August 20, 2018
Nicholas A. Petruska
Executive Vice President, Chief Financial Officer and Secretary
Hennessy Capital Acquisition Corp. III
3845 North Pine Way
Suite 110
Wilson, WY 83014
Re: Hennessy Capital Acquisition Corp. III
PREM14A filed July 20, 2018
File No. 001-38119
Dear Mr. Petruska:
We have reviewed your preliminary proxy statement and have the following
comments. In some of our comments, we may ask you to provide us with
information so we
may better understand your disclosure.
Please respond to this letter by amending your registration statement
and providing the
requested information. If you do not believe our comments apply to your facts
and
circumstances or do not believe an amendment is appropriate, please tell us why
in your
response.
After reviewing any amendment to your filing and the information you
provide in
response to these comments, we may have additional comments.
Preliminary Merger Proxy Statement on Schedule 14A filed July 20, 2018
General, page 1
1. Please update to include interim financial statements for the period
ended June 30, 2018.
Please similarly update your financial information throughout the
filing. See Rule 3-12(a)
of Regulation S-X.
2. We note that you have not filed a Form S-4 for the issuance of shares of
common stock
under the equity component of the total purchase price for your
acquisition of all of the
issued and outstanding membership interests of NRC Group Holdings, LLC
from JFL-
NRC-SES Partners, LLC. Please tell us what exemption from registration
under the
Securities Act that you are relying upon and the facts supporting your
use of the
Nicholas A. Petruska
FirstNameCapital Acquisition Corp. III
Hennessy LastNameNicholas A. Petruska
Comapany NameHennessy Capital Acquisition Corp. III
August 20, 2018
August 20, 2018 Page 2
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FirstName LastName
exemption.
Summary Term Sheet, page 1
3. Refer to the final bullet point on page 3. Please provide examples of
what percentage of
your stock public owners would own assuming varying redemption
percentages, such as
where between 11% and 100% redeem and if fewer than 11% redeem, or
advise.
4. In your example calculation at the bottom of page 3 please clarify
that Nomura's
ownership percentage would result from the operation of the Backstop
agreement, and
explain whether the Backstop agreement will take effect if fewer than
100% of the
redeemable shares are redeemed.
Questions and Answers about the Proposals for Stockholders, page 13
5. Refer to the first question and answer on page 17. Your answer
provides a list of the
proposals and states that the changes are those the directors believe
are needed to
"adequately address the post-Business Combination needs of the
company." Since the
question is why you are proposing the changes, please expand to
clarify in sufficient detail
how each proposal is expected to satisfy a specific need of the
company following the
business combination.
6. Please expand your disclosure in the first question and answer on page
19 to indicate the
conversion rate of the Series A Convertible Preferred Stock and to
explain whether there
are any limitations on the number of shares the Sponsor may issue for
no consideration.
Summary of the Proxy Statement , page 25
7. You present the NRC specialized asset base as a significant advantage.
Please provide
additional details about the aging and replacement of those assets,
and discuss the impact
that any new regulations would have on your ability to repair or
replace those assets.
8. Refer to the bar graph on page 29. Please clarify what the graph
illustrates about NRC
Group's current or planned business and what comparison statistics are
presented. For
example, you have identified several locations as "other" but it is
unclear how those relate
to NRC or what the comparison oil breakevens show about the NRC
business.
Selected Historical Combined Financial Information of NRC Group, page 45
9. Your disclosure states NRC Group had an operating loss of $9.5 million
for the year
ended December 31, 2015, but it appears to us that the operating loss
should be $12.4
million. Please revise your disclosure or otherwise explain to us the
basis for your
operating loss discussion.
Risk Factors, page 49
10. While a fairness opinion is not required and has not been provided for
the business
Nicholas A. Petruska
FirstNameCapital Acquisition Corp. III
Hennessy LastNameNicholas A. Petruska
Comapany NameHennessy Capital Acquisition Corp. III
August 20, 2018
August 20, 2018 Page 3
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FirstName LastName
combination, advise what consideration you have given to risk factor
disclosure of the
absence of a fairness opinion.
Restrictions on ownership of our common stock by non-U.S. Citizens, page 67
11. Discuss what remedies, if any, warrant holders may have if they are
unable to exercise
their warrants as a result of operation of the Jones Act and/or your
actions in attempt to
comply with the Jones Act.
Since our Sponsor, executive officers and directors will not be eligible to be
reimbursed for their
out-of-pocket expenses..., page 79
12. We note the disclosure that there is no cap or ceiling on the
reimbursement of out-of-
pocket expenses incurred in connection with activities on your behalf.
Please quantify to
the extent practicable in the summary term sheet any out-of-pocket
expenses incurred in
connection with activities on your behalf by your sponsor, executive
officers, and
directors or their affiliates that will be reimbursed at the business
combination's closing.
The Purchase Agreement, page 104
13. Notwithstanding the disclaimers here and under "Amendment of the
Purchase Agreement"
on page 117, the representations, warranties, and covenants in the
purchase agreement
filed with this proxy statement constitute public disclosure for
purposes of the federal
securities laws, and Hennessy Capital Acquisition Corp. III is
responsible for considering
whether additional specific disclosures of material information about
material contractual
provisions of the purchase agreement are required to make the
statements included in the
proxy statement not misleading. Please include disclosure
acknowledging that if specific
material facts exist that contradict the representations, warranties,
or covenants in the
purchase agreement, you have provided corrective disclosure in the
proxy statement.
Furthermore, if subsequent information concerning the subject matter
of the
representations, warranties, and covenants in the purchase agreement
may or may not be
fully reflected in your public disclosures, please clarify that
Hennessy Capital Acquisition
Corp. III's public disclosures will include any material information
necessary to provide
its stockholders a materially complete understanding of the purchase
agreement
disclosures.
Payments with Respect to the Potential Acquisition, page 106
14. Provide additional details that will allow an investor to assess how
the Potential
Acquisition may impact your post-acquisition company. Specifically,
provide sufficient
quantified details to show how the target might affect future results
and how the
acquisition could impact your balance sheet.
Additional Covenants of the Parties, page 113
15. Disclosure in the last sentence appears inconsistent with disclosures
elsewhere that
Nicholas A. Petruska
FirstNameCapital Acquisition Corp. III
Hennessy LastNameNicholas A. Petruska
Comapany NameHennessy Capital Acquisition Corp. III
August 20, 2018
August 20, 2018 Page 4
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Proposal 4 relates to Section 6.4 of the proposed charter, Proposal 5
relates to Section 8.1
of the proposed charter, Proposal 6 relates to Article XI of the
proposed charter, and
Proposal 7 relates to Article VII of the proposed charter. Please
clarify that your
stockholders are voting on four separate proposals concerning the
provisions of Section
6.4, Section 8.1, Article VII, and Article XI of the proposed charter.
Leading Middle-Market Business at an Attractive Valuation, page 130
16. Disclose the names of the comparable environmental services and
hazardous waste
management companies whose valuation multiples your board of directors
considered,
and describe briefly the salient comparability characteristics of
those companies.
Additionally, disclose the names of the public peer group whose
implied multiple for 2018
and 2019 on an adjusted free cash flow basis your board of directors
considered, and
describe briefly the salient comparability characteristics of those
companies.
U.S. Federal Income Tax Considerations to U.S. Hennessy Capital Stockholders,
page 141
17. Delete the word "generally" throughout this section because the word
may imply that U.S.
Hennessy Capital stockholders cannot rely on the disclosure.
Additionally, revise
wherever similar disclosure appears elsewhere in the proxy statement.
Alternatively,
describe the basis for any uncertainty of the United States federal
income tax
consequences for U.S. Hennessy Capital stockholders.
Summary Compensation Table, page 198
18. Disclosure on page 199 indicates that the annual cash bonuses of
Messrs. Christian
Swinbank, Paul Taveira, and Robert Nelson based on fiscal 2017 were
paid in 2018.
Disclose the annual cash bonus amounts in the "Bonus" column of the
summary
compensation table.
NRC Group's Management's Discussion and Analysis of Financial Condition and
Results of
Operations
NRC Liquidity and Capital Resources, page 211
19. Please revise your disclosure to provide a more robust discussion of
the changes in
operating, investing and financing cash flows as depicted in your
statement of cash flows
for each of the periods presented for both NRC and Sprint, where
applicable. Your
disclosure revisions should focus on the primary drivers of and other
material factors
necessary to an understanding of your cash flows and the indicative
value of historical
cash flows, and should not only quantify the impact of the line
item(s) which contributed
most to the changes but should also provide detailed explanations of
the reasons for the
fluctuations. For example, we note your discussion of net cash
provided by operating
activities on page 211 simply states the amount of net cash provided
by operating
activities for the three months ended March 31, 2018 and March 31,
2017. Please refer to
the SEC Interpretive Release No. 33-8350.
Nicholas A. Petruska
FirstNameCapital Acquisition Corp. III
Hennessy LastNameNicholas A. Petruska
Comapany NameHennessy Capital Acquisition Corp. III
August 20, 2018
August 20, 2018 Page 5
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FirstName LastName
EBITDA and Adjusted EBITDA, page 213
20. We note that NRC Group defines EBITDA as net income (loss) plus (i)
depreciation and
amortization, (ii) interest expense, net (iii) provision for income
taxes, (iv) foreign
currency translation gain or loss and (v) gain or loss on equipment
sales or retirements.
Please re-name the measure, as you are including other non-cash
charges that are not
consistent with the generally understood definition of EBITDA . See
Question 103.01 of
the Non-GAAP Financial Measures Compliance and Disclosure
Interpretations issued on
April 4, 2018.
21. Please expand your disclosure here to more clearly explain how the tax
effects of non-
GAAP adjustments are calculated. Refer to Question 102.11 of the
Non-GAAP Financial
Measures Compliance and Disclosure Interpretations issued on April 4,
2018.
22. You disclose that Adjusted EBITDA is substantially the same as the
metric called
"Consolidated Adjusted EBITDA," as defined in the New Credit Facility,
which is a key
component in the determination of NRC Group's leverage ratios. As
such, it appears that
Adjusted EBITDA may be a liquidity measure and not necessarily a
performance
measure. Please explain to us why you should not address the
limitations of Adjusted
EBITDA as a liquidity measure, including providing a reconciliation of
Adjusted
EBITDA to the most directly comparable GAAP liquidity measure.
Selling, General and Administrative Expenses, page 235
23. We note you disclose on page 219, that selling, general and
administrative expenses
represent costs that are directly attributable to the sale of
services; however, you disclose
on page 235 that these expenses represent costs that are not directly
attributable to the sale
of services. Please revise your disclosure to address this apparent
discrepancy.
Critical Accounting Policies and Estimates
Income Taxes, page 242
24. Regarding Sprint's critical accounting policy for income taxes, please
enhance the
disclosure to include a discussion of the material assumptions you
made as well as the
financial statement impact if actual results might differ from the
estimates made by
management. Please refer to the SEC Interpretive Release No. 33-8350
for guidance.
NRC Group Related Person Transactions, page 270
25. Please discuss the 2018 Dividend or advise.
Financial Statements of Hennessy Capital Acquisition Corp. III
Note 6 - Stockholders' Equity, page F-15
26. We note your disclosure which states you had 24,475,832 shares of
common stock issued
and outstanding subject to redemption at December 31, 2017; however,
per your balance
Nicholas A. Petruska
FirstNameCapital Acquisition Corp. III
Hennessy LastNameNicholas A. Petruska
Comapany NameHennessy Capital Acquisition Corp. III
August 20, 2018
August 20, 2018 Page 6
Page 6
FirstName LastName
sheet on page F-3, it appears you actually had 24,427,763 shares of
common stock issued
and outstanding subject to redemption at December 31, 2017. Please
explain to us the
reasons for the differing amounts or otherwise address any disclosure
discrepancy
accordingly.
Financial Statements of SES Hold Co, LLC
Note 3. Significant Accounting Policies
Concentrations of Credit Risk, page F-54
27. You disclose that SES Hold Co derived approximately 43%, 43% and 55%
of its revenues
from its top five customers in 2017, 2016 and 2015, respectively. With
reference to ASC
280-10-50-42, please disclose the total amount of revenue from each
customer who
represented more than ten percent of revenue for each period presented
in the notes to
your financial statements. Please also disclose the identity of the
segment(s) that reports
revenue derived from customer(s) who represented more than ten percent
of revenue for
each period presented.
Financial Statements of JFL-NRC Holdings, LLC
Note 2. Summary of Significant Accounting Policies
Inventories, page F-73
28. We note your disclosure on page F-76 that you adopted ASU 2015-11 as
of January 1,
2017; however, your disclosure on page F-73 continues to state that
inventories are stated
at the lower of cost (using the first-in, first-out method) or market.
Please revise to state,
if true, inventories are stated at the lower of cost or net realizable
value.
Financial Statements of Progressive Environmental Services, Inc., page F-110
29. You disclose on page 93 that the acquisition of Progressive
Environmental Services, Inc.
meets the threshold for reporting of significant acquired businesses.
We further note your
disclosure on page 272 that the audited financial statements of
Progressive Environmental
Services, Inc. have been included in reliance on the report of Jaynes
Reitmeier Boyd
& Therrel, P.C. It does not appear that you have presented the audit
report of Jaynes
Reitmeier Boyd & Therrel, P.C. within the financial statements of
Progressive
Environmental Services, Inc. Please include an audit opinion with your
next amendment
for these financial statements.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact Jeff Gordon, Staff Accountant, at 202-551-3866 or
Kevin Stertzel, Staff
Nicholas A. Petruska
Hennessy Capital Acquisition Corp. III
August 20, 2018
Page 7
Accountant, at 202-551-3723 if you have questions regarding comments on the
financial
statements and related matters. Please contact Edward Kelly, Staff Attorney, at
202-551-3728 or
Amanda Ravitz, Assistant Director at 202-551-3412 with any other questions.
Sincerely,
FirstName LastNameNicholas A. Petruska
Division of
Corporation Finance
Comapany NameHennessy Capital Acquisition Corp. III
Office of
Manufacturing and
August 20, 2018 Page 7 Construction
FirstName LastName