Business context and reporting period
This is Hennessy Capital Acquisition Corp.’s unaudited Form 10-Q for the quarter ended September 30, 2014—not an operating-company 10-Q filed by Blue Bird Corp. Hennessy was a blank-check company that had not begun operations or generated revenue. Its reported activity related to formation, its January 2014 IPO, and pursuing a business combination.
On September 21, 2014, Hennessy agreed to acquire School Bus Holdings Inc. (SBH), whose subsidiaries operate under the Blue Bird name. The proposed $255 million equity purchase price was to be paid in cash and stock. The filing does not provide Blue Bird’s standalone quarterly operating results.
Financial results and liquidity
| Metric | Three months ended Sep. 30, 2014 | Nine months ended Sep. 30, 2014 |
|---|---|---|
| Revenue | $0 | $0 |
| General and administrative expense | $3.355 million | $3.881 million |
| Interest income on trust assets | $20,000 | $24,000 |
| Net loss | $3.335 million | $3.857 million |
| Basic and diluted loss per share | $0.90 | $1.07 |
- At September 30, 2014, total assets were $115.533 million, including $115.024 million in the restricted trust account and $477,000 of cash outside the trust.
- Current liabilities were $3.242 million; total liabilities were $6.980 million, including $3.738 million of deferred underwriting compensation. The filing reports no long-term debt.
- Stockholders’ equity was $5.0 million; 10.355 million public shares, with approximately $103.553 million in redemption value, were classified outside permanent equity.
- Cash used in operating activities was $671,000 for the nine-month period. Trust assets were invested in short-term U.S. Treasury bills; interest-rate risk was described as immaterial.
- Margins are not meaningful because Hennessy had no revenue. The filing provides no clear Blue Bird margin, cash-flow, debt, or liquidity figures.
Changes versus prior comparable period
Hennessy reported a $3.335 million third-quarter loss and a $3.857 million nine-month loss. The listed 2013 comparison covers only the period from inception on September 24 through September 30, 2013, when there was no operating activity, so it is not a comparable full quarter. Expenses increased substantially in the 2014 third quarter as Hennessy evaluated candidates, negotiated the Blue Bird transaction, and prepared shareholder materials. Management attributed approximately $3.2 million of third-quarter costs to transaction-related professional, consulting, travel, fairness-opinion, and financing work.
Transaction outlook, risks, and unusual items
- The $255 million purchase price consisted of a cash component and an initial equity component of 11.5 million shares, subject to adjustment based on cash available. If cash were below $100 million, the seller could terminate the agreement.
- Funding was expected to include trust funds remaining after redemptions, a proposed $40 million private investment in convertible preferred stock (potentially up to $50 million), and a commitment for up to $10 million of common-stock purchases. These were proposed or committed funding sources, not completed financing as of the reporting date.
- Closing required, among other things, shareholder approval, completion of the redemption offer, applicable regulatory clearances, and satisfaction of listing and other contractual conditions. The agreement could be terminated in specified circumstances, including failure to close by March 31, 2015.
- Estimated Hennessy transaction costs were approximately $15 million, including deferred underwriting compensation. Blue Bird transaction expenses were estimated at approximately $10 million. Approximately 13.6% of the cash component—estimated at about $19 million before tax—was payable to certain Blue Bird directors, officers, and employees under a phantom award plan and expected to be recorded as compensation expense at closing.
- Management disclosed substantial doubt about Hennessy’s ability to continue as a going concern if the combination did not close: the $477,000 of unrestricted cash was insufficient to cover $3.242 million of current liabilities, and trust funds were unavailable for those obligations absent a business combination.
- Nasdaq had identified a shortfall under its minimum public-holder rule. Hennessy received an extension through February 3, 2015 to obtain approval, complete the combination, and demonstrate compliance with initial listing requirements.
- Management reported effective disclosure controls and no material change in internal control over financial reporting. The filing reported no legal proceedings and no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether the proposed acquisition closed, and whether shareholder, regulatory, redemption, and Nasdaq listing conditions were met.
- Final cash available after redemptions, actual preferred-stock and backstop funding, and any resulting adjustment to seller consideration or share issuance.
- Blue Bird’s standalone financial statements and operating trends; they are not presented in this filing.
- Actual transaction expenses, including the deferred underwriting fee and the estimated phantom-award compensation charge.
- Hennessy’s ability to meet accrued obligations if the transaction failed or was delayed, given restricted trust funds and the disclosed going-concern uncertainty.