- Fourth Quarter 2018 Consolidated Total Net
Revenue Grew 14.5% Year-Over-Year to $524.9 million -- Full Year
2018 Consolidated Total Net Revenue Grew 21.0% Over 2017 to $2.0
billion - - Full Year 2018 Net Income Attributable to Common
and Participating Preferred Stockholders of $155.6 million -- Full
Year 2018 Core Operating Subsidiaries Adjusted EBITDA of $104.4
million -- Initiates 2019 Adjusted EBITDA Guidance for Construction
Segment -
HC2 Holdings, Inc. (“HC2” or the “Company”) (NYSE: HCHC), a
diversified holding company, announced today its consolidated
results for the fourth quarter and full year ended December 31,
2018.
Fourth Quarter 2018
Highlights
- Consolidated total net revenue grew
14.5% year-over-year to $524.9 million.
- Net loss attributable to common and
participating preferred stockholders of $(16.1) million, or $(0.36)
per fully diluted share, compared to net loss of $(9.2) million, or
$(0.21) per fully diluted share, for the fourth quarter 2017.
- Total Adjusted EBITDA, excluding
Insurance, of $15.1 million, compared to $19.7 million in the
prior-year period.
- Adjusted EBITDA for Core Operating
Subsidiaries* of $28.5 million, compared to $32.4 million in the
prior-year period.
- Completed acquisition of GrayWolf
Industrial at the end of November 2018.* “Core Operating
Subsidiaries” consists of HC2’s Construction, Marine, Energy and
Telecommunications segments.
“We recorded a solid fourth quarter at most of
our portfolio’s segments, offset by some near-term challenges
specific to our Marine segment,” said Philip Falcone, HC2’s
Chairman, Chief Executive Officer and President. “Our
Construction segment continues to generate strong recurring cash
flow and maintains a robust backlog, bolstered by our recent
acquisition of GrayWolf Industrial. Our Insurance subsidiary
also produced a solid quarter of positive Pre-tax Adjusted
Operating Income, while our Broadcasting segment continued to
expand its reach, adding key broadcast markets to its distribution
platform. While the strategic alternatives process continues
at Global Marine, the segment was affected by delays in the timing
of certain projects, which we expect will also impact its
performance for the first half of the current year.”
“As we look into 2019 and beyond, our strategy
from a near to mid-term perspective is focused on the reduction of
debt at the holding company level and, consequently, our interest
expense,” continued Mr. Falcone. “Longer term, we are
committed to moving forward on our hybrid strategy of generating
consistent, strong cash flows over time, primarily at our
Construction and Insurance segments. We will also continue to
invest prudently to take advantage of significant opportunities for
long-term growth and unlocking value that we’ve identified at our
Broadcasting and Life Sciences businesses. At Broadcasting,
we are seeking to materially build out our distribution platform,
positioning the segment for accelerated growth and
profitability. While at Life Sciences, we're positioned for a
potential monetization event in the mid-term with our MediBeacon
investment and continue to explore opportunities for strategic
alliances for R2 Dermatology to drive additional value.
Overall, 2019 will be another transformative year at HC2, as we set
the Company to deliver long-term value for our stockholders.”
Fourth Quarter Financial Highlights
- Net Revenue: For
the fourth quarter of 2018, HC2 grew consolidated total net revenue
by 14.5% to $524.9 million, as compared to $458.5 million for the
year-ago quarter. The increase was primarily driven by higher
revenue from the Telecommunications, Insurance and Construction
segments, as well as the inclusion of the new Broadcasting
segment.
|
REVENUE by OPERATING SEGMENT |
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
Three Months Ended December 31, |
|
Years Ended December 31, |
|
2018 |
|
2017 |
|
Change |
|
2018 |
|
2017 |
|
Change |
Construction |
$ |
185.1 |
|
|
$ |
175.7 |
|
|
$ |
9.4 |
|
|
$ |
716.4 |
|
|
$ |
579.0 |
|
|
$ |
137.4 |
|
Marine Services |
44.4 |
|
|
46.1 |
|
|
(1.7 |
) |
|
194.3 |
|
|
169.5 |
|
|
24.8 |
|
Energy |
4.6 |
|
|
4.1 |
|
|
0.5 |
|
|
20.7 |
|
|
16.4 |
|
|
4.3 |
|
Telecommunications |
213.0 |
|
|
181.7 |
|
|
31.3 |
|
|
793.6 |
|
|
701.9 |
|
|
91.7 |
|
Total Core Operating
Subsidiaries |
$ |
447.1 |
|
|
$ |
407.5 |
|
|
$ |
39.5 |
|
|
$ |
1,725.0 |
|
|
$ |
1,466.8 |
|
|
$ |
258.2 |
|
Insurance |
56.0 |
|
|
39.5 |
|
|
16.5 |
|
|
217.1 |
|
|
151.6 |
|
|
65.5 |
|
Broadcasting |
11.7 |
|
|
4.8 |
|
|
6.9 |
|
|
45.4 |
|
|
4.8 |
|
|
40.6 |
|
Other |
— |
|
|
6.6 |
|
|
(6.6 |
) |
|
3.7 |
|
|
10.9 |
|
|
(7.2 |
) |
Eliminations (1) |
10.1 |
|
|
— |
|
|
10.1 |
|
|
(14.5 |
) |
|
— |
|
|
(14.5 |
) |
Consolidated HC2 |
$ |
524.9 |
|
|
$ |
458.5 |
|
|
$ |
66.4 |
|
|
$ |
1,976.7 |
|
|
$ |
1,634.1 |
|
|
$ |
342.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numbers may not foot due to rounding(1)
The Insurance segment revenues are inclusive of
mark-to-market adjustments in the amount of $10.1 million and $14.5
million for the quarter and year ended December 31, 2018 recorded
on equity securities in accordance with ASU 2016-01. Such
adjustments are related to transactions between entities under
common control which are eliminated or are reclassified to Other
income (expenses), net in consolidation.
- Net Income (Loss):
For the fourth quarter of 2018, HC2 reported Net (Loss)
attributable to common and participating preferred stockholders of
$(16.1) million, or $(0.36) per fully diluted share, compared to
Net (Loss) of $(9.2) million, or $(0.21) per fully diluted share,
for the fourth quarter 2017.During the fourth quarter 2018, HC2’s
insurance subsidiary, Continental General Insurance Company
(“Continental”), recognized an additional bargain purchase gain of
$6.3 million related to completing the acquisition of Humana Inc.’s
long-term care (“LTC”) business, KMG America Corporation (“KMG”),
and recognized a $29.2 million gain in the fourth quarter on the
recapture of one of its reinsurance treaties.
- Adjusted EBITDA:
Adjusted EBITDA for “Core Operating Subsidiaries” was a combined
$28.5 million for the fourth quarter of 2018, compared to $32.4
million for the year-ago quarter, as reduced contributions from
Marine Services and Telecommunications were partially offset by
improvements at the Construction and Energy segments.For the fourth
quarter of 2018, Total HC2 Adjusted EBITDA, which excludes the
Insurance segment, was $15.1 million, compared to $19.7 million for
the year-ago quarter, due primarily to larger losses at the
Broadcasting segment (which conducted a full quarter of operations
in fourth quarter 2018 versus a partial quarter in 2017) and a net
decrease from the Company’s Core Operating Subsidiaries, partially
offset by decreased losses in the Life Sciences segment and
reductions in recurring expenses at the Non-operating Corporate
segment.
|
ADJUSTED EBITDA by OPERATING SEGMENT |
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
Three Months Ended December 31, |
|
Years Ended December 31, |
|
2018 |
|
2017 |
|
Change |
|
2018 |
|
2017 |
|
Change |
Construction |
$ |
19.4 |
|
|
$ |
15.1 |
|
|
$ |
4.3 |
|
|
$ |
60.9 |
|
|
$ |
51.6 |
|
|
$ |
9.3 |
|
Marine Services |
6.9 |
|
|
15.3 |
|
|
(8.4 |
) |
|
32.7 |
|
|
44.0 |
|
|
(11.3 |
) |
Energy |
0.8 |
|
|
0.4 |
|
|
0.4 |
|
|
5.5 |
|
|
2.9 |
|
|
2.6 |
|
Telecommunications |
1.4 |
|
|
1.6 |
|
|
(0.2 |
) |
|
5.3 |
|
|
6.9 |
|
|
(1.6 |
) |
Total Core Operating
Subsidiaries |
$ |
28.5 |
|
|
$ |
32.4 |
|
|
$ |
(3.9 |
) |
|
$ |
104.4 |
|
|
$ |
105.5 |
|
|
$ |
(1.0 |
) |
Life Sciences |
(2.7 |
) |
|
(5.2 |
) |
|
2.5 |
|
|
(14.9 |
) |
|
(22.4 |
) |
|
7.5 |
|
Broadcasting |
(3.2 |
) |
|
(0.8 |
) |
|
(2.4 |
) |
|
(16.9 |
) |
|
(0.8 |
) |
|
(16.1 |
) |
Other and
Eliminations |
— |
|
|
2.1 |
|
|
(2.1 |
) |
|
(2.2 |
) |
|
(2.3 |
) |
|
0.1 |
|
Non-Operating
Corporate |
(7.5 |
) |
|
(8.7 |
) |
|
1.2 |
|
|
(25.9 |
) |
|
(29.2 |
) |
|
3.3 |
|
Consolidated HC2 |
$ |
15.1 |
|
|
$ |
19.7 |
|
|
$ |
(4.6 |
) |
|
$ |
44.5 |
|
|
$ |
50.8 |
|
|
$ |
(6.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numbers may not foot due to rounding
Full Year 2018 Financial
Highlights
- Net Revenue: For
the full year ended December 31, 2018, HC2 grew consolidated total
net revenue by 21.0% to $2.0 billion, compared to $1.6 billion in
2017. The increase was primarily driven by higher revenue
from the Construction, Telecommunications and Insurance segments,
as well as from the inclusion of the new Broadcasting segment.
- Net Income (Loss):
For the full year ended December 31, 2018, HC2 reported Net Income
attributable to common and participating preferred stockholders of
$155.6 million, or $2.90 per fully diluted share, compared to Net
(Loss) of $(49.7) million, or $(1.16) per fully diluted share, for
2017.A number of non-recurring transactions took place during 2018,
which contributed to the significant increase in net income
compared to the prior year. The Company recorded a $102.1
million gain from the sale of BeneVir Biopharm (“BeneVir”) to
Janssen Biotech, Inc. In addition, Continental recognized a
bargain purchase gain of $115.4 million related to the acquisition
of Humana Inc.’s LTC business, KMG, and recognized a $47.0 million
gain on the recapture of two of its reinsurance treaties. Further,
the Company sold its investment in Inseego Corp., recording a net
gain of $34.4 million during 2018.
- Adjusted EBITDA:
Adjusted EBITDA for “Core Operating Subsidiaries” was a combined
$104.4 million for the full year ended December 31, 2018, compared
to $105.5 million for 2017, as improvements in the Construction and
Energy segments were offset by decreases in contributions from
Marine Services and Telecommunications.For the full year ended
December 31, 2018, Total HC2 Adjusted EBITDA, which excludes the
Insurance segment, was $44.5 million, compared to $50.8 million for
2017, due primarily to larger losses at the Broadcasting segment
(which conducted a full year of operations in 2018 versus only one
month of operations in 2017) and a net decrease from the Company’s
Core Operating Subsidiaries, partially offset by decreased losses
in the Life Sciences segment and reductions in recurring expenses
at the Non-operating Corporate segment.
- Balance Sheet: As
of December 31, 2018, HC2 had consolidated cash, cash equivalents
and investments of $4.1 billion, which includes cash and
investments associated with HC2’s Insurance segment. Excluding the
Insurance segment, consolidated cash was $41.7 million, of which
$6.5 million was at the HC2 corporate level.
Fourth Quarter and Full Year 2018
Segment Highlights
- Construction - For
the fourth quarter of 2018, DBM Global Inc. (“DBM”) reported Net
Income of $7.6 million, compared to $9.2 million for the year-ago
quarter. For the full year ended December 31, 2018, Net Income was
$27.7 million, compared to $23.6 million for the 2017 comparable
period.Adjusted EBITDA was $19.4 million for the fourth quarter of
2018, compared to $15.1 million for the year-ago quarter, driven by
positive execution of projects in the Western U.S. For the full
year ended December 31, 2018, DBM’s Adjusted EBITDA was $60.9
million, compared to $51.6 million in 2017, primarily driven by the
ramp-up on certain large scale commercial projects in the Western
U.S., including the new Los Angeles Rams / Chargers stadium, Loma
Linda Hospital and Google Bayview projects.Backlog at the end of
the fourth quarter was $528.5 million ($463.5 million at DBM, $65.0
million at GrayWolf), as compared to $723.4 million for the year
ago quarter. Taking into consideration awarded, but not yet signed
contracts at DBM, including the recently acquired GrayWolf
Industrial, backlog would have been approximately $707
million.
- Marine Services -
For the fourth quarter of 2018, Global Marine Systems (“Global
Marine”) reported a Net (Loss) of $(3.8) million, compared to Net
Income of $6.2 million for the year-ago quarter. For the full year
ended December 31, 2018, Net Income was $0.3 million, compared to
$15.2 million for the 2017 comparable period.Adjusted EBITDA was
$6.9 million for the fourth quarter 2018, compared to $15.3 million
for the year-ago quarter, due primarily to the shift in timing for
certain Global Marine projects, including a resulting increase in
un-utilized costs for marine assets, and rejected customer claims
and receivables write-offs on certain cable installation projects
during the fourth quarter of 2018 and lower income at HMN
associated with the shift in timing of new turnkey projects into
2019. For the full year ended December 31, 2018, Global
Marine’s Adjusted EBITDA was $32.7 million, compared to $44.0
million in 2017, due primarily to an increase in un-utilized costs
associated with recently acquired marine assets, higher than
expected costs on a certain offshore power construction project,
and lower income at HMN attributable to shifts in project timing,
partially offset by improved profit margins on cable installation
projects in the telecom and offshore power markets.As of December
31, 2018, backlog for Global Marine stood at approximately $483.4
million, a significant increase from $357.7 million as of the end
of the third quarter 2018.Per HMN’s long-term annual dividend
policy, during the fourth quarter 2018, Global Marine received
special dividends of approximately $4.9 million and will receive
approximately $4.9 million in additional special dividends in the
second quarter 2019. HMN has agreed to annually distribute a
minimum of 30% of cumulative distributable net profits as
dividends.
- Energy - For the
fourth quarter of 2018, American Natural Gas (“ANG”) reported a Net
(Loss) of $(0.3) million, as compared to Net Income of $1.5 million
for the year-ago quarter. For the full year ended December 31,
2018, Net Loss was $(0.9) million, as compared to $(0.5) million
for the 2017 comparable period.Adjusted EBITDA was $0.8 million for
the fourth quarter of 2018, compared to $0.4 million for the
year-ago quarter, primarily driven by additional income recognized
tax credits related to the use of renewable natural gas, as well as
from overall growth in compressed natural gas (“CNG”) sales across
the network. For the full year ended December 31, 2018, ANG’s
Adjusted EBITDA was $5.5 million, compared to $2.9 million in 2017,
primarily driven by the receipt of a $2.6 million alternative fuel
energy tax credit in the second quarter 2018, which was
retroactively approved by Congress and applicable to 2017 CNG
sales.
- Telecommunications
- For the fourth quarter of 2018, PTGi-ICS reported Net Income of
$1.2 million, compared to $1.3 million for the year-ago quarter.
For the full year ended December 31, 2018, Net Income was $4.6
million, compared to $6.2 million for the 2017 comparable
period.Adjusted EBITDA was $1.4 million for the fourth quarter of
2018, compared to $1.6 million for the year-ago quarter. For the
full year ended December 31, 2018, PTGi-ICS’s Adjusted EBITDA was
$5.3 million, compared to $6.9 million in 2017, due primarily to
fluctuations in the mix of wholesale customer voice traffic and
termination rates.
- Insurance - During
the third quarter of 2018, Continental completed the acquisition of
Humana Inc.’s LTC insurance business, KMG. The transaction was
immediately accretive to the company's risk-based and statutory
capital. As of December 31, 2018, Continental had cash and invested
assets of $4.0 billion, up from $1.5 billion prior to the
transaction, $5.1 billion in total GAAP assets, and had
approximately $289 million of total adjusted insurance capital
base.
|
INSURANCE SEGMENT ADJUSTED OPERATING INCOME
("AOI") |
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
Three Months Ended December 31, |
|
Years Ended December 31, |
|
2018 |
|
2017 |
|
Change |
|
2018 |
|
2017 |
|
Change |
Insurance AOI |
$ |
8.7 |
|
|
$ |
2.6 |
|
|
$ |
6.1 |
|
|
$ |
— |
|
|
$ |
8.0 |
|
|
$ |
(8.0 |
) |
Pre-tax Insurance
AOI |
$ |
9.3 |
|
|
$ |
3.6 |
|
|
$ |
5.7 |
|
|
$ |
0.6 |
|
|
$ |
24.2 |
|
|
$ |
(23.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Insurance segment revenues are inclusive of
mark-to-market adjustments recorded on equity securities in
accordance with ASU 2016-01. Certain of these adjustments related
to consolidated subsidiaries are eliminated and others are
reclassified to Other income (expenses), net in consolidation.
|
For
the fourth quarter of 2018, Continental reported Net Income of
$22.4 million, compared to $3.4 million for the year-ago quarter.
For the full year ended December 31, 2018, Net Income was $165.2
million, compared to $7.1 million for the 2017 comparable
period. |
|
|
|
Pre-tax Insurance AOI was $9.3 million for the fourth quarter of
2018, compared to $3.6 million for the year-ago quarter. The
increase was driven by higher premiums and net investment income
from the addition of Humana's long-term care business, as well as
from higher net investment income for the CGI block from additional
reinvestment into higher yield assets. These were partially offset
by an increase in reserves related to the Humana block and
additional claims incidences from the CGI block. For the full year
ended December 31, 2018, Continental's Pre-tax Insurance AOI was
Income of $0.6 million, compared to $24.2 million for 2017. The
full year 2018 Pre-tax Insurance AOI was driven by the addition of
Humana’s long-term care business, which saw an increase in reserves
shortly after closing the transaction, driven by a higher
proportion of new claims, as well as additional claim incidences
from the CGI block. These were partially offset
by increases in net investment income, both due to the
additional assets acquired in the Humana block, as well as
additional reinvestment into higher yielding assets. |
- Pansend Life
Sciences - As announced on October 22, 2018, the U.S. Food
and Drug Administration (FDA) granted Breakthrough Device
designation to MediBeacon, Inc. for the company’s Transdermal GFR
Measurement System (TGFR). The device is intended to measure
Glomerular Filtration Rate (GFR) in patients with impaired or
normal renal function.(1) The ability to measure GFR is of high
clinical interest, especially in patients with or at risk of kidney
disease. Under the Breakthrough Devices program, a provision of the
21st Century Cures Act, the FDA works with companies to expedite
regulatory review in order to give patients more timely access to
diagnostic and therapeutic technologies. According to the FDA, a
Breakthrough Device like the TGFR is a product that has the
potential to be more effective at diagnosing a life-threatening or
irreversibly debilitating disease or condition compared to the
current standard of care.(2)
- Broadcasting - For
the fourth quarter of 2018, Broadcasting reported a Net (Loss) of
$(5.3) million and an Adjusted EBITDA loss of $(3.2) million, a
$0.8 million increase in Adjusted EBITDA loss compared to the prior
quarter. For the full year ended December 31, 2018, the
Broadcasting segment reported a Net (Loss) of $(34.5) million and
an Adjusted EBITDA loss of $(16.9) million. There were de minimis
results for the Broadcasting segment in 2017 as the segment’s first
Over the Air (“OTA”) broadcasting assets were acquired in the
fourth quarter of 2017.During the fourth quarter 2018, Broadcasting
completed strategic acquisitions that further extended its reach
into key broadcast markets. As of March 6, 2019, including
completed and pending transactions, HC2’s Broadcasting subsidiary
has 176 operational stations, including 15 full-power stations, 58
Class A stations and 103 LPTV stations. In addition, Broadcasting
has an additional 385 silent licenses and construction permits. The
total Broadcasting footprint currently covers approximately 60
percent of the U.S. population, in over 130 U.S. markets, including
9 of the top 10 markets across the United States.
Global Marine Strategic Alternatives Update
HC2 continues to explore strategic alternatives
for its Global Marine subsidiary, including a potential sale. As
previously mentioned, HC2 intends to use the net proceeds from a
potential sale to reduce its overall debt. There can be no
assurance that the exploration of any strategic alternative,
including a potential sale, will result in a consummated
transaction or other alternative. Neither HC2 nor Global Marine has
set a timetable for completion of the process, and neither intends
to comment further regarding the process unless a specific
transaction or other alternative is approved by their respective
Boards of Directors, the process is concluded or it is otherwise
determined that further disclosure is appropriate or required by
law.
Initiates 2019 Guidance for Construction
Segment
In order to provide additional visibility into
the Company’s largest Adjusted EBITDA segment contributor,
Construction, the Company initiated a guidance range reflecting its
current expectations for full year 2019 Adjusted EBITDA. While the
complex nature of certain large-scale DBM Global projects could
cause quarterly variability in their financial results, the Company
expects the following for the full year 2019:
- Construction: $75 million and $80 million of
Adjusted EBITDA
Due to the ongoing strategic alternative process
for its Global Marine subsidiary, the Company has elected not to
provide 2019 Adjusted EBITDA guidance for its Marine Services
segment.
The Company has provided 2019 guidance with
regard to the non-GAAP measures of Adjusted EBITDA. These measures
exclude from the corresponding GAAP financial measures the effect
of special items as described below under “Non-GAAP Financial
Measures.” The Company has not provided a reconciliation of such
non-GAAP guidance to the most directly comparable GAAP measure
because it cannot predict and quantify with a reasonable degree of
confidence all of the special items that may occur during 2019.
HC2 does not guarantee future results of any
kind. The Company’s guidance is based on numerous assumptions about
future events and conditions and, therefore, could vary materially
from actual results, and is subject to risks and uncertainties,
including, without limitation, those factors outlined in the
“Forward Looking Statements” of this release and the “Risk Factors”
section of the Company’s annual and quarterly reports filed with
the Securities and Exchange Commission (“SEC”).
Conference Call
HC2 Holdings, Inc. will host a live conference
call to discuss its fourth quarter and full year 2018 financial
results and operations today, Tuesday, March 12, 2019, at 5:00 p.m.
ET. The Company will post an earnings supplemental presentation in
the Investor Relations section of the HC2 Website at ir.hc2.com, to
accompany the conference call.
Dial-in instructions for the conference call and the replay are
as follows:
Live Call
Domestic Dial-In (Toll Free): 1-866-395-3893
International Dial-In: 1-678-509-7540
Participant Entry Number: 3480439
Alternatively, a live webcast of the conference call can be
accessed by interested parties through the Investor Relations
section of the HC2 Website at ir.hc2.com.
Conference Replay*
Domestic Dial-In (Toll Free): 1-855-859-2056
International Dial-In: 1-404-537-3406
Conference Number: 3480439
*Available approximately two hours after the end of the
conference call through April 10, 2019.
About HC2
HC2 Holdings, Inc. is a publicly traded
(NYSE:HCHC) diversified holding company, which seeks opportunities
to acquire and grow businesses that can generate long-term
sustainable free cash flow and attractive returns in order to
maximize value for all stakeholders. HC2 has a diverse array of
operating subsidiaries across eight reportable segments, including
Construction, Marine Services, Energy, Telecommunications, Life
Sciences, Broadcasting, Insurance and Other. HC2's largest
operating subsidiaries include DBM Global Inc., a family of
companies providing fully integrated structural and steel
construction services, and Global Marine Systems Limited, a leading
provider of engineering and underwater services on submarine
cables. Founded in 1994, HC2 is headquartered in New York, New
York. Learn more about HC2 and its portfolio companies at
www.hc2.com.
ContactInvestor
RelationsGarrett EdsonICRPhone: (212) 235-2691E-mail:
ir@hc2.com
Non-GAAP Financial Measures
In this release, HC2 refers to certain financial
measures that are not presented in accordance with U.S. generally
accepted accounting principles (“GAAP”), including Adjusted EBITDA
(excluding the Insurance segment) and Adjusted Operating Income
(“Insurance AOI”) and Pre-tax Adjusted Operating Income (“Pre-tax
Insurance AOI”) for our Insurance segment.
Adjusted EBITDA
Management believes that Adjusted EBITDA
measures provide investors with meaningful information for gaining
an understanding of the Company’s results as it is frequently used
by the financial community to provide insight into an
organization’s operating trends and facilitates comparisons between
peer companies, because interest, taxes, depreciation, amortization
and the other items for which adjustments are made as noted in the
definition of Adjusted EBITDA below can differ greatly between
organizations as a result of differing capital structures and tax
strategies. In addition, management uses Adjusted EBITDA measures
in evaluating certain of the Company’s segments' performance
because they eliminate the effects of considerable amounts of
non-cash depreciation and amortization and items not within
the control of the Company’s operations managers. While management
believes that these non-GAAP measurements are useful as
supplemental information, such adjusted results are not intended to
replace our GAAP financial results and should be read together with
HC2’s results reported under GAAP.
Management defines Adjusted EBITDA as net income
(loss), excluding the Insurance segment, as adjusted for
depreciation and amortization; amortization of equity method fair
value adjustments at acquisition; (gain) loss on sale or disposal
of assets; lease termination costs; asset impairment expense;
interest expense; net gain (loss) on contingent consideration; loss
on early extinguishment or restructuring of debt; gain (loss) on
sale and deconsolidation of subsidiary; other (income) expense,
net; foreign currency transaction (gain) loss included in cost of
revenue; income tax (benefit) expense; (gain) loss from
discontinued operations; noncontrolling interest; bonus to be
settled in equity; share-based payment expense; non-recurring
items; and acquisition and disposition costs. A reconciliation of
Adjusted EBITDA to Net Income (Loss) is included in the financial
tables at the end of this release.
Management recognizes that using Adjusted EBITDA
as a performance measure has inherent limitations as an analytical
tool as compared to net income (loss) or other GAAP financial
measures, as these non-GAAP measures exclude certain items,
including items that are recurring in nature, which may be
meaningful to investors.
As a result of the exclusions, Adjusted EBITDA
should not be considered in isolation and do not purport to be
alternatives to net income (loss) or other GAAP financial measures
or a measure of our operating performance.
Adjusted Operating Income -
Insurance
Adjusted Operating Income (“Insurance AOI”) and
Pre-tax Adjusted Operating Income (“Pre-tax Insurance AOI”) for the
Insurance segment are non-U.S. GAAP financial measures
frequently used throughout the insurance industry and are economic
measures the Insurance segment uses to evaluate its financial
performance. Management believes that Insurance AOI and Pre-tax
Insurance AOI measures provide investors with meaningful
information for gaining an understanding of certain results and
provide insight into an organization’s operating trends and
facilitates comparisons between peer companies. However, Insurance
AOI and Pre-tax Insurance AOI have certain limitations, and we may
not calculate it the same as other companies in our industry. It
should, therefore, be read together with the Company's results
calculated in accordance with U.S. GAAP.
Management recognizes that using Insurance AOI
and Pre-tax Insurance AOI as performance measures have inherent
limitations as an analytical tool as compared to income (loss) from
operations or other U.S. GAAP financial measures, as these non-U.S.
GAAP measures excludes certain items, including items that are
recurring in nature, which may be meaningful to investors. As a
result of the exclusions, Insurance AOI and Pre-tax Insurance AOI
should not be considered in isolation and do not purport to be an
alternative to income (loss) from operations or other U.S. GAAP
financial measures as a measure of our operating performance.
Management defines Insurance AOI as Net income
(loss) for the Insurance segment adjusted to exclude the impact of
net investment gains (losses), including other-than-temporary
impairment (“OTTI”) losses recognized in operations; asset
impairment; intercompany elimination; bargain purchase gains;
reinsurance gains; and acquisition costs. Management defines
Pre-tax Insurance AOI as Insurance AOI adjusted to exclude the
impact of income tax (benefit) expense recognized during the
current period. Management believes that Insurance AOI and Pre-tax
Insurance AOI provide meaningful financial metrics that help
investors understand certain results and profitability. While these
adjustments are an integral part of the overall performance of the
Insurance segment, market conditions impacting these items can
overshadow the underlying performance of the business. Accordingly,
we believe using a measure which excludes their impact is effective
in analyzing the trends of our operations.
Cautionary Statement Regarding
Forward-Looking Statements
Safe Harbor Statement under the Private
Securities Litigation Reform Act of 1995: This press release
contains, and certain oral statements made by our representatives
from time to time may contain, forward-looking statements.
Generally, forward-looking statements include information
describing actions, events, results, strategies and expectations
and are generally identifiable by use of the words “believes,”
“expects,” “guidance,” “intends,” “anticipates,” “plans,” “seeks,”
“estimates,” “projects,” “may,” “will,” “could,” “might,” or
“continues” or similar expressions. The forward-looking statements
in this press release include, without limitation, our 2019
guidance for the Construction segment and statements regarding our
expectations regarding building shareholder value and future cash
flow and invested assets. Such statements are based on the
beliefs and assumptions of HC2's management and the management of
HC2's subsidiaries and portfolio companies. HC2 believes these
judgments are reasonable, but you should understand that these
statements are not guarantees of performance or results, and the
Company’s actual results could differ materially from those
expressed or implied in the forward-looking statements due to a
variety of important factors, both positive and negative, that may
be revised or supplemented in subsequent statements and reports
filed with the Securities and Exchange Commission (“SEC”),
including in our reports on Forms 10-K, 10-Q, and 8-K. Such
important factors include, without limitation, issues related to
the restatement of our financial statements; the fact that we have
historically identified material weaknesses in our internal control
over financial reporting, and any inability to remediate future
material weaknesses; capital market conditions; the ability of
HC2's subsidiaries and portfolio companies to generate sufficient
net income and cash flows to make upstream cash distributions;
volatility in the trading price of HC2 common stock; the ability of
HC2 and its subsidiaries and portfolio companies to identify any
suitable future acquisition or disposition opportunities; our
ability to realize efficiencies, cost savings, income and margin
improvements, growth, economies of scale and other anticipated
benefits of strategic transactions; difficulties related to the
integration of financial reporting of acquired or target
businesses; difficulties completing pending and future acquisitions
and dispositions; effects of litigation, indemnification claims,
and other contingent liabilities; changes in regulations and tax
laws; and risks that may affect the performance of the operating
subsidiaries and portfolio companies of HC2. Although HC2
believes its expectations and assumptions regarding its future
operating performance are reasonable, there can be no assurance
that the expectations reflected herein will be achieved.
These risks and other important factors discussed under the caption
“Risk Factors” in our most recent Annual Report on Form 10-K filed
with the SEC, and our other reports filed with the SEC could cause
actual results to differ materially from those indicated by the
forward-looking statements made in this press release.
You should not place undue reliance on
forward-looking statements. All forward-looking statements
attributable to HC2 or persons acting on its behalf are expressly
qualified in their entirety by the foregoing cautionary statements.
HC2 has no obligation to update any of the guidance provided to
conform to actual results or changes in HC2's expectations.
All statements speak only as of the date made, and unless
legally required, HC2 undertakes no obligation to update or revise
publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.
-----------------------------------------------------------(1)
Data on file. MediBeacon, Inc., St. Louis, MO.(2) U.S. Food and
Drug
Administration.https://www.fda.gov/downloads/MedicalDevices/DeviceRegulationandGuidance/GuidanceDocuments/UCM581664.pdf
|
HC2 HOLDINGS, INC.CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS(in millions,
except per share amounts) |
|
|
|
|
|
Three Months EndedDecember
31, |
|
|
2018 |
|
2017 |
Revenue |
|
$ |
458.8 |
|
|
$ |
419.0 |
|
Life, accident and
health earned premiums, net |
|
29.1 |
|
|
19.9 |
|
Net investment
income |
|
47.8 |
|
|
17.5 |
|
Net realized and
unrealized gains (losses) on investments |
|
(10.8 |
) |
|
2.1 |
|
Net
revenue |
|
524.9 |
|
|
458.5 |
|
Operating expenses |
|
|
|
|
Cost of
revenue |
|
406.0 |
|
|
365.3 |
|
Policy
benefits, changes in reserves, and commissions |
|
63.2 |
|
|
29.4 |
|
Selling,
general and administrative |
|
58.4 |
|
|
56.1 |
|
Depreciation and amortization |
|
6.7 |
|
|
8.7 |
|
Other
operating (income) expenses |
|
2.8 |
|
|
0.5 |
|
Total
operating expenses |
|
537.1 |
|
|
460.0 |
|
Loss from
operations |
|
(12.2 |
) |
|
(1.5 |
) |
Interest expense |
|
(21.7 |
) |
|
(15.7 |
) |
Gain (loss) on
contingent consideration |
|
(0.8 |
) |
|
5.4 |
|
Income from equity
investees |
|
1.7 |
|
|
5.1 |
|
Gain on bargain
purchase |
|
6.3 |
|
|
— |
|
Other income
(expenses), net |
|
14.7 |
|
|
(4.5 |
) |
Income
(loss) from continuing operations before income taxes |
|
(12.0 |
) |
|
(11.2 |
) |
Income tax (expense)
benefit |
|
(0.5 |
) |
|
5.4 |
|
Net
income (loss) |
|
(12.5 |
) |
|
(5.8 |
) |
Less: Net (income) loss
attributable to noncontrolling interest and redeemable
noncontrolling interests |
|
0.7 |
|
|
(2.7 |
) |
Net
income (loss) attributable to HC2 Holdings, Inc. |
|
(11.8 |
) |
|
(8.5 |
) |
Less: Preferred stock
and deemed dividends |
|
4.3 |
|
|
0.7 |
|
Net
income (loss) attributable to common stock and participating
preferred stockholders |
|
$ |
(16.1 |
) |
|
$ |
(9.2 |
) |
|
|
|
|
|
Income (loss) per
common share: |
|
|
|
|
Basic and
Diluted |
|
$ |
(0.36 |
) |
|
$ |
(0.21 |
) |
|
|
|
|
|
Weighted average common
shares outstanding: |
|
|
|
|
Basic and
Diluted |
|
44.5 |
|
|
43.6 |
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS, INC.CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS(in millions,
except per share amounts) |
|
|
|
|
|
Years Ended December 31, |
|
|
2018 |
|
2017 |
|
2016 |
Revenue |
|
$ |
1,774.1 |
|
|
$ |
1,482.5 |
|
|
$ |
1,415.7 |
|
Life, accident and
health earned premiums, net |
|
94.4 |
|
|
80.5 |
|
|
79.4 |
|
Net investment
income |
|
116.6 |
|
|
66.1 |
|
|
58.0 |
|
Net realized and
unrealized gains (losses) on investments |
|
(8.4 |
) |
|
5.0 |
|
|
5.0 |
|
Net
revenue |
|
1,976.7 |
|
|
1,634.1 |
|
|
1,558.1 |
|
Operating expenses |
|
|
|
|
|
|
Cost of
revenue |
|
1,585.2 |
|
|
1,313.1 |
|
|
1,254.0 |
|
Policy
benefits, changes in reserves, and commissions |
|
197.3 |
|
|
108.7 |
|
|
123.2 |
|
Selling,
general and administrative |
|
218.4 |
|
|
182.8 |
|
|
152.9 |
|
Depreciation and amortization |
|
31.7 |
|
|
31.3 |
|
|
24.5 |
|
Other
operating (income) expenses |
|
(0.1 |
) |
|
(0.7 |
) |
|
5.0 |
|
Total
operating expenses |
|
2,032.5 |
|
|
1,635.2 |
|
|
1,559.6 |
|
Loss from
operations |
|
(55.8 |
) |
|
(1.1 |
) |
|
(1.5 |
) |
Interest expense |
|
(75.7 |
) |
|
(55.1 |
) |
|
(43.4 |
) |
Gain on sale and
deconsolidation of subsidiary |
|
105.1 |
|
|
— |
|
|
— |
|
Gain (loss) on
contingent consideration |
|
(0.8 |
) |
|
11.4 |
|
|
(8.9 |
) |
Income from equity
investees |
|
15.4 |
|
|
17.8 |
|
|
10.8 |
|
Gain on bargain
purchase |
|
115.4 |
|
|
— |
|
|
— |
|
Other income
(expenses), net |
|
78.7 |
|
|
(12.8 |
) |
|
(2.8 |
) |
Income
(loss) from continuing operations before income taxes |
|
182.3 |
|
|
(39.8 |
) |
|
(45.8 |
) |
Income tax expense |
|
(2.4 |
) |
|
(10.7 |
) |
|
(51.6 |
) |
Net
income (loss) |
|
179.9 |
|
|
(50.5 |
) |
|
(97.4 |
) |
Less: Net (income) loss
attributable to noncontrolling interest and redeemable
noncontrolling interests |
|
(17.9 |
) |
|
3.6 |
|
|
2.9 |
|
Net
income (loss) attributable to HC2 Holdings, Inc. |
|
162.0 |
|
|
(46.9 |
) |
|
(94.5 |
) |
Less: Preferred stock
and deemed dividends |
|
6.4 |
|
|
2.8 |
|
|
10.9 |
|
Net
income (loss) attributable to common stock and participating
preferred stockholders |
|
$ |
155.6 |
|
|
$ |
(49.7 |
) |
|
$ |
(105.4 |
) |
|
|
|
|
|
|
|
Income (loss) per
common share: |
|
|
|
|
|
|
Basic |
|
$ |
3.14 |
|
|
$ |
(1.16 |
) |
|
$ |
(2.83 |
) |
Diluted |
|
$ |
2.90 |
|
|
$ |
(1.16 |
) |
|
$ |
(2.83 |
) |
|
|
|
|
|
|
|
Weighted average common
shares outstanding: |
|
|
|
|
|
|
Basic |
|
44.3 |
|
|
42.8 |
|
|
37.3 |
|
Diluted |
|
46.8 |
|
|
42.8 |
|
|
37.3 |
|
|
|
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS, INC.CONDENSED
CONSOLIDATED BALANCE SHEETS(in millions, except
share amounts) |
|
|
|
|
|
December 31, |
|
|
2018 |
|
2017 |
Assets |
|
|
|
|
Investments: |
|
|
|
|
Fixed maturity
securities, available-for-sale at fair value |
|
$ |
3,391.6 |
|
|
$ |
1,340.6 |
|
Equity
securities |
|
200.5 |
|
|
47.5 |
|
Mortgage
loans |
|
137.6 |
|
|
52.1 |
|
Policy
loans |
|
19.8 |
|
|
17.9 |
|
Other
invested assets |
|
72.5 |
|
|
85.4 |
|
Total
investments |
|
3,822.0 |
|
|
1,543.5 |
|
Cash and
cash equivalents |
|
325.0 |
|
|
97.9 |
|
Accounts
receivable, net |
|
379.2 |
|
|
322.4 |
|
Recoverable from reinsurers |
|
1,000.2 |
|
|
526.3 |
|
Deferred
tax asset |
|
2.1 |
|
|
1.7 |
|
Property,
plant, and equipment, net |
|
376.3 |
|
|
374.7 |
|
Goodwill |
|
171.7 |
|
|
131.7 |
|
Intangibles, net |
|
219.2 |
|
|
117.1 |
|
Other
assets |
|
208.1 |
|
|
102.4 |
|
Total assets |
|
$ |
6,503.8 |
|
|
$ |
3,217.7 |
|
|
|
|
|
|
Liabilities,
temporary equity and stockholders’ equity |
|
|
|
|
Life,
accident and health reserves |
|
$ |
4,562.1 |
|
|
$ |
1,694.0 |
|
Annuity
reserves |
|
245.2 |
|
|
243.2 |
|
Value of
business acquired |
|
244.6 |
|
|
43.0 |
|
Accounts
payable and other current liabilities |
|
344.9 |
|
|
347.5 |
|
Deferred
tax liability |
|
30.3 |
|
|
10.7 |
|
Debt
obligations |
|
743.9 |
|
|
593.2 |
|
Other
liabilities |
|
110.8 |
|
|
70.1 |
|
Total liabilities |
|
6,281.8 |
|
|
3,001.7 |
|
Commitments and
contingencies |
|
|
|
|
Temporary equity |
|
|
|
|
Preferred
stock |
|
20.3 |
|
|
26.3 |
|
Redeemable noncontrolling interest |
|
8.0 |
|
|
1.6 |
|
Total temporary
equity |
|
28.3 |
|
|
27.9 |
|
Stockholders’
equity |
|
|
|
|
Common
stock, $.001 par value |
|
— |
|
|
— |
|
Shares
authorized: 80,000,000 at December 31, 2018 and December 31,
2017; |
|
|
|
|
Shares
issued: 45,391,397 and 44,570,004 at December 31, 2018 and December
31, 2017, respectively |
|
|
|
|
Shares
outstanding: 44,907,818 and 44,190,826 at December 31, 2018 and
December 31, 2017, respectively |
|
|
|
|
Additional paid-in capital |
|
260.5 |
|
|
254.7 |
|
Treasury
stock, at cost: 483,579 and 379,178 at December 31, 2018 and
December 31, 2017, respectively |
|
(2.6 |
) |
|
(2.1 |
) |
Accumulated deficit |
|
(57.2 |
) |
|
(221.2 |
) |
Accumulated other comprehensive income (loss) |
|
(112.6 |
) |
|
41.7 |
|
Total HC2 Holdings,
Inc. stockholders’ equity |
|
88.1 |
|
|
73.1 |
|
Noncontrolling interest |
|
105.6 |
|
|
115.0 |
|
Total stockholders’
equity |
|
193.7 |
|
|
188.1 |
|
Total liabilities,
temporary equity and stockholders’ equity |
|
$ |
6,503.8 |
|
|
$ |
3,217.7 |
|
|
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS,
INC.RECONCILIATION OF NET INCOME (LOSS) TO
ADJUSTED EBITDA(in millions) |
|
|
|
|
|
Three Months Ended December 31, 2018 |
|
|
Core Operating Subsidiaries |
|
Early Stage and Other |
|
|
|
|
|
|
Construction |
|
MarineServices |
|
Energy |
|
Telecom |
|
LifeSciences |
|
Broadcasting |
|
Other andEliminations |
|
Non-operatingCorporate |
|
HC2 |
Net loss attributable
to HC2 Holdings, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(11.8 |
) |
Less: Net Income
attributable to HC2 Holdings Insurance Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22.4 |
|
Less: Consolidating
eliminations attributable to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1 |
|
Net Income (loss)
attributable to HC2 Holdings, Inc., excluding Insurance
Segment |
|
$ |
7.6 |
|
|
$ |
(3.8 |
) |
|
$ |
(0.3 |
) |
|
$ |
1.2 |
|
|
$ |
(2.4 |
) |
|
$ |
(5.3 |
) |
|
$ |
(6.6 |
) |
|
$ |
(24.7 |
) |
|
(34.3 |
) |
Adjustments to
reconcile net income (loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
2.4 |
|
|
7.1 |
|
|
1.4 |
|
|
— |
|
|
0.1 |
|
|
1.1 |
|
|
— |
|
|
— |
|
|
12.1 |
|
Depreciation and amortization (included in cost of revenue) |
|
1.9 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1.9 |
|
Amortization of equity method fair value adjustment at
acquisition |
|
— |
|
|
(0.4 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(0.4 |
) |
Asset
impairment expense |
|
— |
|
|
— |
|
|
0.4 |
|
|
— |
|
|
— |
|
|
0.2 |
|
|
— |
|
|
— |
|
|
0.6 |
|
(Gain)
loss on sale or disposal of assets |
|
0.1 |
|
|
2.1 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2.2 |
|
Interest
expense |
|
1.1 |
|
|
1.1 |
|
|
0.4 |
|
|
— |
|
|
— |
|
|
1.8 |
|
|
— |
|
|
17.3 |
|
|
21.7 |
|
Loss on
early extinguishment or restructuring of debt |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.1 |
|
|
— |
|
|
2.5 |
|
|
2.6 |
|
Net loss
(gain) on contingent consideration |
|
— |
|
|
0.8 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.8 |
|
Other
(income) expense, net |
|
(0.7 |
) |
|
(0.5 |
) |
|
0.1 |
|
|
0.1 |
|
|
(0.1 |
) |
|
1.1 |
|
|
7.9 |
|
|
(5.7 |
) |
|
2.2 |
|
Gain on
sale and deconsolidation of subsidiary |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Foreign
currency (gain) loss (included in cost of revenue) |
|
— |
|
|
0.5 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.5 |
|
Income
tax (benefit) expense |
|
2.9 |
|
|
— |
|
|
(1.1 |
) |
|
— |
|
|
— |
|
|
(1.0 |
) |
|
(1.3 |
) |
|
0.4 |
|
|
(0.1 |
) |
Noncontrolling interest |
|
0.6 |
|
|
(1.7 |
) |
|
(0.1 |
) |
|
— |
|
|
(0.4 |
) |
|
0.9 |
|
|
— |
|
|
— |
|
|
(0.7 |
) |
Bonus to
be settled in equity |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1.5 |
|
|
1.5 |
|
Share-based payment expense |
|
— |
|
|
0.5 |
|
|
— |
|
|
— |
|
|
0.1 |
|
|
(0.7 |
) |
|
— |
|
|
1.0 |
|
|
0.9 |
|
Non-recurring Items |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Acquisition and disposition costs |
|
3.5 |
|
|
1.2 |
|
|
— |
|
|
0.1 |
|
|
— |
|
|
(1.4 |
) |
|
— |
|
|
0.2 |
|
|
3.6 |
|
Adjusted EBITDA |
|
$ |
19.4 |
|
|
$ |
6.9 |
|
|
$ |
0.8 |
|
|
$ |
1.4 |
|
|
$ |
(2.7 |
) |
|
$ |
(3.2 |
) |
|
$ |
— |
|
|
$ |
(7.5 |
) |
|
$ |
15.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Core Operating Subsidiaries |
|
$ |
28.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS,
INC.RECONCILIATION OF NET INCOME (LOSS) TO
ADJUSTED EBITDA(in millions) |
|
|
|
|
|
Three Months Ended December 31, 2017 |
|
|
Core Operating Subsidiaries |
|
Early Stage and Other |
|
|
|
|
|
|
Construction |
|
MarineServices |
|
Energy |
|
Telecom |
|
LifeSciences |
|
Broadcasting |
|
Other andEliminations |
|
Non-operatingCorporate |
|
TotalHC2 |
Net loss attributable
to HC2 Holdings, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(8.5 |
) |
Less: Net Income
attributable to HC2 Holdings Insurance Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.4 |
|
Less: Consolidating
eliminations attributable to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
Net Income (loss)
attributable to HC2 Holdings, Inc., excluding Insurance
Segment |
|
$ |
9.2 |
|
|
$ |
6.2 |
|
|
$ |
1.5 |
|
|
$ |
1.3 |
|
|
$ |
(3.8 |
) |
|
$ |
(4.9 |
) |
|
$ |
(3.3 |
) |
|
$ |
(18.0 |
) |
|
(11.9 |
) |
Adjustments to
reconcile net income (loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
1.4 |
|
|
6.3 |
|
|
1.2 |
|
|
0.1 |
|
|
0.1 |
|
|
0.3 |
|
|
0.3 |
|
|
— |
|
|
9.7 |
|
Depreciation and amortization (included in cost of revenue) |
|
1.4 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1.4 |
|
Amortization of equity method fair value adjustment at
acquisition |
|
— |
|
|
(0.4 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(0.4 |
) |
(Gain)
loss on sale or disposal of assets |
|
0.2 |
|
|
— |
|
|
0.2 |
|
|
0.2 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.6 |
|
Lease
termination costs |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Interest
expense |
|
0.4 |
|
|
1.0 |
|
|
0.6 |
|
|
— |
|
|
— |
|
|
2.0 |
|
|
— |
|
|
11.7 |
|
|
15.7 |
|
Gain on
contingent consideration |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(5.4 |
) |
|
(5.4 |
) |
Other
(income) expense, net |
|
0.1 |
|
|
0.2 |
|
|
(0.2 |
) |
|
0.1 |
|
|
— |
|
|
— |
|
|
3.7 |
|
|
0.4 |
|
|
4.4 |
|
Foreign
currency gain (included in cost of revenue) |
|
— |
|
|
0.1 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.1 |
|
Income
tax (benefit) expense |
|
0.9 |
|
|
— |
|
|
(4.3 |
) |
|
— |
|
|
(0.8 |
) |
|
(1.8 |
) |
|
0.7 |
|
|
(1.1 |
) |
|
(6.4 |
) |
Noncontrolling interest |
|
0.8 |
|
|
(0.1 |
) |
|
1.3 |
|
|
— |
|
|
(0.7 |
) |
|
0.8 |
|
|
0.7 |
|
|
— |
|
|
2.7 |
|
Bonus to
be settled in equity |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2.8 |
|
|
2.8 |
|
Share-based payment expense |
|
— |
|
|
0.4 |
|
|
— |
|
|
— |
|
|
0.1 |
|
|
0.2 |
|
|
— |
|
|
0.5 |
|
|
1.2 |
|
Non-recurring items |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Acquisition and disposition costs |
|
0.8 |
|
|
1.5 |
|
|
— |
|
|
— |
|
|
— |
|
|
2.6 |
|
|
— |
|
|
0.3 |
|
|
5.3 |
|
Adjusted EBITDA |
|
$ |
15.1 |
|
|
$ |
15.3 |
|
|
$ |
0.4 |
|
|
$ |
1.6 |
|
|
$ |
(5.2 |
) |
|
$ |
(0.8 |
) |
|
$ |
2.1 |
|
|
$ |
(8.7 |
) |
|
$ |
19.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Core Operating Subsidiaries |
|
$ |
32.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numbers may not foot due to rounding
|
HC2 HOLDINGS,
INC.RECONCILIATION OF NET INCOME (LOSS) TO
ADJUSTED EBITDA(in millions) |
|
|
|
|
|
Year Ended December 31, 2018 |
|
|
Core Operating Subsidiaries |
|
Early Stage and Other |
|
|
|
|
|
|
Construction |
|
MarineServices |
|
Energy |
|
Telecom |
|
LifeSciences |
|
Broadcasting |
|
Other andEliminations |
|
Non-operatingCorporate |
|
HC2 |
Net income attributable
to HC2 Holdings, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
162.0 |
|
Less: Net Income
attributable to HC2 Holdings Insurance Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
165.2 |
|
Less: Consolidating
eliminations attributable to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19.2 |
|
Net Income (loss)
attributable to HC2 Holdings, Inc., excluding Insurance
Segment |
|
$ |
27.7 |
|
|
$ |
0.3 |
|
|
$ |
(0.9 |
) |
|
$ |
4.6 |
|
|
$ |
65.2 |
|
|
$ |
(34.5 |
) |
|
$ |
(2.9 |
) |
|
$ |
(81.9 |
) |
|
(22.4 |
) |
Adjustments to
reconcile net income (loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
7.4 |
|
|
27.2 |
|
|
5.5 |
|
|
0.3 |
|
|
0.2 |
|
|
3.3 |
|
|
0.1 |
|
|
0.1 |
|
|
44.1 |
|
Depreciation and amortization (included in cost of revenue) |
|
7.0 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
7.0 |
|
Amortization of equity method fair value adjustment at
acquisition |
|
— |
|
|
(1.5 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1.5 |
) |
Asset
impairment expense |
|
— |
|
|
— |
|
|
0.7 |
|
|
— |
|
|
— |
|
|
0.3 |
|
|
— |
|
|
— |
|
|
1.0 |
|
(Gain)
loss on sale or disposal of assets |
|
(0.2 |
) |
|
(0.7 |
) |
|
(0.2 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1.1 |
) |
Interest
expense |
|
2.6 |
|
|
4.8 |
|
|
1.6 |
|
|
— |
|
|
— |
|
|
9.5 |
|
|
— |
|
|
57.1 |
|
|
75.6 |
|
Loss on
early extinguishment or restructuring of debt |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2.6 |
|
|
— |
|
|
2.5 |
|
|
5.1 |
|
Net loss
(gain) on contingent consideration |
|
— |
|
|
0.8 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.8 |
|
Other
(income) expense, net |
|
(2.6 |
) |
|
(1.8 |
) |
|
0.3 |
|
|
0.1 |
|
|
— |
|
|
1.5 |
|
|
4.6 |
|
|
(4.8 |
) |
|
(2.7 |
) |
Gain on
sale and deconsolidation of subsidiary |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(102.1 |
) |
|
— |
|
|
(1.6 |
) |
|
— |
|
|
(103.7 |
) |
Foreign
currency (gain) loss (included in cost of revenue) |
|
— |
|
|
0.1 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.1 |
|
Income
tax (benefit) expense |
|
11.9 |
|
|
0.2 |
|
|
(1.1 |
) |
|
— |
|
|
— |
|
|
(1.0 |
) |
|
(1.6 |
) |
|
(6.6 |
) |
|
1.8 |
|
Noncontrolling interest |
|
2.2 |
|
|
— |
|
|
(0.4 |
) |
|
— |
|
|
19.1 |
|
|
(1.9 |
) |
|
(1.1 |
) |
|
— |
|
|
17.9 |
|
Bonus to
be settled in equity |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2.0 |
|
|
2.0 |
|
Share-based payment expense |
|
— |
|
|
1.9 |
|
|
— |
|
|
— |
|
|
0.2 |
|
|
1.6 |
|
|
0.3 |
|
|
5.0 |
|
|
9.0 |
|
Non-recurring Items |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Acquisition and disposition costs |
|
4.9 |
|
|
1.4 |
|
|
— |
|
|
0.3 |
|
|
2.5 |
|
|
1.7 |
|
|
— |
|
|
0.7 |
|
|
11.5 |
|
Adjusted EBITDA |
|
$ |
60.9 |
|
|
$ |
32.7 |
|
|
$ |
5.5 |
|
|
$ |
5.3 |
|
|
$ |
(14.9 |
) |
|
$ |
(16.9 |
) |
|
$ |
(2.2 |
) |
|
$ |
(25.9 |
) |
|
$ |
44.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Core Operating Subsidiaries |
|
$ |
104.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS,
INC.RECONCILIATION OF NET INCOME (LOSS) TO
ADJUSTED EBITDA(in millions) |
|
|
|
|
|
Year Ended December 31, 2017 |
|
|
Core Operating Subsidiaries |
|
Early Stage and Other |
|
|
|
|
|
|
Construction |
|
MarineServices |
|
Energy |
|
Telecom |
|
LifeSciences |
|
Broadcasting |
|
Other andEliminations |
|
Non-operatingCorporate |
|
HC2 |
Net (loss) attributable
to HC2 Holdings, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(46.9 |
) |
Less: Net Income
attributable to HC2 Holdings Insurance Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.1 |
|
Less: Consolidating
eliminations attributable to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
Net Income (loss)
attributable to HC2 Holdings, Inc., excluding Insurance
Segment |
|
$ |
23.6 |
|
|
$ |
15.2 |
|
|
$ |
(0.5 |
) |
|
$ |
6.2 |
|
|
$ |
(18.1 |
) |
|
$ |
(4.9 |
) |
|
$ |
(13.1 |
) |
|
$ |
(62.3 |
) |
|
(54.0 |
) |
Adjustments to
reconcile net income (loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
5.6 |
|
|
22.9 |
|
|
5.1 |
|
|
0.4 |
|
|
0.2 |
|
|
0.3 |
|
|
1.2 |
|
|
0.1 |
|
|
35.7 |
|
Depreciation and amortization (included in cost of revenue) |
|
5.3 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
5.3 |
|
Amortization of equity method fair value adjustment at
acquisition |
|
— |
|
|
(1.6 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1.6 |
) |
Asset
impairment expense |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
1.8 |
|
|
— |
|
|
1.8 |
|
(Gain)
loss on sale or disposal of assets |
|
0.3 |
|
|
(3.5 |
) |
|
0.2 |
|
|
0.2 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(2.8 |
) |
Lease
termination costs |
|
— |
|
|
0.2 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.3 |
|
Interest
expense |
|
1.0 |
|
|
4.4 |
|
|
1.2 |
|
|
— |
|
|
— |
|
|
2.0 |
|
|
2.4 |
|
|
44.1 |
|
|
55.1 |
|
Gain on
contingent consideration |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(11.4 |
) |
|
(11.4 |
) |
Other
(income) expense, net |
|
— |
|
|
2.7 |
|
|
1.5 |
|
|
0.1 |
|
|
— |
|
|
— |
|
|
6.5 |
|
|
(0.1 |
) |
|
10.7 |
|
Foreign
currency gain (included in cost of revenue) |
|
— |
|
|
(0.1 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(0.1 |
) |
Income
tax (benefit) expense |
|
10.7 |
|
|
0.2 |
|
|
(4.2 |
) |
|
— |
|
|
(0.8 |
) |
|
(1.8 |
) |
|
0.7 |
|
|
(10.2 |
) |
|
(5.5 |
) |
Noncontrolling interest |
|
1.9 |
|
|
0.3 |
|
|
(0.7 |
) |
|
— |
|
|
(3.9 |
) |
|
0.8 |
|
|
(2.0 |
) |
|
— |
|
|
(3.6 |
) |
Bonus to
be settled in equity |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
4.1 |
|
|
4.1 |
|
Share-based payment expense |
|
— |
|
|
1.5 |
|
|
0.4 |
|
|
— |
|
|
0.3 |
|
|
0.2 |
|
|
0.1 |
|
|
2.8 |
|
|
5.2 |
|
Non-recurring items |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Acquisition and disposition costs |
|
3.3 |
|
|
1.8 |
|
|
— |
|
|
— |
|
|
— |
|
|
2.6 |
|
|
— |
|
|
3.8 |
|
|
11.5 |
|
Adjusted EBITDA |
|
$ |
51.6 |
|
|
$ |
44.0 |
|
|
$ |
2.9 |
|
|
$ |
6.9 |
|
|
$ |
(22.4 |
) |
|
$ |
(0.8 |
) |
|
$ |
(2.3 |
) |
|
$ |
(29.2 |
) |
|
$ |
50.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Core Operating Subsidiaries |
|
$ |
105.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numbers may not foot due to rounding
HC2 HOLDINGS,
INC.RECONCILIATION OF NET INCOME (LOSS) TO
ADJUSTED OPERATING INCOME ("INSURANCE AOI")(in
millions)
The table below shows the adjustments made to
the reported Net income (loss) of the Insurance segment to
calculate Insurance AOI and Pre-tax Insurance AOI for the three
months and full year ended December 31, 2018 and 2017,
respectively:
|
|
Three Months Ended December 31, |
|
Years Ended December 31, |
|
|
2018 |
|
2017 |
|
2018comparedto 2017 |
|
2018 |
|
2017 |
|
2018comparedto 2017 |
Net income (loss) -
Insurance segment |
|
$ |
22.4 |
|
|
$ |
3.4 |
|
|
$ |
19.0 |
|
|
$ |
165.2 |
|
|
$ |
7.1 |
|
|
$ |
158.1 |
|
Effect of investment
(gains) |
|
21.5 |
|
|
(2.1 |
) |
|
23.6 |
|
|
(5.6 |
) |
|
(5.0 |
) |
|
(0.6 |
) |
Asset impairment |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3.4 |
|
|
(3.4 |
) |
Bargain Purchase
Gain |
|
(6.3 |
) |
|
— |
|
|
(6.3 |
) |
|
(115.4 |
) |
|
— |
|
|
(115.4 |
) |
Reinsurance Gain |
|
(29.2 |
) |
|
— |
|
|
(29.2 |
) |
|
(47.0 |
) |
|
— |
|
|
(47.0 |
) |
Acquisition costs |
|
0.3 |
|
|
1.4 |
|
|
(1.1 |
) |
|
2.8 |
|
|
2.5 |
|
|
0.3 |
|
Insurance
AOI |
|
$ |
8.7 |
|
|
$ |
2.6 |
|
|
$ |
6.1 |
|
|
$ |
— |
|
|
$ |
8.0 |
|
|
$ |
(8.0 |
) |
Income
tax expense |
|
0.6 |
|
|
1.0 |
|
|
(0.4 |
) |
|
0.6 |
|
|
16.2 |
|
|
(15.6 |
) |
Pre-tax
Insurance AOI |
|
$ |
9.3 |
|
|
$ |
3.6 |
|
|
$ |
5.7 |
|
|
$ |
0.6 |
|
|
$ |
24.2 |
|
|
$ |
(23.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numbers may not foot due to rounding
1) The Insurance segment revenues are
inclusive of mark-to-market adjustments recorded on equity
securities in accordance with ASU 2016-01. Certain of these
adjustments related to consolidated subsidiaries are eliminated and
others are reclassified to Other income (expenses), net in
consolidation.
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