HC2 Holdings, Inc. (“HC2” or the “Company”) (NYSE: HCHC), a
diversified holding company, announced today its consolidated
results for the first quarter ended March 31, 2019.
First Quarter 2019
Highlights
- Consolidated net revenue grew 8.3% year-over-year to $491.4
million.
- Net loss attributable to common and participating preferred
stockholders improved by $34.1 million to $(1.6) million, or
$(0.04) per fully diluted share, compared to $(35.7) million, or
$(0.81) per fully diluted share, in the prior-year period.
- Adjusted EBITDA for Core Operating Subsidiaries* grew 52.1% to
$14.3 million, compared to $9.4 million in the prior-year
period.
- Total Adjusted EBITDA, excluding Insurance, of $2.8 million,
compared to Adjusted EBITDA loss of $(6.9) million in the
prior-year period.
- Pre-tax Adjusted Operating Income (“Pre-tax Insurance AOI”) for
Insurance segment of $28.7 million, compared to $2.2 million in the
prior-year period.* “Core Operating Subsidiaries” consists of HC2’s
Construction, Marine Services, Energy and Telecommunications
segments.
“We started off 2019 strong, making significant
progress across our portfolio, particularly in our Construction and
Insurance segments,” said Philip Falcone, HC2’s Chairman, Chief
Executive Officer and President. “Construction generated
nearly $200 million in revenue in the quarter, while maintaining a
healthy backlog, and continued the integration of GrayWolf
Industrial. Meanwhile, our Insurance subsidiary had an
excellent quarter driven by the recent addition of the KIC block
and buoyed by strong investment performance.”
“Looking at the balance of the year, our
strategy in the near-term remains unchanged in terms of reducing
debt at the holding company level as we focus on generating
consistent and strong cash flows at our Construction and Insurance
segments,” continued Mr. Falcone. “Longer term, we are
excited about the platform and growth opportunity at Broadcasting
and the inherent value at Life Sciences. Our portfolio of
businesses performed well in the first quarter, and we look to
transform the Company to deliver long-term value for our
stockholders.”
First Quarter Financial Highlights
- Net Revenue: For the first quarter of 2019,
HC2 grew consolidated net revenue by 8.3% to $491.4 million, as
compared to $453.7 million for the year-ago quarter. The increase
was primarily driven by higher revenue from the Insurance,
Construction and Marine Services segments, partially offset by a
decline in Telecommunications.
NET
REVENUE by OPERATING SEGMENT |
|
|
|
|
|
|
|
(in millions) |
|
Three Months
Ended March 31, |
|
|
2019 |
|
2018 |
|
Increase /(Decrease) |
Construction |
|
$ |
192.1 |
|
|
$ |
158.9 |
|
|
$ |
33.2 |
|
Marine Services |
|
42.4 |
|
|
36.7 |
|
|
5.7 |
|
Energy |
|
5.1 |
|
|
4.5 |
|
|
0.6 |
|
Telecommunications |
|
155.5 |
|
|
202.3 |
|
|
(46.8 |
) |
Total Core Operating Subsidiaries |
|
$ |
395.1 |
|
|
$ |
402.4 |
|
|
$ |
(7.3 |
) |
Insurance |
|
88.8 |
|
|
40.2 |
|
|
48.6 |
|
Broadcasting |
|
9.8 |
|
|
10.7 |
|
|
(0.9 |
) |
Other |
|
— |
|
|
2.4 |
|
|
(2.4 |
) |
Eliminations (1) |
|
(2.3 |
) |
|
(2.0 |
) |
|
(0.3 |
) |
Consolidated HC2 |
|
$ |
491.4 |
|
|
$ |
453.7 |
|
|
$ |
37.7 |
|
(1) The Insurance segment revenues are
inclusive of realized and unrealized gains and net investment
income for the three months ended March 31, 2019 and 2018. Such
adjustments are related to transactions between entities under
common control which are eliminated or are reclassified in
consolidation.
- Net Income / (Loss): For the first
quarter of 2019, HC2 reported Net Loss attributable to common stock
and participating preferred stockholders of $(1.6) million, or
$(0.04) per fully diluted share, compared to $(35.7) million, or
$(0.81) per fully diluted share, for the first quarter 2018.
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) by OPERATING SEGMENT |
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
Three Months Ended March 31, |
|
|
2019 |
|
|
2018 |
|
|
Increase /(Decrease) |
Construction |
|
$ |
2.1 |
|
|
$ |
3.5 |
|
|
$ |
(1.4 |
) |
Marine Services |
|
(6.4 |
) |
|
(6.3 |
) |
|
(0.1 |
) |
Energy |
|
(0.6 |
) |
|
(0.7 |
) |
|
0.1 |
|
Telecommunications |
|
0.6 |
|
|
1.1 |
|
|
(0.5 |
) |
Total Core Operating Subsidiaries |
|
$ |
(4.3 |
) |
|
$ |
(2.4 |
) |
|
$ |
(1.9 |
) |
Life Sciences |
|
(2.6 |
) |
|
(3.9 |
) |
|
1.3 |
|
Insurance |
|
33.8 |
|
|
1.2 |
|
|
32.6 |
|
Broadcasting |
|
(4.4 |
) |
|
(12.7 |
) |
|
8.3 |
|
Other & Elimination |
|
0.6 |
|
|
(0.1 |
) |
|
0.7 |
|
Non-operating Corporate |
|
(23.6 |
) |
|
(15.1 |
) |
|
(8.5 |
) |
Consolidating eliminations attributable
to HC2 Holdings Insurance segment |
|
(2.3 |
) |
|
(2.0 |
) |
|
(0.3 |
) |
Net loss attributable to HC2 Holdings,
Inc. |
|
$ |
(2.8 |
) |
|
$ |
(35.0 |
) |
|
$ |
32.2 |
|
Less: Preferred dividends, deemed
dividends, and repurchase gains |
|
(1.2 |
) |
|
0.7 |
|
|
(1.9 |
) |
Net loss attributable to common stock and
participating preferred stockholders |
|
$ |
(1.6 |
) |
|
$ |
(35.7 |
) |
|
$ |
34.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Adjusted EBITDA: Adjusted EBITDA for
“Core Operating Subsidiaries” grew 52.1% to a combined $14.3
million for the first quarter of 2019, compared to $9.4 million for
the year-ago quarter, as improvements at the Construction, Marine
Services and Energy segments more than offset reduced contributions
from Telecommunications.For the first quarter of 2019, Total HC2
Adjusted EBITDA, which excludes the Insurance segment, was $2.8
million, compared to an Adjusted EBITDA loss of $(6.9) million for
the year-ago quarter, due primarily to net growth from the
Company’s Core Operating Subsidiaries, reduced losses at the
Broadcasting and Life Sciences segments, and lower recurring
expenses at the Non-operating Corporate segment.
|
|
|
|
|
|
|
|
|
|
|
|
ADJUSTED EBITDA by OPERATING SEGMENT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
Three Months Ended March 31, |
|
|
2019 |
|
|
|
2018 |
|
|
|
Increase / (Decrease) |
|
Construction |
$ |
12.4 |
|
|
$ |
10.0 |
|
|
$ |
2.4 |
|
Marine Services |
|
0.1 |
|
|
|
(2.4 |
) |
|
|
2.5 |
|
Energy |
|
1.0 |
|
|
|
0.7 |
|
|
|
0.3 |
|
Telecommunications |
|
0.8 |
|
|
|
1.1 |
|
|
|
(0.3 |
) |
Total Core Operating Subsidiaries |
$ |
14.3 |
|
|
$ |
9.4 |
|
|
|
4.9 |
|
Life Sciences |
|
(2.9 |
) |
|
|
(4.3 |
) |
|
$ |
1.4 |
|
Broadcasting |
|
(2.5 |
) |
|
|
(5.1 |
) |
|
|
2.6 |
|
Other and Eliminations |
|
— |
|
|
|
(0.2 |
) |
|
|
0.2 |
|
Non-operating Corporate |
|
(6.1 |
) |
|
|
(6.7 |
) |
|
|
0.6 |
|
Total HC2 Adjusted EBITDA |
$ |
2.8 |
|
|
$ |
(6.9 |
) |
|
$ |
9.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
- Balance Sheet: As of March 31, 2019, HC2 had
consolidated cash, cash equivalents and investments of $4.3
billion, which includes cash and investments associated with HC2’s
Insurance segment. Excluding the Insurance segment, consolidated
cash was $46.6 million, of which $1.3 million was at the HC2
corporate level. On April 3, 2019, HC2 entered into a $15 million
secured revolving credit agreement with MSD PCOF Partners IX, LLC,
as the lender.
First Quarter 2019 Segment
Highlights
- Construction– For the first quarter of
2019, DBM Global Inc. (“DBM”) reported Net Income of $2.1 million,
compared to $3.5 million for the year-ago quarter. Adjusted
EBITDA grew 24% year-over-year to $12.4 million, driven by positive
project execution in the Western U.S. and a full quarter of
contributions from GrayWolf Industrial.– Total backlog for
Construction was approximately $558.6 million as of March 31, 2019,
compared to $718.3 million for the year-ago quarter. Taking
into consideration awarded, but not yet signed contracts, backlog
would have been approximately $678 million at the end of the first
quarter 2019, compared to $759 million as of the first quarter
2018.
- Insurance– As of March 31, 2019,
Insurance had $4.3 billion of cash and invested assets, $5.4
billion in total GAAP assets, and an estimated $310 million of
total adjusted insurance capital base.– For the first
quarter of 2019, Continental Insurance Group (“Continental”)
reported Net Income of $33.8 million, compared to $1.2
million for the year-ago quarter. Pre-tax Insurance AOI was
$28.7 million for the first quarter of 2019, compared to $2.2
million for the year-ago quarter, driven by net investment income
and policy premiums from the KIC block acquisition. Additionally
contributing to the increase was higher net investment income on
the legacy CGI block, driven by both the growth and mix of the
investment portfolio, and decreases in benefits and expenses
related to higher claims terminations.
- Marine Services– Total backlog for
Marine Services was approximately $455.1 million as of March 31,
2019, inclusive of $119.8 million of installation projects,
compared to $430.1 million for the year-ago quarter, inclusive of
$70.3 million of installation projects. Installation project
backlog increased by $49.5 million compared to the year-ago
quarter.– Global Marine will receive approximately $4.9
million in additional special dividends in the second quarter 2019.
Prospectively, Huawei Marine has agreed to annually distribute a
minimum of 30% of cumulative distributable net profits as
dividends.
- Broadcasting– As of May 1, 2019,
including completed and pending transactions, HC2’s Broadcasting
segment has 186 operational stations, including 15 full-power
stations, 61 Class A stations and 110 LPTV stations. In addition,
Broadcasting has over 350 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.
Reaffirms 2019 Guidance for Construction
Segment
While the complex nature of certain large-scale
DBM Global projects could cause quarterly variability in their
financial results, the Company reaffirms its expectations for the
full year 2019 for its largest Adjusted EBITDA segment contributor,
Construction:
- Construction: $75 million and $80 million of
Adjusted EBITDA
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 first quarter 2019 financial results and
operations today 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: 2062747
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: 2062747
*Available approximately two hours after the end of the
conference call through June 6, 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 press release, HC2 refers to certain
financial measures that are not presented in accordance with U.S.
generally accepted accounting principles (“GAAP”), including Core
Operating Subsidiary Adjusted EBITDA, Total Adjusted EBITDA
(excluding the Insurance segment), Adjusted EBITDA for its
operating segments, Adjusted Operating Income for the Insurance
segment and Pre-Tax Adjusted Operating Income for the Insurance
segment.
Adjusted EBITDA
Management believes that Adjusted EBITDA
provides investors with meaningful information for gaining an
understanding of our 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, since interest, taxes, depreciation, amortization and
the other items listed in the definition of Adjusted EBITDA below
can differ greatly between organizations as a result of differing
capital structures and tax strategies. Adjusted EBITDA can also be
a useful measure of a company’s ability to service debt. While
management believes that non-U.S. GAAP measurements are useful
supplemental information, such adjusted results are not intended to
replace our U.S. GAAP financial results. Using Adjusted EBITDA as a
performance measure has inherent limitations as an analytical tool
as compared to net income (loss) or other U.S. GAAP financial
measures, as this non-GAAP measure excludes 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 does not purport
to be an alternative to net income (loss) or other U.S. GAAP
financial measures as a measure of our operating performance.
Adjusted EBITDA excludes the results of operations and any
consolidating eliminations of our Insurance segment.
The calculation of Adjusted EBITDA, as defined
by us, consists of Net income (loss) as adjusted for depreciation
and amortization; amortization of equity method fair value
adjustments at acquisition; Other operating (income) expense, which
is inclusive of (gain) loss on sale or disposal of assets, lease
termination costs, asset impairment expense, and FCC
reimbursements; interest expense; net gain (loss) on contingent
consideration; loss on early extinguishment or restructuring of
debt; gain (loss) on sale of subsidiaries; 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 compensation expense; non-recurring
items; and acquisition and disposition costs.
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
Pretax 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.
Similarly to Adjusted EBITDA, 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 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,” “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 and Marine Services segments 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. The Company 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, including the
ability of HC2 and HC2's subsidiaries to raise capital; 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.
All such 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.
|
|
|
|
|
|
|
|
HC2 HOLDINGS, INC.CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS(in millions, except per
share amounts)(Unaudited) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2019 |
|
|
|
2018 |
|
Revenue |
$ |
404.9 |
|
|
$ |
415.5 |
|
Life, accident and health earned
premiums, net |
|
29.9 |
|
|
|
20.0 |
|
Net investment income |
|
51.1 |
|
|
|
17.7 |
|
Net realized and unrealized gains
on investments |
|
5.5 |
|
|
|
0.5 |
|
Net revenue |
|
491.4 |
|
|
|
453.7 |
|
Operating expenses |
|
|
|
|
|
|
|
Cost of revenue |
|
357.7 |
|
|
|
375.6 |
|
Policy benefits, changes in reserves, and commissions |
|
52.7 |
|
|
|
32.3 |
|
Selling, general and administrative |
|
52.9 |
|
|
|
52.1 |
|
Depreciation and amortization |
|
6.9 |
|
|
|
9.7 |
|
Other operating income, net |
|
(0.4 |
) |
|
|
(2.2 |
) |
Total operating expenses |
|
469.8 |
|
|
|
467.5 |
|
Income (loss) from operations |
|
21.6 |
|
|
|
(13.8 |
) |
Interest expense |
|
(22.3 |
) |
|
|
(19.3 |
) |
Loss from equity investees |
|
(4.9 |
) |
|
|
(5.2 |
) |
Other income, net |
|
3.3 |
|
|
|
1.1 |
|
Loss from continuing operations before income taxes |
|
(2.3 |
) |
|
|
(37.2 |
) |
Income tax expense |
|
(4.0 |
) |
|
|
(1.7 |
) |
Net loss |
|
(6.3 |
) |
|
|
(38.9 |
) |
Less: Net loss attributable to
noncontrolling interest and redeemable noncontrolling interest |
|
3.5 |
|
|
|
3.9 |
|
Net loss attributable to HC2 Holdings, Inc. |
|
(2.8 |
) |
|
|
(35.0 |
) |
Less: Preferred dividends, deemed
dividends, and repurchase gains |
|
(1.2 |
) |
|
|
0.7 |
|
Net loss attributable to common stock and participating preferred
stockholders |
$ |
(1.6 |
) |
|
$ |
(35.7 |
) |
|
|
|
|
|
|
|
|
Loss per common share |
|
|
|
|
|
|
|
Basic and diluted |
$ |
(0.04 |
) |
|
$ |
(0.81 |
) |
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
Basic and diluted |
|
44.8 |
|
|
|
44.3 |
|
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS, INC.CONDENSED CONSOLIDATED
BALANCE SHEET(in millions, except share
amounts)(Unaudited) |
|
|
|
|
|
|
|
|
|
Assets |
|
|
March 31,2019 |
|
|
|
December 31,2018 |
|
Investments: |
|
|
|
|
|
|
|
|
Fixed maturity securities, available-for-sale at fair value |
|
$ |
3,625.9 |
|
|
$ |
3,391.6 |
|
Equity securities |
|
|
172.7 |
|
|
|
200.5 |
|
Mortgage loans |
|
|
137.2 |
|
|
|
137.6 |
|
Policy loans |
|
|
19.7 |
|
|
|
19.8 |
|
Other invested assets |
|
|
67.9 |
|
|
|
72.5 |
|
Total investments |
|
|
4,023.4 |
|
|
|
3,822.0 |
|
Cash and cash equivalents |
|
|
302.2 |
|
|
|
325.0 |
|
Accounts receivable, net |
|
|
328.4 |
|
|
|
379.2 |
|
Recoverable from reinsurers |
|
|
975.8 |
|
|
|
1,000.2 |
|
Deferred tax asset |
|
|
1.8 |
|
|
|
2.1 |
|
Property, plant and equipment, net |
|
|
376.6 |
|
|
|
376.3 |
|
Goodwill |
|
|
171.7 |
|
|
|
171.7 |
|
Intangibles, net |
|
|
221.7 |
|
|
|
219.2 |
|
Other assets |
|
|
280.8 |
|
|
|
208.1 |
|
Total assets |
|
$ |
6,682.4 |
|
|
$ |
6,503.8 |
|
|
|
|
|
|
|
|
|
|
Liabilities, temporary
equity and stockholders’ equity |
|
|
|
|
|
|
|
|
Life, accident and health reserves |
|
$ |
4,549.0 |
|
|
$ |
4,562.1 |
|
Annuity reserves |
|
|
241.5 |
|
|
|
245.2 |
|
Value of business acquired |
|
|
238.0 |
|
|
|
244.6 |
|
Accounts payable and other current liabilities |
|
|
320.3 |
|
|
|
344.9 |
|
Deferred tax liability |
|
|
34.6 |
|
|
|
30.3 |
|
Debt obligations |
|
|
762.0 |
|
|
|
743.9 |
|
Other liabilities |
|
|
187.2 |
|
|
|
110.8 |
|
Total liabilities |
|
|
6,332.6 |
|
|
|
6,281.8 |
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
Temporary equity |
|
|
|
|
|
|
|
|
Preferred stock |
|
|
10.3 |
|
|
|
20.3 |
|
Redeemable noncontrolling interest |
|
|
7.3 |
|
|
|
8.0 |
|
Total temporary equity |
|
|
17.6 |
|
|
|
28.3 |
|
Stockholders’ equity |
|
|
|
|
|
|
|
|
Common stock, $.001 par value |
|
|
— |
|
|
|
— |
|
Shares authorized: 80,000,000 at March 31, 2019 and December 31,
2018; |
|
|
|
|
|
|
|
|
Shares issued: 46,266,918 and 45,391,397 at March 31, 2019 and
December 31, 2018; |
|
|
|
|
|
|
|
|
Shares outstanding: 45,563,003 and 44,907,818 at March 31, 2019 and
December 31, 2018, respectively |
|
|
|
|
|
|
|
|
Additional paid-in capital |
|
|
264.4 |
|
|
|
260.5 |
|
Treasury stock, at cost: 703,915 and 483,579 shares at March
31, 2019 and December 31, 2018, respectively |
|
|
(3.2 |
) |
|
|
(2.6 |
) |
Accumulated deficit |
|
|
(64.3 |
) |
|
|
(57.2 |
) |
Accumulated other comprehensive income (loss) |
|
|
36.2 |
|
|
|
(112.6 |
) |
Total HC2 Holdings, Inc.
stockholders’ equity |
|
|
233.1 |
|
|
|
88.1 |
|
Noncontrolling interest |
|
|
99.1 |
|
|
|
105.6 |
|
Total stockholders’ equity |
|
|
332.2 |
|
|
|
193.7 |
|
Total liabilities, temporary
equity and stockholders’ equity |
|
$ |
6,682.4 |
|
|
$ |
6,503.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS, INC.RECONCILIATION OF NET
INCOME (LOSS) TO ADJUSTED
EBITDA(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
Three Months Ended March 31, 2019 |
|
|
Core Operating Subsidiaries |
|
Early Stage & Other |
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
|
MarineServices |
|
|
|
Energy |
|
|
|
Telecom |
|
|
|
LifeSciences |
|
|
|
Broadcasting |
|
|
|
Other &Elimination |
|
|
|
Non-operatingCorporate |
|
|
|
TotalHC2 |
|
Net (loss) attributable to HC2
Holdings, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(2.8 |
) |
Less: Net Income attributable
to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33.8 |
|
Less: Consolidating
eliminations attributable to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2.3 |
) |
Net Income (loss) attributable
to HC2 Holdings, Inc., excluding Insurance Segment |
|
$ |
2.1 |
|
|
$ |
(6.4 |
) |
|
$ |
(0.6 |
) |
|
$ |
0.6 |
|
|
$ |
(2.6 |
) |
|
$ |
(4.4 |
) |
|
$ |
0.6 |
|
|
$ |
(23.6 |
) |
|
$ |
(34.3 |
) |
Adjustments to reconcile net
income (loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
3.9 |
|
|
|
6.6 |
|
|
|
1.4 |
|
|
|
0.1 |
|
|
|
— |
|
|
|
1.4 |
|
|
|
— |
|
|
|
— |
|
|
|
13.4 |
|
Depreciation and amortization (included in cost of revenue) |
|
|
2.1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2.1 |
|
Amortization of equity method fair value adjustment at
acquisition |
|
|
— |
|
|
|
(0.4 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.4 |
) |
Other operating (income) expenses |
|
|
(0.1 |
) |
|
|
0.6 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.9 |
) |
|
|
— |
|
|
|
— |
|
|
|
(0.4 |
) |
Interest expense |
|
|
2.5 |
|
|
|
1.1 |
|
|
|
0.4 |
|
|
|
— |
|
|
|
— |
|
|
|
1.6 |
|
|
|
— |
|
|
|
16.7 |
|
|
|
22.3 |
|
Other (income) expense, net |
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
|
|
(0.6 |
) |
|
|
(2.7 |
) |
|
|
(3.1 |
) |
Foreign currency loss (included in cost of revenue) |
|
|
— |
|
|
|
0.1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
Income tax (benefit) expense |
|
|
1.0 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2.3 |
|
|
|
3.3 |
|
Noncontrolling interest |
|
|
0.1 |
|
|
|
(2.4 |
) |
|
|
(0.3 |
) |
|
|
— |
|
|
|
(0.3 |
) |
|
|
(0.6 |
) |
|
|
— |
|
|
|
— |
|
|
|
(3.5 |
) |
Share-based payment expense |
|
|
— |
|
|
|
0.4 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.2 |
|
|
|
— |
|
|
|
1.1 |
|
|
|
1.7 |
|
Non-recurring items |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Acquisition and disposition costs |
|
|
0.8 |
|
|
|
0.5 |
|
|
|
— |
|
|
|
0.1 |
|
|
|
— |
|
|
|
0.1 |
|
|
|
— |
|
|
|
0.1 |
|
|
|
1.6 |
|
Adjusted EBITDA |
|
$ |
12.4 |
|
|
$ |
0.1 |
|
|
$ |
1.0 |
|
|
$ |
0.8 |
|
|
$ |
(2.9 |
) |
|
$ |
(2.5 |
) |
|
$ |
— |
|
|
$ |
(6.1 |
) |
|
$ |
2.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Core Operating Subsidiaries |
|
$ |
14.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
Three Months Ended March 31, 2018 |
|
|
|
Core Operating Subsidiaries |
|
Early Stage & Other |
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
|
MarineServices |
|
|
|
Energy |
|
|
|
Telecom |
|
|
|
LifeSciences |
|
|
|
Broadcasting |
|
|
|
Other &Elimination |
|
|
|
Non-operatingCorporate |
|
|
|
TotalHC2 |
|
Net (loss) attributable to HC2
Holdings, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(35.0 |
) |
Less: Net Income attributable
to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.2 |
|
Less: Consolidating
eliminations attributable to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2.0 |
) |
Net Income (loss) attributable
to HC2 Holdings, Inc., excluding Insurance segment |
|
$ |
3.5 |
|
|
$ |
(6.3 |
) |
|
$ |
(0.7 |
) |
|
$ |
1.1 |
|
|
$ |
(3.9 |
) |
|
$ |
(12.7 |
) |
|
$ |
(0.1 |
) |
|
$ |
(15.1 |
) |
|
$ |
(34.2 |
) |
Adjustments to reconcile net
income (loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
1.5 |
|
|
|
6.9 |
|
|
|
1.3 |
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.7 |
|
|
|
— |
|
|
|
— |
|
|
|
10.6 |
|
Depreciation and amortization (included in cost of revenue) |
|
|
1.6 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1.6 |
|
Amortization of equity method fair value adjustment at
acquisition |
|
|
— |
|
|
|
(0.4 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.4 |
) |
Other operating (income) expenses |
|
|
0.4 |
|
|
|
(2.6 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2.2 |
) |
Interest expense |
|
|
0.4 |
|
|
|
1.2 |
|
|
|
0.3 |
|
|
|
— |
|
|
|
— |
|
|
|
5.7 |
|
|
|
— |
|
|
|
11.7 |
|
|
|
19.3 |
|
Other (income) expense, net |
|
|
0.1 |
|
|
|
0.9 |
|
|
|
0.1 |
|
|
|
(0.1 |
) |
|
|
— |
|
|
|
(0.1 |
) |
|
|
— |
|
|
|
(0.7 |
) |
|
|
0.2 |
|
Foreign currency (gain) (included in cost of revenue) |
|
|
— |
|
|
|
(0.1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.1 |
) |
Income tax (benefit) expense |
|
|
1.8 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3.3 |
) |
|
|
(1.5 |
) |
Noncontrolling interest |
|
|
0.3 |
|
|
|
(2.4 |
) |
|
|
(0.3 |
) |
|
|
— |
|
|
|
(0.8 |
) |
|
|
(0.6 |
) |
|
|
(0.1 |
) |
|
|
— |
|
|
|
(3.9 |
) |
Bonus to be settled in equity |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.2 |
|
|
|
0.2 |
|
Share-based payment expense |
|
|
— |
|
|
|
0.4 |
|
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
|
|
0.3 |
|
|
|
— |
|
|
|
0.3 |
|
|
|
1.1 |
|
Non-recurring items |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Acquisition and disposition costs |
|
|
0.4 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.2 |
|
|
|
1.6 |
|
|
|
— |
|
|
|
0.2 |
|
|
|
2.4 |
|
Adjusted EBITDA |
|
$ |
10.0 |
|
|
$ |
(2.4 |
) |
|
$ |
0.7 |
|
|
$ |
1.1 |
|
|
$ |
(4.3 |
) |
|
$ |
(5.1 |
) |
|
$ |
(0.2 |
) |
|
$ |
(6.7 |
) |
|
$ |
(6.9 |
) |
|
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|
Total Core Operating Subsidiaries |
|
$ |
9.4 |
|
|
|
|
|
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HC2 HOLDINGS,
INC.RECONCILIATION OF NET INCOME (LOSS) TO
ADJUSTED OPERATING INCOME ("INSURANCE AOI")AND
PRE-TAX OPERATING INCOME ("PRE-TAX INSURANCE
AOI")(Unaudited)
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.
(in millions) |
|
Three Months Ended March 31, |
|
|
2019 |
|
2018 |
|
Increase /(Decrease) |
Net income |
|
$ |
33.8 |
|
|
$ |
1.2 |
|
|
$ |
32.6 |
|
Effect of investment (gains)
(1) |
|
|
(6.0 |
) |
|
|
(2.5 |
) |
|
|
(3.5 |
) |
Acquisition costs |
|
|
0.2 |
|
|
|
0.3 |
|
|
|
(0.1 |
) |
Insurance AOI |
|
|
28.0 |
|
|
|
(1.0 |
) |
|
|
29.0 |
|
Income tax expense (benefit) |
|
|
0.7 |
|
|
|
3.2 |
|
|
|
(2.5 |
) |
Pre-tax Insurance AOI |
|
$ |
28.7 |
|
|
$ |
2.2 |
|
|
$ |
26.5 |
|
(1) The Insurance segment revenues are inclusive of
realized and unrealized gains and net investment income for the
three months ended March 31, 2019 and 2018. Such adjustments are
related to transactions between entities under common control which
are eliminated or are reclassified in consolidation.
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