ | 1,521 | $ | - | $ | 7,590 | ||||||
Corporate | - | 30,562 | - | |||||||||
| $ | 1,521 | $ | 30,562 | $ | 7,590 | |||||||
For the Successor period from December 6, 2018 through October 31, 2019, capital expenditures for the U.S. Concrete Pumping, U.K. Operations and U.S Concrete Waste Management Services segments were $22.4 million, $4.8 million and $5.6 million, respectively.
For the fiscal year ended October 31, 2018, capital expenditures for the U.S. Concrete Pumping, U.K. Operations and U.S Concrete Waste Management Services segments were $22.7 million, $2.3 million and $3.5 million, respectively.
Total assets by segment for the periods presented are as follows:
Successor | Predecessor | |||||||
October 31, | October 31, | |||||||
(in thousands) | 2019 | 2018 | ||||||
Total Assets | ||||||||
U.S. Concrete Pumping | $ | 637,384 | $ | 277,936 | ||||
U.K. Operations | 138,435 | 39,167 | ||||||
U.S. Concrete Waste Management Services | 137,646 | 32,782 | ||||||
Corporate | 24,223 | 20,259 | ||||||
Intersegment | (66,323 | ) | - | |||||
| $ | 871,365 | $ | 370,144 | |||||
The U.S. and U.K. were the only regions that accounted for more than 10% of the Company’s revenue for the periods presented. There was no single customer that accounted for more than 10% of revenue for the periods presented. Revenue for the periods presented and long lived assets as of October 31, 2019 and October 31, 2018 are as follows:
Successor | Predecessor | |||||||||||
(in thousands) | December 6, 2018 through October 31, 2019 | November 1, 2018 through December 5, 2018 | Year Ended October 31, 2018 | |||||||||
Revenues | ||||||||||||
U.S. | $ | 214,544 | $ | 19,253 | $ | 192,775 | ||||||
U.K. | 44,021 | 5,143 | 50,448 | |||||||||
| $ | 258,565 | $ | 24,396 | $ | 243,223 | |||||||
Successor | Predecessor | |||||||
October 31, | October 31, | |||||||
(in thousands) | 2019 | 2018 | ||||||
Long Lived Assets | ||||||||
U.S. | $ | 263,363 | $ | 167,369 | ||||
U.K. | 44,052 | 34,546 | ||||||
| $ | 307,415 | $ | 201,915 | |||||
Note 19. Related-Party Transactions
Successor
As discussed in Note 14, in connection with the transaction,Company's public offering of 18,098,166 shares of its common stock, certain of the Company’s directors, officers and significant stockholders, and certain other related investors purchased an aggregate of 3,980,166 shares from the underwriters at the public offering price of $4.50, representing approximately 25% of the total shares issued (without giving effect to the underwriters’ option to purchase additional shares).
Predecessor
The Predecessor had a Management Services Agreement, as amended from time to time, with PGP Advisors, LLC (PGP), the Predecessor’s largest shareholder, to provide advisory, consulting and other professional services. Under terms of the agreement, before it was terminated as a result of the Business Combination, the annual fee for these services was $4.0 million from September of 2017 through August of 2019, and $2.0 million annually thereafter. For the period from November 1, 2018 through December 19, 20175, 2018 and throughfor the date of termination. During the first quarter offiscal year ended October 31, 2018, the Company received $1,275,067 fromPredecessor incurred $0.0 and $4.3 million, respectively, related to this agreement and other agreed upon expenses. These expenses were included in general and administrative expenses on the Sellers asaccompanying consolidated statement of income. In conjunction with the final settlementBusiness Combination, this agreement was terminated.
In connection with the acquisitions of amounts owed underO’Brien and Camfaud, the Reimbursement Agreement. Any remaining unreimbursed expenses will be financed with Company proceeds held outsidePredecessor paid $0.5 million in transaction costs to PGP that is included in transaction costs on the consolidated statements of income for the Trust Account or with a working capital loan from the Sponsor.fiscal year ended October 31, 2018.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
As of the end of the period covered by this Annual Report, we conducted an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures are(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of October 31, 2019, the disclosure controls and other procedures that are designedwere effective to ensure that the information required to be disclosed by us in our reports filedthat we file or submittedsubmit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and procedures include, without limitation, controlsmaintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and procedures designed to ensure that information required to be disclosed in Company reports filed or submitted15d-15(f) under the Exchange ActAct. Our internal control over financial reporting is accumulateddesigned to provide reasonable assurance regarding the reliability of financial reporting and communicatedthe preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management including our Chief Executive Officer and Chief Financial Officer, to allowdirectors of the Company; and (3) provide reasonable assurance regarding prevention or timely decisions regarding required disclosure.detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
As required by Rules 13a-15Our assessment of internal control over financial reporting did not include the internal control over financial reporting of Capital, which we acquired in May 2019. The operating results of Capital since the acquisition date are included in the Company’s consolidated financial statements as of and 15d-15 underfor the Exchange Act, our Chief Executive Officerperiod from December 6, 2018 through October 31, 2019 (the “Successor Period”) and Chief Financial Officer carried out anconstituted approximately 15% of total assets as of October 31, 2019, and approximately 10% of revenues for the Successor Period.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management has assessed the effectiveness of the designCompany’s internal control over financial reporting as of October 31, 2019, utilizing the criteria in the Committee of Sponsoring Organizations of the Treadway Commission’s Internal Control-Integrated Framework (2013). Based on its assessment, our management concluded that all previously reported material weaknesses have been remediated and operationthe Company’s internal control over financial reporting was effective as of October 31, 2019.
Attestation Report of the Independent Registered Public Accounting Firm
This Annual Report on Form 10-K does not include an attestation report of our disclosure controls and proceduresindependent registered public accounting firm on our internal control over financial reporting because Section 103 of the JOBS Act provides that an emerging growth company is not required to provide an auditor’s report on internal control over financial reporting for as long as we qualify as an emerging growth company.
Remediation of Prior Material Weakness
As of October 31, 2017. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer2019, management concluded that the previously disclosed material weaknesses in our disclosureinternal controls over financial reporting related to our accounting and financial reporting control environment, our accounting department’s infrastructure, limitations of our financial close processes and supporting systems, and insufficient restrictions on admin access for information technology in the U.K., were fully remediated based on the following actions taken during the year:
● | New members were added to our accounting and finance team with the appropriate qualified experience in financial reporting, consolidations, tax, technical accounting, internal audit and internal controls |
| ● | Changes were made to limit the accessibility of our accounting systems; | |
● | New controls were created and implemented throughout the various business processes that are present within the Company; and |
● | Procedures and controls were implemented in our financial statement close process |
These actions resulted in an improved internal control environment which enhanced review procedures (as definedand improved documentation standards which were in Rules 13a-15 (e) and 15d-15 (e) underplace for a period of time in 2019 that was sufficiently long for our management to conclude, through testing that the Exchange Act)controls were effective.operating effectively.
There has beenChanges in Internal Control Over Financial Reporting
Other than changes described under Remediation of Prior Material Weaknesses above, there was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ending Decemberthree months ended October 31, 20172019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
This Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting due to a transition period established by the rules of the SEC for newly public companies. This Form 10-K does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. As a non-accelerated filer, management’s report is not subject to attestation by our registered public accounting firm.Item 9B. Other Information
None.
Directors and Executive Officers
Our directors and executive officers are as follows:
Howard D. Morgan, 55, has been our Chief Executive Officer and a member of our board of directors since April 2017. Mr. Morgan has been a co-founder, Partner and Senior Managing Director of Argand Partners as well as a member of its Management Committee and Investment Committee since September 2015. Prior to forming Argand Partners, Mr. Morgan was the President of Castle Harlan, Inc. (“Castle Harlan”) from September 2014 to July 2015 and Co-President from August 2010 to September 2014. In addition, he served as chief executive officer and president of CHI Private Equity LLC (“CHI Private Equity”) from February 2015 to July 2015. Until July 2015, Mr. Morgan was also a member of the board of directors and associated board committees of CHAMP Private Equity Pty. Ltd. (“CHAMP”). Mr. Morgan joined Castle Harlan in 1996. Previously, Mr. Morgan was a partner at The Ropart Group, a private equity investment firm, and began his career at Allen & Company, Inc. Mr. Morgan is a former director of over one dozen companies, including Shelf Drilling Inc., Pretium Packaging, LLC, IDQ Holdings, Inc. (“IDQ”), Securus Technologies, Inc., Baker & Taylor Acquisitions Corp., Polypipe Group plc (“Polypipe”), Austar United Communications Ltd. (ASX: AUN), Norcast Wear Solutions, Inc., AmeriCast Technologies, Inc., Ion Track Instruments, Inc., Land ‘N’ Sea Distributing, Inc., Penrice Soda Products Pty. Ltd., Branford Chain, Inc. and various CHAMP entities. He is a director and past Chairman of the Harvard Business School Club of New York, Vice Chairman of the Parkinson’s Foundation, a director of the Alexander Hamilton Institute and the World Press Institute, and a director and Treasurer of the Friends of the Garvan Institute of Medical Research. Mr. Morgan was a director and officer of the Harvard Business School Alumni Board from 2006 to 2011. He received his B.A. from Hamilton College in Mathematics and Government and his M.B.A. from the Harvard Business School.
Mr. Morgan’s qualifications to serve on our board of directors include: his extensive leadership and board experience; his track record as a partner and senior managing director of Argand Partners and as president of Castle Harlan; and his network of contacts in the industrial manufacturing and services industries.PART III
Heather L. Faust, 38, Heather L. Faust has been ourItem 10. Directors, Executive Vice PresidentOfficers and a member of our board of directors since April 2017. Ms. Faust has been a co-founder, Partner and Managing Director of Argand Partners as well as a member of its Management Committee and Investment Committee since September 2015. Previously, she was a Managing Director at Castle Harlan, where she worked from August 2008 to July 2015. In addition, she served as a Managing Partner of CHI Private Equity from February 2015 to July 2015. Prior to joining Castle Harlan, Ms. Faust was a management consultant at McKinsey & Company, where she worked in the United States and abroad across a variety of industries. Ms. Faust advised and directly assisted her clients in defining and implementing key strategic and operational business transformations. Ms. Faust’s experience also includes roles in the consumer industry as well as international development work in the Middle East. She has been a director of Sigma Electric Manufacturing Corp. (“Sigma Electric”) since October 2016, and a director of Tensar Corporation, an industrial manufacturing company, since July 2014. Ms. Faust also previously served as a director of Baker & Taylor Acquisitions Corp., IDQ and Ames True Temper. Ms. Faust graduated Cum Laude from Princeton University with a BSE in Operations Research and Financial Engineering and holds an MBA from the Harvard Business School.Corporate Governance
Ms. Faust’s qualificationsInformation not disclosed below that is required with respect to serve on our board of directors, include: her leadership and business experience; her track record as a partner and managing director of Argand Partners; and her network of contacts in the industrial manufacturing and services industry.
Tariq Osman, 39, has been our Executive Vice President and a member of our board of directors since April 2017. Mr. Osman has been a co-founder, Partner and Managing Director of Argand Partners as well as a member of its Management Committee and Investment Committee since September 2015. Previously, he was a Managing Director at Castle Harlan (and its affiliate, CHAMP), where he worked from January 2003 to July 2015, where he focused on private equity transactions across a wide range of industries, including portfolio management work for Shelf Drilling, Gold Star Foods, Caribbean Restaurants, International Energy Services, Blue Star Group and Austar United Communications. In addition, he served as a Managing Partner of CHI Private Equity from February 2015 to July 2015. Mr. Osman also previously worked at McKinsey & Company as a management consultant. In this role, he advised clients in the oil and gas, mining, construction and telecommunications sectors on strategy and operational improvements. Mr. Osman began his career in Australia as an engineer at Gutteridge, Haskins & Davey, working on oil and gas, mining and government infrastructure projects. He has been Chairmanexecutive officers, filings under Section 16(a) of the boardSecurities and Exchange Act of directors of Brintons Carpet Limited (“Brintons”1934, as amended (the “Exchange Act”), a carpet manufacturer, since July 2017, Chairman of the board of directors of Sigma Electric since October 2016, and a director of Gold Star Foods, a food distribution company, since April 2014. In October 2016, Argand Partners acquired Sigma Electric, a global manufacturer of small, highly engineered castings for multinational companies serving the North American electrical products, power transmission and distribution, and general industrial markets. Sigma Electric operates nine manufacturing plants in India and has its U.S. headquarters and distribution center in Garner, North Carolina. Hecorporate governance is a former director of Shelf Drilling Inc., Caribbean Restaurants, LLC, International Energy Services, the Blue Star Group and Hercules Offshore, Inc. (OTC: HERO). Mr. Osman holds an M.B.A.incorporated herein by reference, when filed, from the Wharton Graduate School of Business, a Masters of Engineering from the University of Adelaide and a Masters of Applied Finance from Macquarie University.
Mr. Osman’s qualifications to serve on our board of directors include: his leadership and business experience; his track record as a partner and managing director of Argand Partners; and his network of contacts in the industrial manufacturing and services industry.
Joseph Del Toro, 46, has been our Chief Financial Officer since April 2017. Mr. Del Toro has served as Chief Financial Officer and Director of Portfolio Operations for Argand Partners since 2015. Mr. Del Toro has held several executive financial roles in private equity-Sponsored companies. Prior to joining Argand, he was Chief Financial Officer for Novitex Enterprise Solutions, a spin out from Pitney Bowes and a portfolio company of Apollo Global Management, from May 2014 to August 2015; Chief Financial Officer of Undertone, at the time a portfolio company of JMI Equity, from August 2012 to May 2014; and Vice President and Chief Financial Officer of The Topps Company, at the time a portfolio company of Madison Dearborn Partners, from March 2007 to August 2012. Mr. Del Toro also previously worked at Time Warner Inc. (NYSE: TWX), holding senior financial and operating roles at Time Inc. (NYSE: TIME), its magazine division, and in the Finance and Acquisitions unit of the corporate parent, where he was involved in approximately $20 billion of cable, publishing, and other media transactions. He began his career in the Mergers and Acquisitions department of Morgan Stanley and later served as an Associate at H.I.G. Capital Management, a global private equity firm. Mr. Del Toro has been a Director and member of the Audit Committee of Sigma Electric since October 2016 . Mr. Del Toro holds a Bachelor of Arts in Economics-Mathematics with a Concentration in Mathematics from Columbia University and holds an M.B.A. from the Harvard Business School.
Charles Burns, 32, has been our Secretary since April 2017. Mr. Burns has been a vice president at Argand Partners since February 2016. Previously, he was an associate at Castle Harlan from August 2011 to July 2013, where he worked on numerous investments including Securus Technologies, Inc., IDQ and Caribbean Restaurants, LLC. Prior to joining Castle Harlan, Mr. Burns was an analyst at Audax Group, where he focused on private equity transactions in middle market businesses across a variety of industries, including special chemicals, automotive aftermarket and dental practice management. While at Audax Group, Mr. Burns was also a director of Affordable Interior Systems. His experience also includes roles in the consumer, media and telecom industries. Mr. Burns holds a B.A. in Economics from Harvard College and an M.B.A. from the Harvard Business School.
David A.B. Brown, 74, has been our Non-Executive Chairman and a member of our board of directors since July 2017. Mr. Brown has been the Chairman of the board of directors of Layne Christensen Company (Nasdaq: LAYN), a global water management, construction and drilling company, since June 2005 and served as its President and Chief Executive Officer from June 2014 to January 2015. In addition, Mr. Brown has served on the board of directors of EMCOR Group, Inc. (NYSE: EME) since December 1994, of Hercules Offshore, Inc. (OTC: HERO), an energy services company, from February 2015 to December 2016 and of Global Power Equipment Group Inc. (OTCMKTS: GLPW) since May 2016. Mr. Brown served as the Chairman of the board of directors of Pride International, Inc. (“Pride”proxy statement (the “Proxy Statement”) until Pride’s acquisition by Ensco Plc (NYSE: ESV) (“Ensco”) in May 2011 for approximately $8.6 billion, and he served as a member of Ensco’s board of directors from May 2011 to May 2014. Mr. Brown also previously served as the co-founder and President of The Windsor Group, Inc., and a director of numerous other companies in the energy industry. Mr. Brown is a Chartered Public Accountant. He earned his Bachelor of Commerce and a Masters in Accounting from McGill University and an M.B.A. from Harvard Business School.
Mr. Brown’s qualifications to serve on our board of directors include: his extensive leadership and business experience; his strong background in finance and public company governance; and his network of contacts in the industrial manufacturing and services industry.
Thomas K. Armstrong, Jr., 64, has been a member of our board of directors since July 2017. Mr. Armstrong previously served as the Chief Operating Officer of the Engineered Products division, a full service steel foundry and machining organization, at Bradken Limited (“Bradken”), from August 2008 to October 2013. Prior to that, Mr. Armstrong served as President and Chief Executive Officer of AmeriCast Technologies, Inc., from December 2003 to July 2008 when the business was sold to Bradken. He has also served as the Chairman, President and Chief Executive Officer of Atchison Casting Corp. Mr. Armstrong has been a business advisor for TKA Investments LLC since March 2014 and a director of Sigma Electric since October 2016. Mr. Armstrong has also been President of the Armstrong Foundation since October 2013. Mr. Armstrong holds a Bachelor’s degree in Industrial and Systems Engineering from Georgia Institute of Technology.
Mr. Armstrong’s qualifications to serve on our board of directors include: his extensive leadership and business experience; his track record as the chief operating officer of Bradken and Chief Executive Officer at AmeriCast Technologies, Inc.; and his network of contacts in the industrial manufacturing and services industry.
David G. Hall, 59, has been a member of our board of directors since July 2017. Mr. Hall has also been a director of Brintons since January 2018. Mr. Hall was the Chief Executive Officer of Polypipe (LON: PLP) and a member of Polypipe’s board of directors from September 2005 to October 2017. Polypipe is one of Europe’s largest and most innovative manufacturers of plastic piping and energy efficient ventilation systems for the residential, commercial, civilAnnual Meeting of Shareholders to be filed with the Securities and Infrastructure sectors. Following a number of divisional Managing Director positions in both private and publicly listed companies, Mr. Hall led the management buyout of Polypipe in Sept 2005, and following a number of disposals and acquisitionsExchange Commission pursuant to reposition and refocus the business after a successful period of private ownership, Polypipe listed on the main market of the London Stock Exchange during April 2014. The company achieved FTSE 250 status in January 2016. Mr. Hall has been President of the British Plastics Foundation since 2015 and has more than 20 years of experience in the building products industry. Mr. Hall holds a Bachelor of Science in Mechanical Engineering from Kingston University.
Mr. Hall’s qualifications to serve on our board of directors include: his leadership and business experience; his track record as the chief executive officer of Polypipe; and his network of contacts in the industrial manufacturing and services industry.
Brian Hodges, 64, has been a member of our board of directors since July 2017. From December 2001 to December 2015, Mr. Hodges was the Managing Director and Chief Executive Officer of Bradken (ASX: BKN), an Australian public company and global manufacturer and supplier of steel products for the mining, transport, general industrial and contract manufacturing markets. During his tenure as chief executive of Bradken, Mr. Hodges guided Bradken through periods of considerable change and corporate activity with four different owners. Over the course of his career, he has gained considerable management and leadership experience in raw material production and processing, supply and logistics and steel manufacturing. Mr. Hodges holds a Bachelor of Engineering from the University of Newcastle.
Mr. Hodges’s qualifications to serve on our board of directors include: his leadership and business experience; his track record as the managing director and chief executive officer of Bradken; and his network of contacts in the industrial manufacturing and services industry.
Gerard F. Rooney, 57, has been a member of our board of directors since July 2017. Mr. Rooney has been an independent financial and operations consultant since July 2016. Previously, he served as Executive Vice President of operations of Armored Autogroup Inc., a consumer products company consisting primarily of the Armor All and STP brands, from March 2014 to June 2016 after its purchase of IDQ, the leading manufacturer of do-it-yourself air conditioner recharge products. Mr. Rooney was Chief Operating Officer of IDQ from December 2012 to March 2014 and Chief Financial Officer of IDQ from January 2008 to March 2014. Mr. Rooney was also previously the Chief Financial Officer of the predecessor of IDQ, Interdynamics, Inc., and he is currently a director of UCI Holdings, Inc., an industrial manufacturing company. In addition, Mr. Rooney is a Certified Public Accountant. He holds his B.B.A. in Public Accounting from Pace University.
Mr. Rooney’s qualifications to serve on our board of directors include: his leadership and business experience; his strong background in finance; and his network of contacts in the industrial manufacturing and services industry.
Number and Terms of Office of Officers and Directors
Our board of directors consists of eight directors and is divided into three classes, with only one class of directors being elected in each year and each class (except for those directors appointed prior to our first annual meeting of stockholders) serving a three-year term. In accordance with Nasdaq corporate governance requirements, we are not required to hold an annual meeting until one year after our first fiscal year end following our listing on Nasdaq. The term of office of the first class of directors, consisting of Thomas K. Armstrong, Jr. and Gerard F. Rooney, will expire at our first annual meeting of stockholders. The term of office of the second class of directors, consisting of David A.B. Brown, Brian Hodges and David G. Hall, will expire at the second annual meeting of stockholders. The term of office of the third class of directors, consisting of Howard D.
Morgan, Heather Faust and Tariq Osman, will expire at the third annual meeting of stockholders.
Our officers are appointed by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws provide that our officers may consist of a Chairman of the Board, Chief Executive Officer, Chief Financial Officer, Senior Managing Directors, Managing Directors, President, Vice Presidents, Secretary, Treasurer, Assistant Secretaries and such other offices as may be determined by the board of directors.
Committees of the Board of Directors
Our board of directors has two standing committees: an audit committee and a compensation committee. Subject to phase-in rules and a limited exception, Nasdaq rules and Rule 10A-3 ofRegulation 14A under the Exchange Act require thatno later than 120 days after the audit committee of a listed company be comprised solely of independent directors, and Nasdaq rules require that the compensation committee of a listed company be comprised solely of independent directors.
Board Committees
Audit Committee
Messrs. Armstrong, Brown, Hall, Hodges and Rooney are members of our audit committee, and Mr. Rooney is chairend of the audit committee. Under the Nasdaq listing standards and applicable SEC rules, we are required to have at least three members of the audit committee, all of whom must be independent. Each of Messrs. Armstrong, Brown, Hall, Hodges and Rooney meet the independent director standard under Nasdaq listing standards and under Rule 10-A-3(b)(1) of the Exchange Act.
Each member of the audit committee is financially literate and our board of directors has determined that Mr. Brown qualifies as an “audit committee financial expert” as defined in applicable SEC rules.fiscal year ended October 31, 2019.
We have adopted an audit committee charter, which details the principal functions of the audit committee, including:
Compensation Committee
Messrs. Armstrong, Brown, Hall, Hodges and Rooney serve as members of our compensation committee. Under the Nasdaq listing standards and applicable SEC rules, we are required to have at least two members of the compensation committee, all of whom must be independent. Messrs. Armstrong, Brown, Hall, Hodges and Rooney are independent and Mr. Armstrong is the chair of the compensation committee.
We have adopted a compensation committee charter, which details the principal functions of the compensation committee, including:
Director Nominations
We do not have a standing nominating committee though we intend to form a corporate governance and nominating committee as and when required to do so by law or Nasdaq rules. In accordance with Rule 5605 of the Nasdaq rules, a majority of the independent directors may recommend a director nominee for selection by the board of directors. The board of directors believes that the independent directors can satisfactorily carry out the responsibility of properly selecting or approving director nominees without the formation of a standing nominating committee. The directors who will participate in the consideration and recommendation of director nominees are Messrs. Armstrong, Brown, Hall, Hodges and Rooney. In accordance with Rule 5605 of the Nasdaq rules, all such directors are independent. As there is no standing nominating committee, we do not have a nominating committee charter in place.
The board of directors will also consider director candidates recommended for nomination by our stockholders during such times as they are seeking proposed nominees to stand for election at the next annual meeting of stockholders (or, if applicable, a special meeting of stockholders). Our stockholders that wish to nominate a director for election to our board of directors should follow the procedures set forth in our bylaws.
We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director, the board of directors considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our stockholders.
Compensation Committee Interlocks and Insider Participation
None of our officers currently serves, or in the past year has served, as a member of the compensation committee of any entity that has one or more officers serving on our board of directors.
Code of Ethics and Committee Charters
We have adopted a code of ethics that applies to our officers and directors. We have filed copies of our code of ethics and our board committee charters as exhibits to our registration statement in connection with our initial public offering. You may review these documents by accessing our public filings at the SEC’s web site at www.sec.gov. In addition, a copy of the code of ethics will be providedperson without charge, upon request, a copy of our Corporate Code of Conduct, Corporate Governance Guidelines, code of ethics applicable to us in writingour principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions (collectively “senior financial officers”) and the charters for our Audit Committee, Compensation Committee, Legal Committee and Corporate Governance/Nominating Committee. You may obtain these documents on our website at 28 West 44th Street, Suite 501 New York, NY 10036 or by telephone at (212) 588-6470.We intendwww. https://ir.concretepumpingholdings.com. Our intention is to disclosepost on our website any amendments to or waivers of certain provisions offrom our code of ethics in a Current Report on Form 8-K.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our officers, directors and persons who own more than ten percent of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC. Officers, directors and ten percent stockholders are required by regulation to furnish us with copies of all Section 16(a) forms they file. Based solely on review of the copies of such forms furnished to us, or written representations that no Forms 5 were required, we believe that, during the fiscal year ended December 31, 2017, all Section 16(a) filing requirements applicable to our senior financial officers and directors were complied with.
Conflicts of Interest
Argand Partners manages several investment vehicles. Funds managed by Argand Partners or its affiliates may compete with us for business combination opportunities. If these funds decide to pursue any such opportunity, we may be precluded from procuring such opportunities. In addition, investment ideas generated within Argand Partners may be suitable for both us and for a current or future Argand Partners fund and may be directed to such investment vehicle rather than to us. Neither Argand Partners nor members of our management team who are also employed by Argand Partners have any obligation to present us with any opportunity for a potential business combination of which they become aware, unless presented to such member solely in his or her capacity as an officer of the company. Argand Partners and/or our management, in their capacities as employees of Argand Partners or in their other endeavors, currently are required to present certain investment opportunities and potential business combinations to the various related entities described above, current Argand Partners investment vehicles, or third parties, before they present such opportunities to us. Argand Partners and our management may have similar obligations to future investment vehicles or third parties.
Notwithstanding the foregoing, we may, at our option, pursue an Affiliated Joint Acquisition opportunity with any such fund or other investment vehicle, but such parties would co-invest only if permitted by applicable regulatory and other legal limitations and to the extent considered appropriate. Such entity may co-invest with us in the target business at the time of our initial business combination, or we could raise additional proceeds to complete the initial business combination by making a specified future issuance to any such fund or vehicle.
Argand Partners and each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to other entities pursuant to which such officer or director is or will be required to present an initial business combination opportunity. For example, Argand Partners and certain of its officers currently are obligated by contract to offer or allocate certain investment opportunities first to specific private funds managed by them. Accordingly, if any of our officers or directors becomes aware of an initial business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such other entity. We do not believe, however, that the fiduciary duties or contractual obligations of Argand Partners and our officers or directors will materially affect our ability to complete our initial business combination. In addition, we may, at our option, pursue an Affiliated Joint Acquisition opportunity with an entity to which Argand Partners or an officer or director has a fiduciary or contractual obligation. Any such entity may co-invest with us in the target business at the time of our initial business combination, or we could raise additional proceeds to complete the initial business combination by making a specified future issuance to any such entity. Our amended and restated certificate of incorporation will provide that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation.
Our sponsor, officers and directors have agreed not to participate in the formation of, or become an officer or director of, any other blank check company such as our company until we have entered into a definitive agreement regarding our initial business combination or we have failed to complete our initial business combination within 24 months after the closing of this offering.
Potential investors should also be aware of the following other potential conflicts of interest:
The conflicts described above may not be resolved in our favor.
In general, officers and directors of a corporation incorporated under the laws of the State of Delaware are required to present business opportunities to a corporation if:
Accordingly, as a result of multiple business affiliations, our officers and directors may have similar legal obligations relating to presenting business opportunities meeting the above-listed criteria to multiple entities. Furthermore, our amended and restated certificate of incorporation will provide that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation.
Below is a table summarizing the entities to which our executive officers, directors and director nominees currently have fiduciary duties or contractual obligations:
Accordingly, if any of the above executive officers, directors or director nominees becomes aware of an initial business combination opportunity which is suitable for any of the above entities to which he or she has current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such other entity, and only present it to us if such entity rejects the opportunity.
We are not prohibited from pursuing an initial business combination with a company thatdisclosure is affiliated with our sponsor, officers or directors. In the event we seek to complete our initial business combination with such a company, we, or a committee of independent directors, would obtain an opinion from an independent investment banking firm which is a member of FINRA, or from an independent accounting firm, that such an initial business combination is fair to our company from a financial point of view.
In the event that we submit our initial business combination to our public stockholders for a vote, pursuant to the letter agreement, our sponsor, officers and directors have agreed to vote any founder shares held by them and any public shares purchased during or after the offering (including in open market and privately negotiated transactions) in favor of our initial business combination.
Limitation on Liability and Indemnification of Officers and Directors
Our amended and restated certificate of incorporation will provide that our officers and directors will be indemnified by us to the fullest extent authorized by Delaware law, as it now exists or may in the future be amended. In addition, our amended and restated certificate of incorporation will provide that our directors will not be personally liable for monetary damages to us or our stockholders for breaches of their fiduciary duty as directors, unless they violated their duty of loyalty to us or our stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived an improper personal benefit from their actions as directors.
We have entered into agreements with our officers and directors to provide contractual indemnification in addition to the indemnification provided for in our amended and restated certificate of incorporation. Our bylaws also will permit us to secure insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether Delaware law would permit such indemnification. We have purchased a policy of directors’ and officers’ liability insurance that insures our officers and directors against the cost of defense, settlement or payment of a judgment in some circumstances and insures us against our obligations to indemnify our officers and directors.
These provisions may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against officers and directors pursuant to these indemnification provisions.
We believe that these provisions, the directors’ and officers’ liability insurance and the indemnity agreements are necessary to attract and retain talented and experienced officers and directors.
None of our executive officers has received any cash compensation for services rendered to us. We have agreed to pay each of our independent directors $50,000 per year for services rendered as board members prior to the completion of our initial business combination. Commencing July 26, 2017, have also agreed to pay our Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees. Other than as described above, no finder’s fee, reimbursement, consulting fee or monies in respect of any payment of a loan or other compensation, will be paid by us to our Sponsor, officers or directors, or any affiliate of our Sponsor or officers, prior to, or in connection with any services rendered in order to effectuate, the consummation of our initial business combination (regardless of the type of transaction that it is). However, these individuals will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made to our Sponsor, officers or directors, or our or their affiliates. Any such payments prior to an initial business combination will be made using funds held outside the trust account. Other than quarterly audit committee review of such payments, we do not expect to have any additional controls in place governing our reimbursement payments to our directors and executive officers for their out-of-pocket expenses incurred in connection with identifying and consummating an initial business combination.
After the completion of our initial business combination, directors or members of our management team who remain with us may be paid consulting or management fees from the combined company. All of these fees will be fully disclosed to stockholders, to the extent then known, in the tender offer materials or proxy solicitation materials furnished to our stockholders in connection with a proposed initial business combination. We have not established any limit on the amount of such fees that may be paid by the combined company to our directors or members of management. It is unlikely the amount of such compensation will be known at the time of the proposed initial business combination, because the directors of the post-combination business will be responsible for determining officer and director compensation. Any compensation to be paid to our officers will be determined, or recommended to the board of directors for determination, either by a compensation committee constituted solely by independent directors or by a majority of the independent directors on our board of directors.
We do not intend to take any action to ensure that members of our management team maintain their positions with us after the consummation of our initial business combination, although it is possible that some or all of our officers and directors may negotiate employment or consulting arrangements to remain with us after our initial business combination. The existence or terms of any such employment or consulting arrangements to retain their positions with us may influence our management’s motivation in identifying or selecting a target business but we do not believe that the ability of our management to remain with us after the consummation of our initial business combination will be a determining factor in our decision to proceed with any potential business combination. We are not party to any agreements with our officers and directors that provide for benefits upon termination of employment.
The following table sets forth information regarding the beneficial ownership of our common stock as of March 29, 2018, by:
Unless otherwise indicated, we believe that all persons named in the table below have sole voting and investment power with respect to all shares of common stock beneficially owned by them. The following table does not reflect record or beneficial ownership of the private placement warrants as these warrants are not exercisable within 60 days of the date of this prospectus.
| Name and Address of Beneficial Owner(1) | Number of Shares Beneficially Owned(2) | Approximate Percentage of Outstanding Common Stock | ||||||
| Industrea Alexandria LLC(3) | 5,606,250 | 19.5 | % | |||||
| Howard D. Morgan | — | — | ||||||
| Heather Faust | — | — | ||||||
| Tariq Osman | — | — | ||||||
| Joseph Del Toro | — | — | ||||||
| Charles Burns | — | — | ||||||
| Thomas K. Armstrong, Jr. | 28,750 | * | ||||||
| David A.B. Brown | 28,750 | * | ||||||
| David G. Hall | 28,750 | * | ||||||
| Brian Hodges | 28,750 | * | ||||||
| Gerard F. Rooney | 28,750 | * | ||||||
| All executive officers, directors and director nominees as a group (10 individuals) | — | — | ||||||
| Davidson Kempner Capital Management LP(4) | 1,500,000 | 5.2 | % | |||||
| Polar Asset Management Partners Inc.(5) | 2,799,900 | 9.7 | % | |||||
*Less than 1%
Founder Shares
On April 10, 2017, we issued 5,750,000 shares of Class B common stock to the Sponsor in exchange for an aggregate purchase price of $25,000. In April and May 2017, the Sponsor transferred a total of 28,750 founder shares to each of our independent director nominees at the same per-share purchase price paid by the Sponsor. The foregoing transfers of founder shares were made in reliance upon an exemption from the registration requirements of the Securities Act pursuant to the so-called 4(a)(1)-½ exemption. The founder shares will automatically convert into shares of Class A common stock upon the consummation of an initial business combination on a one-for-one basis, subject to adjustments. In the case that additional shares of Class A common stock, or equity-linked securities convertible or exercisable for shares of Class A common stock, are issued or deemed issued in excess of the amounts offered in our final prospectus and related to the closing of our initial business combination, including pursuant to a specified future issuance, the ratio at which founder shares will convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding founder shares agree to waive such adjustment with respect to any such issuance or deemed issuance, including a specified future issuance) so that the number of shares of Class A common stock issuable upon conversion of all founder shares will equal in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the initial public offering plus all shares of Class A common stock and equity-linked shares issued or deemed issued in connection with the initial business combination (excluding any shares of Class A common stock or equity-linked securities issued, or to be issued, to any seller in the initial business combination and any private placement-equivalent warrants issued to the Sponsor or its affiliates upon conversion of loans made to us).
The initial stockholders have agreed not to transfer, assign or sell any of the founder shares (except to certain permitted transferees) until the earlier to occur of: (A) one year after the completion of the initial business combination; or (B) subsequent to the initial business combination, (x) if the last sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the completion of an initial business combination or (y) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Private Placement Warrants
Concurrently with the closing of the initial public offering, the Sponsor purchased an aggregate of 11,100,000 private placement warrants at $1.00 per private placement warrant, generating gross proceeds of $11.1 million in the aggregate. Each private placement warrant is exercisable to purchase one share of Class A common stock at $11.50 per share. A portion of the proceeds from the sale of the private placement warrants was added to the proceeds from the initial public offering to be held in the trust account. If we do not complete an initial business combination within the Combination Period, the private placement warrants will expire worthless.
Related Party Loans
On August 1, 2017, we repaid in full an aggregate of $224,403 loaned to us by the Sponsor pursuant to a promissory note to cover the payment of costs related to the initial public offering. The loan was non-interest bearing, unsecured and due upon the closing of the initial public offering.
In addition, in order to finance transaction costs in connection with an initial business combination, our Sponsor or an affiliate of the Sponsor, or certain of our officers and directors may, but are not obligated to, loan us Working Capital Loans. If we complete an initial business combination, the Company would repay the Working Capital Loans out of the proceeds of the trust account released to the Company. In the event that an initial business combination does not close, we may use a portion of proceeds held outside the trust account to repay the Working Capital Loans but no proceeds held in the trust account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of an initial business combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post business combination entity at a price of $1.00 per warrant. The warrants would be identical to the private placement warrants.
Administrative Support Agreement and Officer and Director Compensation
We have agreed to reimburse the Sponsor in an amount not to exceed $10,000 per month for office space, and secretarial and administrative services, commencing on July 27, 2017 through the earlier of our consummation of an initial business combination or our liquidation.
In addition, we have agreed to pay each of the five independent directors $50,000 per year commencing July 26, 2017 through the earlier of our consummation of a business combination or liquidation.
We recognized an aggregate of $159,140 in expenses incurred in connection with the aforementioned arrangements with the related parties on our Statements of Operations for the period from April 7, 2017 (date of inception) through December 31, 2017.
Related Party Policy
Our code of ethics requires us to avoid, wherever possible, all conflicts of interests, except under guidelines or resolutions approved by our board of directors (or the appropriate committee of our board) or as disclosed in our public filings with the SEC. Under our code of ethics, conflict of interest situations include any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) involving the Company.
In addition, our audit committee, pursuant to a written charter, is responsible for reviewing and approving related party transactions to the extent that we enter into such transactions. An affirmative vote of a majority of the members of the audit committee present at a meeting at which a quorum is present is required in order to approve a related party transaction. A majority of the members of the entire audit committee constitutes a quorum. Without a meeting, the unanimous written consent of all of the members of the audit committee is required to approve a related party transaction. We also require each of our directors and executive officers to complete a directors’ and officers’ questionnaire that elicits information about related party transactions.
These procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents a conflict of interest on the part of a director, employee or officer.
To further minimize conflicts of interest, we have agreed not to consummate an initial business combination with an entity that is affiliated with any of our sponsor, officers or directors unless we, or a committee of independent directors, have obtained an opinion from an independent investment banking firm which is a member of FINRA or an independent accounting firm that our initial business combination is fair to our company from a financial point of view. Furthermore, no finder’s fees, reimbursements, consulting fee, monies in respect of any payment of a loan or other compensation will be paid by us to our sponsor, officers or directors, or any affiliate of our sponsor or officers, for services rendered to us prior to, or in connection with any services rendered in order to effectuate, the consummation of our initial business combination (regardless of the type of transaction that it is). However, the following payments will be made to our sponsor, officers or directors, or our or their affiliates, none of which will be made from the proceeds of our initial public offering held in the trust account prior to the completion of our initial business combination:
Our audit committee reviews on a quarterly basis all payments that were made to our Sponsor, officers or directors, or our or their affiliates.
Director Independence
Nasdaq listing standards require that a majority of our board of directors be independent. An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Our board of directors has determined that Messrs. Armstrong, Brown, Hall, Hodges and Rooney are “independent directors” as defined in the Nasdaq listing standards and applicable SEC rules. Our independent directors have regularly scheduled meetings at which only independent directors are present.
The firm of WithumSmith+Brown, PC (“Withum”) has served as our independent registered public accounting firm from April 7, 2017 (date of inception) through December 31, 2017. The following is a summary of fees paid to Withum for services rendered.
Audit Fees
Fees paid or payable for our independent registered public accounting firm were approximately $83,500 for the services it performed in connection with the Quarterly Reports on Form 10-Q for the fiscal quarters ended on June 30, 2017 and September 30, 2017 and our initial public offering, including review of our registration statement on Form S-1 and amendments thereto, comfort letters and consents.
Audit Related Fees
Audit-related fees consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our year-end financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultation concerning financial accounting and reporting standards. During the period from April 7, 2017 (date of inception) to December 31, 2017, we did not pay Withum for consultations concerning financial accounting and reporting standards.
Tax Fees
We have not incurred any fees for tax services.
All Other Fees
All other fees consist of fees billed for all other services. We did not pay Withum for other services other than those set forth above.
Pre-Approval Policy
The audit committee is responsible for appointing, setting compensation and overseeing the work of the independent auditors. In recognition of this responsibility, the audit committee shall review and, in its sole discretion, pre-approve all audit and permitted non-audit services to be provided by the independent auditors as provided under the audit committee charter.required.
PART IVItem 11. Executive Compensation
Information required to be set forth hereunder has been omitted and will be incorporated by reference, when filed, from our Proxy Statement.
See “IndexItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information required to be set forth hereunder has been omitted and will be incorporated by reference, when filed, from our Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information required to be set forth hereunder has been omitted and will be incorporated by reference, when filed, from our Proxy Statement.
Item 14. Principal Accounting Fees and Services
Information required to be set forth hereunder has been omitted and will be incorporated by reference, when filed, from our Proxy Statement.
PART IV
Item 15. Exhibits, Financial Statements”Statement Schedules
(1) Financial Statements and Schedules
The audited consolidated financial statements of Concrete Pumping Holdings, Inc. and its subsidiaries, as required to be filed, are included under Item 8 of Part II.
All financial statementthis Annual Report. Other schedules arehave been omitted becauseas they are not applicable or the amounts are immaterial, not required, or the required information is presentedset forth in the consolidated financial statements andor notes thereto in Item 8 of Part II above.thereto.
(2) Exhibits
The documents set forth below are filed herewith or incorporated herein by reference to the location indicated.
Exhibit
| Description | |||
2.1 | ||||
2.2 | ||||
2.3 | ||||
2.4 | ||||
2.5 | ||||
3.1 | ||||
3.2 | ||||
3.3 | ||||
10.8 | ||||
10.9 | ||||
10.10 | ||||
10.11 | ||||
10.12 | ||||
10.13 | ||||
10.14 | ||||
10.15 | ||||
10.16 | ||||
10.17 | ||||
10.18 | ||||
10.19* | ||||
10.20* | ||||
10.21* | ||||
16.1 | ||||
21.1 | ||||
23.1 | ||||
31.1 | ||||
31.2 | ||||
Certification of the Chief Financial Officer required by Rule 13a-14(b) or Rule15d-14(a). | ||||
32.1 | ||||
32.2 | ||||
101.INS | XBRL Instance Document | |||
101.SCH | XBRL Taxonomy Extension Schema | |||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |||
101.DEF | XBRL Taxonomy Extension Definition Linkbase | |||
101.LAB | XBRL Taxonomy Extension Label Linkbase | |||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase | |||
* | ||||
Indicates a management contract or compensatory plan. | ||||
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereuntohereunto duly authorized.
| By: | /s/ | ||
| Name: | |||
| Title: Chief | |||
Dated: January 14, 2020
POWER OF ATTORNEY
KNOW ALL PERSONSMEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Howard D. Morgan, Heather FaustBruce Young and Tariq Osman,Iain Humphries, and each or any one of them, his or her true and lawful attorney-in-factattorneys-in-fact and agent,agents, with full power to act separately and full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the United States Securities and Exchange Commission, granting unto said attorneys-in-factattorney-in-facts and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith,and about the premises, as fully to all intents and purposes as they or he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or anyeither of them or his or hertheir substitute or substitutes or substitute, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney shall not revoke any powers of attorney previously executed by the undersigned. This Power of Attorney shall not be revoked by any subsequent power of attorney that the undersigned may execute, unless such subsequent power of attorney specifically provides that it revokes this Power of Attorney by referring to the date of the undersigned’s execution of this Power of Attorney. For the avoidance of doubt, whenever two or more powers of attorney granting the powers specified herein are valid, the agents appointed on each shall act separately unless otherwise specified.
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of Concrete Pumping Holdings, Inc. and in the capacities andindicated, on the dates indicated below.January 14, 2020.
/s/ | Chief Executive Officer and Director | January 14, 2020 | ||
Bruce Young | (principal executive officer) | |||
/s/ Iain Humphries | Chief Financial Officer and Director | January 14, 2020 | ||
Iain Humphries | (principal financial and accounting officer) | |||
/s/ David A.B. Brown | Chairman of the Board | January 14, 2020 | ||
David A.B. Brown | ||||
/s/ Tariq Osman | Vice Chairman of the Board | January 14, 2020 | ||
Tariq Osman | ||||
/s/ Raymond Cheesman | Director | January 14, 2020 | ||
Raymond Cheesman | ||||
/s/ Heather L. Faust | Director | January 14, 2020 | ||
Heather L. Faust |
/s/ David G. Hall | Director | January 14, 2020 | ||
David G. Hall | ||||
/s/ Brian Hodges | Director | January 14, 2020 | ||
Brian Hodges | ||||
/s/ Matthew Homme | Director | January 14, 2020 | ||
Matthew Homme | ||||
/s/ | Director | January 14, 2020 | ||
Howard D. Morgan | ||||
/s/ John Piecuch | Director | January 14, 2020 | ||
John Piecuch | ||||
| /s/ | ||||
| Director | ||||
M. Brent Stevens | ||||
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