Target Hospitality Corp 8-K, filed May 6, 2021
Target Hospitality Corp. (TH)
8-K
2021-05-06
For: 2021-04-30
View Original
Added on
April 12, 2026
About this 8-K
Target Hospitality Corp filed this 8-K on May 6, 2021, reporting on events of April 30, 2021.
Items reported
- Item 4.02: Earlier financial statements no longer reliable
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): May 6, 2021 (April 30, 2021 )
(Exact Name of Registrant as Specified in Its Charter)
(Commission File Number)
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(State or Other Jurisdiction of Incorporation)
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(I.R.S. Employer Identification No.)
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(Address of principal executive offices, including zip code)
(800 ) 832-4242
(Registrant’s telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading
Symbol(s)
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Name of each exchange on which registered
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act
of 1934 (§240.12b-2 of this chapter):
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act.☐
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Item 4.02(a) Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review
On April 30, 2021, the Audit Committee of the Board of Directors (the “Audit Committee”) of Target Hospitality
Corp. (the “Company”), after considering the recommendation of the Company’s management (with the assistance of the Company's legal advisors and the Company's independent valuation firm) and after discussions with Ernst & Young LLP, the
Company’s independent registered public accounting firm, concluded that the Company’s consolidated financial statements and other financial information for the years ended December 31, 2020 and 2019 and for each of the interim quarterly periods
therein (the “Non-Reliance Period”) should no longer be relied upon and the Form 10-K for the year ended December 31, 2020 will be amended to restate the consolidated financial statements contained therein due to changes in accounting for certain
previously issued warrants to conform with the SEC Staff Statement described below.
After consideration of the views expressed in the Securities and Exchange Commission (the
“SEC”) Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) dated April 12, 2021 (the “SEC Staff Statement”) in which the SEC clarified its interpretations of certain
generally accepted accounting principles related to certain terms that are common in warrants issued in connection with the initial public offerings of SPACs, the Company’s management became aware that the Company’s accounting for warrants in its
consolidated financial statements for the Non-Reliance Period was inconsistent with this new SEC Staff Statement. The SEC Staff Statement addressed certain accounting and reporting considerations related to warrants of a kind similar to those
issued by the Company. Based on Accounting Standards Codification 815-40, Contracts in an Entity’s Own Equity, warrant instruments that do
not meet the criteria to be considered indexed to an entity’s own stock shall be classified as liabilities at their estimated fair values, regardless of the likelihood that such instruments will ever be settled in cash. In periods subsequent to
issuance, changes in the estimated fair values of the derivative instruments should be reported in the consolidated statement of comprehensive income (loss).
In 2018, the Company’s legal predecessor, Platinum Eagle Acquisition Corp., issued warrants
to purchase 5,333,334 shares of its common stock in a private placement concurrently with its initial public offering (the “Private Warrants”). Each Private Warrant entitles the holder to purchase one share of the Company’s common stock at a
price of $11.50 per share. If held by the original purchasers (or their permitted transferees), the Private Warrants may be exercised on a cashless basis and are not subject to redemption by the Company. The Company had previously accounted for
these warrants as equity, consistent with common market practice, which existed prior to the SEC Staff Statement.
As a result of the above, the Company will restate its consolidated financial statements for the Non-Reliance
Period to reflect the Private Warrants as liabilities with the associated gains or losses recognized as a result of the changes in fair values and extinguishment. We expect the restatement to impact total liabilities and shareholders’ equity and
to result in incremental non-operating income (expense) related to the changes in the fair values of the Private Warrants which will impact net income (loss), and earnings
(loss) per share. We do not expect the restatement to impact other GAAP metrics, such as revenues, operating income (loss), cash and cash equivalents, assets or debt, or our previously communicated non-GAAP operating metrics, including adjusted
Gross Profit, adjusted EBITDA, or Discretionary cash flows. Further, we do not expect the restatement to impact compliance with the covenants contained in our credit facility.
The Company is working diligently with its auditors and an independent
valuation expert to finalize the valuation of the Private Warrants, and intends to file an amendment to its Annual Report on Form 10-K for the year ended December 31, 2020, originally filed with the Securities and Exchange Commission on March 31,
2021, to conform to the interpretations in the SEC Staff Statement as soon as reasonably practicable. Accordingly, investors and others should not rely on the Company’s previously released financial statements and other financial information and
disclosures for the Non-Reliance Period. Similarly, any previously furnished or filed reports, press releases, earnings releases, investor presentations or other communications describing the Company’s consolidated financial statements and other
related financial information for the Non-Reliance Period should not be relied upon.
The Company is assessing the implications of these issues on the Company's disclosure
controls and procedures and internal control over financial reporting.
The Company’s management and the Audit Committee have discussed the matters disclosed in this
Item 4.02(a) with the Company’s independent registered public accounting firm, Ernst & Young LLP.
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Item 7.01 Regulation FD
The information set forth under Item 4.02 is incorporated into this Item 7.01 by reference.
On May 6, 2021, the Company issued a press release related to the matters described herein. A copy of the
press release is included as Exhibit 99.1 and incorporated herein by reference.
The information furnished pursuant to this Item 7.01 shall not be deemed to be "filed" for purposes of Section
18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any filing under the Securities Act, unless specifically identified therein as being incorporated therein by reference.
Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended. The words “estimates,” “expects,” “anticipates,” “believes,” “forecasts,” “plans,” “intends,” “may,” “will,” “should,” “shall,”
“outlook,” and variations of these words and similar expressions identify forward-looking statements, which are generally not historical in nature. Certain of these forward-looking statements include statements relating the potential effects of
the restatement to the Company's financial statements. These statements are only a prediction and actual events or results may differ materially from those in the forward-looking statements set forth herein. Readers are referred to the Company's
filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q for a discussion of these and other important risk factors concerning the Company. Any
forward-looking statement speaks only at the date which it is made, and the Company disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, as required by
law.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit No. Exhibit Description
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be
signed on its behalf by the undersigned, hereunto duly authorized.
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Target Hospitality Corp.
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By:
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/s/ Heidi D. Lewis
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Dated: May 6, 2021
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Name: Heidi D. Lewis
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Title: Executive Vice President, General Counsel
and Secretary
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Target Hospitality Announces Response to SEC Guidance Change Issued on April 12, 2021 Applicable to Warrants Issued by Special Purpose
Acquisition Companies
THE
WOODLANDS, Texas, May 6, 2021 (PRNewswire) – Target Hospitality Corp. (“Target Hospitality”, “Target” or the “Company”) (NASDAQ: TH), the largest provider of vertically-integrated specialty hospitality accommodations with premium food
management and value-added hospitality services in the U.S., today announced that as a result of the SEC’s staff’s recent guidance change on April 12, 2021 for all Special Purpose Acquisition Companies (“SPACs”) regarding the accounting and reporting
for their warrants (the “SEC Guidance Change”), it will amend and restate its previously issued Annual Report on Form 10-K for the year ended December 31, 2020.
The restatement pertains to the accounting treatment for private placement warrants (the “Private Warrants”) that
were outstanding at the time of the merger with Platinum Eagle Acquisition Corp. (“Platinum Eagle”) on March 15, 2019 (“Business Combination”). Consistent with the Company’s review of the applicable accounting literature, guidance provided by
third-party advisors, including Platinum Eagle’s accounting advisor, as well as common accounting practices for SPACs, the Company previously accounted for the Private Warrants as equity under a fixed accounting model.
However, consistent with the recent SEC Guidance Change, the Company now intends to restate historical financial
statements, for the years ended December 2019 and 2020, such that the Private Warrants are accounted for as liabilities and adjusted to fair value each reporting period (the “restatement”). In periods subsequent to the Business Combination, changes in
the estimated fair value of the Private Warrants will be reported in the consolidated statement of comprehensive income (loss). Target believes that the marked-to-market expense or income included in its financial statements may not be necessarily
reflective of the actual financial performance of the Company.
The Company expects the restatement to be non-cash in nature and does not anticipate any impact to its previously communicated GAAP metrics
such as revenues, operating income (loss), cash and cash equivalents, assets or debt, or previously communicated non-GAAP operating metrics including adjusted Gross Profit, adjusted EBITDA or Discretionary cash flow.
The Company anticipates the restatement to impact total liabilities and shareholders’ equity and to result in incremental non-operating
income (expense) related to the non-cash changes in the fair values of the Private Warrants which will impact net income (loss), and earnings (loss) per share.
As a result of the restatement, Target expects to recognize incremental 2019 and 2020
non-operating income between $2 million and $6 million. There will be no impact to its previously reported net cash flow.
The following provides additional detail regarding how the Company currently anticipates the restatement will impact its various financial
statements:
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Opening Balance Sheet Impact: As of the date of the Business Combination, the fair value of the Private Warrants will be reflected as warrant
liabilities in the Company’s balance sheet with a corresponding offset in Additional paid-in-capital within equity.
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Income Statement Impacts: Subsequent to the close of the Business Combination, any change in the fair value of the Private Warrants is recognized in
the income statement below operating profit as “Change in fair value of warrant liabilities” with a corresponding amount recognized in the balance sheet.
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Balance Sheet Impacts: As noted above, the change in the balance of the warrant liabilities on the Company’s balance sheet is impacted by the fair
value changes of the Private Warrants. When the Private Warrants are exercised, the fair value of the liability is reclassified to Additional paid-in capital within equity. The cash received for the exercise of the Private Warrants is
reflected in cash and cash equivalents, and the corresponding offset is also in Additional paid-in-capital in equity.
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Cash Flow Impacts: The impact of the changes in fair value of the Private Warrants has no impact on net cash provided by (used in) operating
activities.
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Statement of Equity Impacts: The impact to Additional paid-in-capital as of the opening balance sheet is highlighted above. Subsequent exercises of
the Private Warrants result in a reduction of the Company’s warrant liabilities with a corresponding increase to Additional paid-in-capital.
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These estimates are subject to change as management completes the restatement, and the Company’s
independent registered public accounting firm has not audited or reviewed these estimates. As a result, the expected financial impact described above is preliminary and subject to change.
Finally, as of today, Target has approximately 5.3 million Private Warrants outstanding.
About Target Hospitality
Target Hospitality is the largest provider of vertically integrated specialty rental accommodations and value-added hospitality services
in the United States. Target Hospitality builds, owns and operates customized housing communities for a range of end users, and offers a full suite of cost-effective hospitality solutions including culinary, catering, concierge, laundry and security
services as well as recreational facilities. Target Hospitality primarily serves the energy and government sectors, and its growing network of communities is designed to maximize workforce productivity and satisfaction.
Non-GAAP Financial Measures
This press release references non-GAAP financial measures including adjusted Gross Profit, adjusted EBITDA and Discretionary cash flow, which are measurements
not calculated in accordance with US GAAP. These non-GAAP measures are key metrics used by management to assess financial performance. Our business is
capital-intensive, and these additional metrics allow management to further evaluate our operating performance.
Cautionary Statement Regarding Forward Looking Statements
Certain statements made in this press release are "forward looking statements" within the meaning of the "safe harbor" provisions of the
United States Private Securities Litigation Reform Act of 1995. When used in this press release, the words "estimates," "projected," "expects," "anticipates," "forecasts," "plans," "intends," "believes," "seeks," "may," "will," "should," "future,"
"propose" and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. Certain of these forward-looking statements include statements relating to the
potential effects of the restatement to the Company’s financial statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions
and other important factors, many of which are outside our control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. Important factors, among others, that may affect actual results
or outcomes include: the severity and duration of the COVID-19 pandemic, related economic repercussions and the resulting negative impact on demand for oil and natural gas; operational challenges relating to the COVID-19 pandemic and efforts to
mitigate the spread of the virus, including logistical challenges, protecting the health and well-being of our employees and customers, remote work arrangements and return to work arrangements, contract and supply chain disruptions; operational,
economic, political and regulatory risks; federal government budgeting and appropriations; our ability to effectively compete in the specialty rental accommodations and hospitality services industry; effective management of our communities; natural
disasters, including pandemics and other business disruptions; the effect of changes in state building codes on marketing our buildings; changes in demand within a number of key industry end-markets and geographic regions; our reliance on third party
manufacturers and suppliers; failure to retain key personnel; increases in raw material and labor costs; the effect of impairment charges on our operating results; our inability to recognize deferred tax assets and tax loss carry forwards; our future
operating results fluctuating, failing to match performance or to meet expectations; our exposure to various possible claims and the potential inadequacy of our insurance; unanticipated changes in our tax obligations; our obligations under various laws
and regulations; the effect of litigation, judgments, orders, regulatory or customer bankruptcy proceedings on our business; our ability to successfully acquire and integrate new operations; global or local economic and political movements, including
any changes from the Biden administration; our ability to effectively manage our credit risk and collect on our accounts receivable; our ability to fulfill Target Hospitality's public company obligations; any failure of our management information
systems; our ability to meet our debt service requirements and obligations; and risks related to Arrow Bidco's obligations under the senior notes. We undertake no obligation to update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise, except as required by law.
Investor Contact
Mark Schuck
(832) 702 – 8009
ir@targethospitality.com