HC2 Holdings, Inc. (“HC2” or the “Company”) (NYSE: HCHC), a
diversified holding company, announced today its consolidated
results for the second quarter ended June 30, 2019.
Second Quarter 2019
Highlights
- Consolidated net revenue grew 4.4% year-over-year to $518.6
million.
- Net income attributable to common and participating preferred
stockholders of $9.0 million, or $0.12 per fully diluted share,
compared to $54.7 million, or $1.08 per fully diluted share, in the
year-ago quarter. Second quarter 2018 net income benefited
from a one-time $102.1 million gain on the sale of Pansend Life
Sciences’ (“Pansend”) interest in BeneVir.
- Adjusted EBITDA for Core Operating Subsidiaries* of $34.8
million, compared to $40.2 million in the year-ago quarter.
- Total Adjusted EBITDA, excluding Insurance, grew 22% to $27.7
million, compared to $22.7 million in the year-ago quarter.
- Pre-tax Adjusted Operating Income (“Pre-tax Insurance AOI”) for
Insurance segment of $33.0 million, compared to $0.5 million in the
year-ago quarter.
- Energy subsidiary American Natural Gas (“ANG”) completed its
acquisition of ampCNG, adding 20 compressed natural gas (“CNG”)
stations.
- Pansend’s portfolio company R2 Dermatology entered into a
strategic partnership with Huadong Medicine, (“Huadong”) securing
distribution rights for its products in the Greater
China/Asia-Pacific market. * “Core Operating Subsidiaries”
consists of HC2’s Construction, Marine Services, Energy and
Telecommunications segments.
Subsequent to Quarter End
- Pansend’s portfolio company MediBeacon announced a $30 million
equity investment from Huadong, with the initial $15 million equity
payment valuing MediBeacon at $300 million.
“It was a very active and productive second
quarter, in which our portfolio of diverse assets performed very
well,” stated Philip Falcone, HC2’s Chairman, Chief Executive
Officer and President. “Construction continues to benefit from
successful project execution and the continued integration of
GrayWolf Industrial, while backlog for the segment remains solid as
we replace some of the large, complex jobs that are nearing
completion. Similarly, our Insurance segment had another
excellent quarter and continues to create significant value for
HC2, generating over $61 million in Pre-Tax AOI in just the first
six months of 2019. Furthermore, in our Life Sciences
segment, both R2 Dermatology and MediBeacon completed new funding
rounds with a strategic investor at attractive valuations,
providing further validation of the significant value creation that
has occurred since our initial investments.”
“Beyond our improved operational performance in
the second quarter, our near-term strategy remains keenly focused
on completing the strategic alternatives process at Global Marine
and reducing debt at the holding company level, while we continue
to generate consistent and strong cash flows at our Construction
and Insurance segments, providing reliable liquidity to HC2,”
continued Mr. Falcone. “We also remain excited about the
platform and longer-term growth opportunities at our Broadcasting
and Energy segments, and the potential to unlock considerable value
at Life Sciences. We have a very strong portfolio of
businesses, and we will continue to transform the Company to
deliver long-term value for our stockholders.”
Second Quarter Financial Highlights
- Net Revenue: For the second quarter of 2019,
HC2 grew consolidated net revenue by 4.4% to $518.6 million,
compared to $496.8 million for the year-ago quarter.
The increase was primarily driven by higher revenue from the
Insurance and Construction segments, partially offset by a decline
in Marine Services, Energy and Telecommunications.
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NET
REVENUE by OPERATING SEGMENT |
|
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|
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|
|
|
|
|
|
|
(in millions) |
|
Three Months
Ended June 30, |
|
Six Months
Ended June 30, |
|
|
2019 |
|
2018 |
|
Increase / (Decrease) |
|
2019 |
|
2018 |
|
Increase / (Decrease) |
Construction |
|
$ |
195.7 |
|
|
$ |
176.9 |
|
|
$ |
18.8 |
|
|
$ |
387.8 |
|
|
$ |
335.9 |
|
|
$ |
51.9 |
|
Marine Services |
|
39.4 |
|
|
68.4 |
|
|
(29.0 |
) |
|
81.8 |
|
|
105.1 |
|
|
(23.3 |
) |
Energy |
|
5.5 |
|
|
7.1 |
|
|
(1.6 |
) |
|
10.6 |
|
|
11.6 |
|
|
(1.0 |
) |
Telecommunications |
|
189.3 |
|
|
190.5 |
|
|
(1.2 |
) |
|
344.8 |
|
|
392.8 |
|
|
(48.0 |
) |
Total Core Operating Subsidiaries |
|
$ |
429.9 |
|
|
$ |
442.9 |
|
|
$ |
(13.0 |
) |
|
$ |
825.0 |
|
|
$ |
845.4 |
|
|
$ |
(20.4 |
) |
Insurance |
|
82.1 |
|
|
43.8 |
|
|
38.3 |
|
|
170.9 |
|
|
84.0 |
|
|
86.9 |
|
Broadcasting |
|
10.0 |
|
|
11.1 |
|
|
(1.1 |
) |
|
19.8 |
|
|
21.7 |
|
|
(1.9 |
) |
Other |
|
— |
|
|
1.0 |
|
|
(1.0 |
) |
|
— |
|
|
3.4 |
|
|
(3.4 |
) |
Eliminations (1) |
|
(3.4 |
) |
|
(2.0 |
) |
|
(1.4 |
) |
|
(5.7 |
) |
|
(4.0 |
) |
|
(1.7 |
) |
Consolidated HC2 |
|
$ |
518.6 |
|
|
$ |
496.8 |
|
|
$ |
21.8 |
|
|
$ |
1,010.0 |
|
|
$ |
950.5 |
|
|
$ |
59.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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(1) The Insurance segment revenues are
inclusive of realized and unrealized gains and net investment
income for the three and six months ended June 30, 2019 and 2018,
which are related to transactions between entities under common
control which are eliminated or are reclassified in
consolidation.
- Net Income / (Loss): For the second
quarter of 2019, HC2 reported net income attributable to common
stock and participating preferred stockholders of $9.0 million, or
$0.12 per fully diluted share, compared to $54.7 million, or $1.08
per fully diluted share, in the year-ago quarter. Second
quarter 2018 net income benefited from a one-time $102.1 million
gain on the sale of Pansend's interest in BeneVir.
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NET
INCOME (LOSS) by OPERATING SEGMENT |
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|
(in millions) |
|
Three Months
Ended June 30, |
|
Six Months
Ended June 30, |
|
|
2019 |
|
2018 |
|
Increase / (Decrease) |
|
2019 |
|
2018 |
|
Increase / (Decrease) |
Construction |
|
$ |
8.9 |
|
|
$ |
7.4 |
|
|
$ |
1.5 |
|
|
$ |
11.0 |
|
|
$ |
10.8 |
|
|
$ |
0.2 |
|
Marine Services |
|
1.9 |
|
|
10.9 |
|
|
(9.0 |
) |
|
(4.5 |
) |
|
4.6 |
|
|
(9.1 |
) |
Energy |
|
(0.7 |
) |
|
0.7 |
|
|
(1.4 |
) |
|
(1.3 |
) |
|
— |
|
|
(1.3 |
) |
Telecommunications |
|
0.4 |
|
|
1.0 |
|
|
(0.6 |
) |
|
1.0 |
|
|
2.1 |
|
|
(1.1 |
) |
Total Core Operating Subsidiaries |
|
$ |
10.5 |
|
|
$ |
20.0 |
|
|
$ |
(9.5 |
) |
|
$ |
6.2 |
|
|
$ |
17.5 |
|
|
$ |
(11.3 |
) |
Insurance |
|
30.3 |
|
|
0.6 |
|
|
29.7 |
|
|
64.1 |
|
|
1.8 |
|
|
62.3 |
|
Life Sciences |
|
(1.4 |
) |
|
74.2 |
|
|
(75.6 |
) |
|
(4.0 |
) |
|
70.2 |
|
|
(74.2 |
) |
Broadcasting |
|
(3.5 |
) |
|
(11.9 |
) |
|
8.4 |
|
|
(7.9 |
) |
|
(24.5 |
) |
|
16.6 |
|
Other |
|
(0.8 |
) |
|
(0.5 |
) |
|
(0.3 |
) |
|
(0.2 |
) |
|
(0.7 |
) |
|
0.5 |
|
Non-operating Corporate |
|
(22.5 |
) |
|
(25.0 |
) |
|
2.5 |
|
|
(46.1 |
) |
|
(39.9 |
) |
|
(6.2 |
) |
Eliminations (1) |
|
(3.2 |
) |
|
(2.0 |
) |
|
(1.2 |
) |
|
(5.5 |
) |
|
(4.0 |
) |
|
(1.5 |
) |
Net income attributable to HC2 Holdings, Inc. |
|
$ |
9.4 |
|
|
$ |
55.4 |
|
|
$ |
(46.0 |
) |
|
$ |
6.6 |
|
|
$ |
20.4 |
|
|
$ |
(13.8 |
) |
Less: Preferred dividends, deemed dividends, and repurchase
gains |
|
0.4 |
|
|
0.7 |
|
|
(0.3 |
) |
|
(0.8 |
) |
|
1.4 |
|
|
(2.2 |
) |
Net income attributable to common stock and participating
preferred stockholders |
|
$ |
9.0 |
|
|
$ |
54.7 |
|
|
$ |
(45.7 |
) |
|
$ |
7.4 |
|
|
$ |
19.0 |
|
|
$ |
(11.6 |
) |
|
|
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|
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(1) The Insurance segment is inclusive of
realized and unrealized gains and net investment income for the
three and six months ended June 30, 2019 and 2018, which are
related to transactions between entities under common control which
are eliminated or are reclassified in consolidation.
- Adjusted EBITDA: Adjusted EBITDA for
“Core Operating Subsidiaries” was a combined $34.8 million for the
second quarter of 2019, compared to $40.2 million for the year-ago
quarter, as reduced contributions from Marine Services, Energy and
Telecommunications were partially offset by a significant
improvement at Construction.
For the second quarter of 2019, Total HC2
Adjusted EBITDA, which excludes the Insurance segment, grew 22% to
$27.7 million, compared to Adjusted EBITDA of $22.7 million for the
year-ago quarter, due primarily to reduced losses at the
Broadcasting and Life Sciences segments, as well as lower recurring
expenses at the Non-operating Corporate segment.
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ADJUSTED
EBITDA by OPERATING SEGMENT |
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|
|
|
|
|
|
|
|
(in millions) |
Three Months
Ended June 30, |
|
Six months
ended June 30, |
|
2019 |
|
2018 |
|
Increase / (Decrease) |
|
2019 |
|
2018 |
|
Increase / (Decrease) |
Construction |
$ |
23.1 |
|
|
$ |
15.5 |
|
|
$ |
7.6 |
|
|
$ |
35.5 |
|
|
$ |
25.5 |
|
|
$ |
10.0 |
|
Marine Services |
9.6 |
|
|
20.4 |
|
|
(10.8 |
) |
|
9.7 |
|
|
18.0 |
|
|
(8.3 |
) |
Energy |
1.3 |
|
|
3.0 |
|
|
(1.7 |
) |
|
2.3 |
|
|
3.6 |
|
|
(1.3 |
) |
Telecommunications |
0.8 |
|
|
1.3 |
|
|
(0.5 |
) |
|
1.6 |
|
|
2.4 |
|
|
(0.8 |
) |
Total Core Operating Subsidiaries |
$ |
34.8 |
|
|
$ |
40.2 |
|
|
$ |
(5.4 |
) |
|
$ |
49.1 |
|
|
$ |
49.5 |
|
|
$ |
(0.4 |
) |
Life Sciences |
(1.8 |
) |
|
(4.8 |
) |
|
3.0 |
|
|
(4.7 |
) |
|
(9.2 |
) |
|
4.5 |
|
Broadcasting |
(0.9 |
) |
|
(6.3 |
) |
|
5.4 |
|
|
(3.4 |
) |
|
(11.3 |
) |
|
7.9 |
|
Other and Eliminations |
— |
|
|
(1.0 |
) |
|
1.0 |
|
|
— |
|
|
(1.2 |
) |
|
1.2 |
|
Non-operating Corporate |
(4.4 |
) |
|
(5.4 |
) |
|
1.0 |
|
|
(10.5 |
) |
|
(12.0 |
) |
|
1.5 |
|
Total HC2 Adjusted EBITDA |
$ |
27.7 |
|
|
$ |
22.7 |
|
|
$ |
5.0 |
|
|
$ |
30.5 |
|
|
$ |
15.8 |
|
|
$ |
14.7 |
|
|
|
|
|
|
|
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|
|
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|
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|
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|
- Balance Sheet: As of June 30, 2019, HC2 had
consolidated cash, cash equivalents and investments of $4.5
billion, which includes cash and investments associated with HC2’s
Insurance segment. Excluding the Insurance segment,
consolidated cash was $53.9 million, of which $2.8 million was at
the HC2 corporate level.
Second Quarter 2019 Segment
Highlights
– For the second quarter of 2019, DBM Global Inc. (“DBM”)
reported Net Income of $8.9 million, compared to $7.4 million for
the prior-year period. Adjusted EBITDA grew 49%
year-over-year to $23.1 million, driven by positive project
execution and contributions from GrayWolf Industrial.
– DBM's total backlog was approximately $468.5 million as of
June 30, 2019, compared to $656.4 million for the prior-year
period. Taking into consideration awarded, but not yet signed
contracts, backlog would have been approximately $661.5 million at
the end of the second quarter 2019, compared to $675.4 million at
the end of the second quarter 2018, effectively unchanged despite
strong revenue recognition over the prior-year period.
– As of June 30, 2019, Continental Insurance Group
(“Continental”) had $4.4 billion of cash and invested assets, $5.5
billion in total GAAP assets, and an estimated $331 million of
total adjusted capital.
– For the second quarter of 2019, Continental reported Net
Income of $30.3 million, compared to $0.6 million for the
prior-year period. Pre-tax Insurance AOI was $33.0 million
for the second quarter of 2019, compared to $0.5 million for the
prior-year period. The increase was primarily driven by the
incremental net investment income and policy premiums from the
Kanawha Insurance Company (“KIC”) block acquisition and higher net
investment income from the legacy CGI block, driven by both the
growth and mix of the investment portfolio, including premium
reinvestment and rotation into higher yield assets. In
addition, there was a decrease in policy benefits, changes in
reserves, and commissions related to current period reserve
adjustments driven by higher mortality and policy terminations, an
increase in contingent non-forfeiture option activity as a result
of in-force rate actions approved and implemented, and favorable
developments in claims activity. This was partially offset by
an increase in selling, general and administrative expenses,
primarily attributable to headcount additions related to the KIC
acquisition.
– In June, Pansend’s portfolio company, R2 Dermatology, entered
into an exclusive distribution agreement with Huadong for the
Asia-Pacific region. In addition, Huadong made a $10 million
equity investment in R2 Dermatology to fund R2’s next phase of
product and market development.
– MediBeacon, another Pansend portfolio company, also entered
into an exclusive commercial agreement with Huadong, which provides
exclusive rights to MediBeacon’s portfolio of assets in Greater
China. Under the agreement, MediBeacon will receive royalty
payments on net sales in Greater China and other Asia-Pacific
countries. Under the terms of the agreement, MediBeacon
received an initial $15 million equity payment at a pre-money
valuation of $300 million. This will fund the company through
the upcoming FDA pivotal clinical trials and FDA approval
process.
– In June, ANG completed its acquisition of ampCNG, a natural
gas fuel provider, for $41 million - funded entirely at the
portfolio company level. The acquisition added 20 CNG
stations to ANG’s network, expanding its reach to over 60 fueling
stations owned, operated or in development.
– As of early August 2019, including completed and pending
transactions, HC2’s Broadcasting segment has 177 operational
stations, including 10 full-power stations, 60 Class A stations and
107 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.
– Total backlog for Global Marine was approximately $406.2
million as of June 30, 2019, inclusive of $91.6 million of
installation projects, compared to total backlog of $372.2 million
as of June 30, 2018, inclusive of $32.8 million of installation
projects. Installation project backlog increased by $58.8
million compared to the prior-year period.
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 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
Board of Directors, the process is concluded or it is otherwise
determined that further disclosure is appropriate or required by
law.
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 second 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): 1-877-300-8521
International Dial-In: 1-412-317-6026
Participant Entry Number: 10133989
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): 1-844-512-2921
International Dial-In: 1-412-317-6671
Conference Number: 10133989
*Available approximately two hours after the end of the
conference call through August 22, 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.
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 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 HC2’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; HC2's 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 June 30, |
|
Six Months Ended June 30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Revenue |
|
$ |
439.9 |
|
|
$ |
455.0 |
|
|
$ |
844.8 |
|
|
$ |
870.5 |
|
Life, accident and health earned
premiums, net |
|
29.9 |
|
|
19.9 |
|
|
59.8 |
|
|
39.9 |
|
Net investment income |
|
50.3 |
|
|
19.4 |
|
|
101.4 |
|
|
37.1 |
|
Net realized and unrealized gains
(losses) on investments |
|
(1.5 |
) |
|
2.5 |
|
|
4.0 |
|
|
3.0 |
|
Net revenue |
|
518.6 |
|
|
496.8 |
|
|
1,010.0 |
|
|
950.5 |
|
Operating expenses |
|
|
|
|
|
|
|
|
Cost of revenue |
|
381.2 |
|
|
400.6 |
|
|
738.9 |
|
|
776.3 |
|
Policy benefits, changes in reserves, and commissions |
|
48.0 |
|
|
35.4 |
|
|
100.7 |
|
|
67.7 |
|
Selling, general and administrative |
|
52.1 |
|
|
57.1 |
|
|
105.0 |
|
|
109.1 |
|
Depreciation and amortization |
|
7.6 |
|
|
9.0 |
|
|
14.5 |
|
|
18.7 |
|
Other operating (income) expenses |
|
(1.2 |
) |
|
0.2 |
|
|
(1.6 |
) |
|
(2.0 |
) |
Total operating expenses |
|
487.7 |
|
|
502.3 |
|
|
957.5 |
|
|
969.8 |
|
Income (loss) from operations |
|
30.9 |
|
|
(5.5 |
) |
|
52.5 |
|
|
(19.3 |
) |
Interest expense |
|
(23.0 |
) |
|
(17.2 |
) |
|
(45.3 |
) |
|
(36.5 |
) |
Gain on sale and deconsolidation
of subsidiary |
|
— |
|
|
102.1 |
|
|
— |
|
|
102.1 |
|
Income from equity investees |
|
6.1 |
|
|
10.7 |
|
|
1.2 |
|
|
5.5 |
|
Gain on bargain purchase |
|
1.1 |
|
|
— |
|
|
1.1 |
|
|
— |
|
Other income (expense), net |
|
(4.7 |
) |
|
(0.9 |
) |
|
(1.4 |
) |
|
0.2 |
|
Income from continuing operations |
|
10.4 |
|
|
89.2 |
|
|
8.1 |
|
|
52.0 |
|
Income tax expense |
|
(1.2 |
) |
|
(9.4 |
) |
|
(5.2 |
) |
|
(11.1 |
) |
Net income |
|
9.2 |
|
|
79.8 |
|
|
2.9 |
|
|
40.9 |
|
Less: Net (income) loss
attributable to noncontrolling interest and redeemable
noncontrolling interest |
|
0.2 |
|
|
(24.4 |
) |
|
3.7 |
|
|
(20.5 |
) |
Net income attributable to HC2 Holdings, Inc. |
|
9.4 |
|
|
55.4 |
|
|
6.6 |
|
|
20.4 |
|
Less: Preferred dividends, deemed
dividends, and repurchase gains |
|
0.4 |
|
|
0.7 |
|
|
(0.8 |
) |
|
1.4 |
|
Net income attributable to common stock and participating preferred
stockholders |
|
$ |
9.0 |
|
|
$ |
54.7 |
|
|
$ |
7.4 |
|
|
$ |
19.0 |
|
|
|
|
|
|
|
|
|
|
Income per common share |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.19 |
|
|
$ |
1.11 |
|
|
$ |
0.15 |
|
|
$ |
0.39 |
|
Diluted |
|
$ |
0.12 |
|
|
$ |
1.08 |
|
|
$ |
0.08 |
|
|
$ |
0.38 |
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
45.6 |
|
|
44.2 |
|
|
45.2 |
|
|
44.1 |
|
Diluted |
|
58.1 |
|
|
45.5 |
|
|
59.9 |
|
|
45.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS, INC. CONDENSED
CONSOLIDATED BALANCE SHEET (in millions, except
share amounts)(Unaudited)
|
|
|
June 30, 2019 |
|
December 31, 2018 |
Assets |
|
|
|
|
Investments: |
|
|
|
|
Fixed maturity securities, available-for-sale at fair value |
|
$ |
3,812.6 |
|
|
$ |
3,391.6 |
|
Equity securities |
|
143.2 |
|
|
200.5 |
|
Mortgage loans |
|
151.8 |
|
|
137.6 |
|
Policy loans |
|
19.4 |
|
|
19.8 |
|
Other invested assets |
|
71.1 |
|
|
72.5 |
|
Total investments |
|
4,198.1 |
|
|
3,822.0 |
|
Cash and cash equivalents |
|
280.4 |
|
|
325.0 |
|
Accounts receivable, net |
|
350.7 |
|
|
379.2 |
|
Recoverable from reinsurers |
|
961.4 |
|
|
1,000.2 |
|
Deferred tax asset |
|
2.3 |
|
|
2.1 |
|
Property, plant and equipment, net |
|
416.4 |
|
|
376.3 |
|
Goodwill |
|
178.4 |
|
|
171.7 |
|
Intangibles, net |
|
224.9 |
|
|
219.2 |
|
Other assets |
|
270.6 |
|
|
208.1 |
|
Total assets |
|
$ |
6,883.2 |
|
|
$ |
6,503.8 |
|
|
|
|
|
|
Liabilities, temporary
equity and stockholders’ equity |
|
|
|
|
Life, accident and health reserves |
|
$ |
4,536.6 |
|
|
$ |
4,562.1 |
|
Annuity reserves |
|
238.8 |
|
|
245.2 |
|
Value of business acquired |
|
231.9 |
|
|
244.6 |
|
Accounts payable and other current liabilities |
|
338.5 |
|
|
344.9 |
|
Deferred tax liability |
|
59.9 |
|
|
30.3 |
|
Debt obligations |
|
828.2 |
|
|
743.9 |
|
Other liabilities |
|
197.9 |
|
|
110.8 |
|
Total liabilities |
|
6,431.8 |
|
|
6,281.8 |
|
Commitments and
contingencies |
|
|
|
|
Temporary equity |
|
|
|
|
Preferred stock |
|
10.3 |
|
|
20.3 |
|
Redeemable noncontrolling interest |
|
10.3 |
|
|
8.0 |
|
Total temporary equity |
|
20.6 |
|
|
28.3 |
|
Stockholders’ equity |
|
|
|
|
Common stock, $.001 par value |
|
— |
|
|
— |
|
Shares authorized: 80,000,000 at June 30, 2019 and December 31,
2018; |
|
|
|
|
Shares issued: 46,480,105 and 45,391,397 at June 30, 2019 and
December 31, 2018; |
|
|
|
|
Shares outstanding: 45,776,190 and 44,907,818 at June 30, 2019 and
December 31, 2018, respectively |
|
|
|
|
Additional paid-in capital |
|
270.9 |
|
|
260.5 |
|
Treasury stock, at cost: 703,915 and 483,579 shares at June 30,
2019 and December 31, 2018, respectively |
|
(3.2 |
) |
|
(2.6 |
) |
Accumulated deficit |
|
(54.9 |
) |
|
(57.2 |
) |
Accumulated other comprehensive income (loss) |
|
117.1 |
|
|
(112.6 |
) |
Total HC2 Holdings, Inc.
stockholders’ equity |
|
329.9 |
|
|
88.1 |
|
Noncontrolling interest |
|
100.9 |
|
|
105.6 |
|
Total stockholders’ equity |
|
430.8 |
|
|
193.7 |
|
Total liabilities, temporary
equity and stockholders’ equity |
|
$ |
6,883.2 |
|
|
$ |
6,503.8 |
|
|
|
HC2 HOLDINGS, INC.
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED
EBITDA (Unaudited)
|
|
|
(in millions) |
|
Three Months Ended June 30, 2019 |
|
|
Core Operating Subsidiaries |
|
Early Stage & Other |
|
|
|
Total HC2 |
|
|
Construction |
|
Marine Services |
|
Energy |
|
Telecom |
|
Life Sciences |
|
Broadcasting |
|
Other & Elimination |
|
Non-operating Corporate |
|
Net income attributable to HC2
Holdings, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
9.4 |
|
Less: Net Income attributable
to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30.3 |
|
Less: Consolidating
eliminations attributable to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3.2 |
) |
Net Income (loss) attributable
to HC2 Holdings, Inc., excluding Insurance Segment |
|
$ |
8.9 |
|
|
$ |
1.9 |
|
|
$ |
(0.7 |
) |
|
$ |
0.4 |
|
|
$ |
(1.4 |
) |
|
$ |
(3.5 |
) |
|
$ |
(0.8 |
) |
|
$ |
(22.5 |
) |
|
$ |
(17.7 |
) |
Adjustments to reconcile net
income (loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
4.0 |
|
|
6.4 |
|
|
1.5 |
|
|
0.1 |
|
|
0.1 |
|
|
1.5 |
|
|
— |
|
|
— |
|
|
13.6 |
|
Depreciation and amortization (included in cost of revenue) |
|
2.4 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2.4 |
|
Amortization of equity method fair value adjustment at
acquisition |
|
— |
|
|
(0.3 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(0.3 |
) |
Other operating (income) expenses |
|
— |
|
|
(0.8 |
) |
|
0.1 |
|
|
0.5 |
|
|
— |
|
|
(1.0 |
) |
|
— |
|
|
— |
|
|
(1.2 |
) |
Interest expense |
|
2.2 |
|
|
1.0 |
|
|
0.5 |
|
|
— |
|
|
— |
|
|
2.3 |
|
|
— |
|
|
17.3 |
|
|
23.3 |
|
Other (income) expense, net |
|
0.2 |
|
|
(0.3 |
) |
|
0.1 |
|
|
— |
|
|
(0.1 |
) |
|
0.3 |
|
|
0.8 |
|
|
3.7 |
|
|
4.7 |
|
Net loss on contingent consideration |
|
— |
|
|
— |
|
|
— |
|
|
(0.2 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(0.2 |
) |
Foreign currency (gain) loss (included in cost of revenue) |
|
— |
|
|
0.2 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.2 |
|
Income tax (benefit) expense |
|
4.1 |
|
|
0.1 |
|
|
— |
|
|
— |
|
|
— |
|
|
0.1 |
|
|
— |
|
|
(4.8 |
) |
|
(0.5 |
) |
Noncontrolling interest |
|
0.8 |
|
|
0.8 |
|
|
(0.3 |
) |
|
— |
|
|
(0.5 |
) |
|
(1.0 |
) |
|
— |
|
|
— |
|
|
(0.2 |
) |
Share-based payment expense |
|
— |
|
|
0.4 |
|
|
— |
|
|
— |
|
|
0.1 |
|
|
0.2 |
|
|
— |
|
|
1.4 |
|
|
2.1 |
|
Non-recurring items |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Acquisition and disposition costs |
|
0.5 |
|
|
0.2 |
|
|
0.1 |
|
|
— |
|
|
— |
|
|
0.2 |
|
|
— |
|
|
0.5 |
|
|
1.5 |
|
Adjusted EBITDA |
|
$ |
23.1 |
|
|
$ |
9.6 |
|
|
$ |
1.3 |
|
|
$ |
0.8 |
|
|
$ |
(1.8 |
) |
|
$ |
(0.9 |
) |
|
$ |
— |
|
|
$ |
(4.4 |
) |
|
$ |
27.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Core Operating Subsidiaries |
|
$ |
34.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS, INC.
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED
EBITDA (Unaudited)
|
|
|
(in millions) |
|
Three Months Ended June 30, 2018 |
|
|
Core Operating Subsidiaries |
|
Early Stage & Other |
|
|
|
Total HC2 |
|
|
Construction |
|
Marine Services |
|
Energy |
|
Telecom |
|
Life Sciences |
|
Broadcasting |
|
Other & Elimination |
|
Non-operating Corporate |
|
Net income attributable to HC2
Holdings, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
55.4 |
|
Less: Net Income attributable
to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.6 |
|
Less: Consolidating
eliminations attributable to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2.0 |
) |
Net Income (loss) attributable
to HC2 Holdings, Inc., excluding Insurance segment |
|
$ |
7.4 |
|
|
$ |
10.9 |
|
|
$ |
0.7 |
|
|
$ |
1.0 |
|
|
$ |
74.2 |
|
|
$ |
(11.9 |
) |
|
$ |
(0.5 |
) |
|
$ |
(25.0 |
) |
|
$ |
56.8 |
|
Adjustments to reconcile net
income (loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
1.6 |
|
|
6.4 |
|
|
1.4 |
|
|
0.1 |
|
|
— |
|
|
0.8 |
|
|
— |
|
|
— |
|
|
10.3 |
|
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 |
|
— |
|
|
— |
|
|
0.1 |
|
|
— |
|
|
— |
|
|
0.1 |
|
|
— |
|
|
— |
|
|
0.2 |
|
Gain on sale and deconsolidation of subsidiary |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(102.1 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(102.1 |
) |
Interest expense |
|
0.5 |
|
|
1.3 |
|
|
0.4 |
|
|
— |
|
|
— |
|
|
1.5 |
|
|
— |
|
|
13.5 |
|
|
17.2 |
|
Loss on early extinguishment or restructuring of debt |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2.6 |
|
|
— |
|
|
— |
|
|
2.6 |
|
Other (income) expense, net |
|
— |
|
|
(2.0 |
) |
|
0.1 |
|
|
0.1 |
|
|
0.1 |
|
|
0.1 |
|
|
0.1 |
|
|
0.2 |
|
|
(1.3 |
) |
Foreign currency (gain) loss (included in cost of revenue) |
|
— |
|
|
(0.4 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(0.4 |
) |
Income tax (benefit) expense |
|
3.3 |
|
|
0.1 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(0.3 |
) |
|
2.8 |
|
|
5.9 |
|
Noncontrolling interest |
|
0.6 |
|
|
4.0 |
|
|
0.3 |
|
|
— |
|
|
20.6 |
|
|
(0.7 |
) |
|
(0.5 |
) |
|
— |
|
|
24.3 |
|
Bonus to be settled in equity |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.2 |
|
|
0.2 |
|
Share-based payment expense |
|
— |
|
|
0.5 |
|
|
— |
|
|
— |
|
|
— |
|
|
0.3 |
|
|
0.2 |
|
|
2.7 |
|
|
3.7 |
|
Non-recurring items |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Acquisition and disposition costs |
|
0.5 |
|
|
— |
|
|
— |
|
|
0.1 |
|
|
2.4 |
|
|
0.9 |
|
|
— |
|
|
0.2 |
|
|
4.1 |
|
Adjusted EBITDA |
|
$ |
15.5 |
|
|
$ |
20.4 |
|
|
$ |
3.0 |
|
|
$ |
1.3 |
|
|
$ |
(4.8 |
) |
|
$ |
(6.3 |
) |
|
$ |
(1.0 |
) |
|
$ |
(5.4 |
) |
|
$ |
22.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Core Operating Subsidiaries |
|
$ |
40.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS, INC.
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED
EBITDA (Unaudited)
|
|
|
(in millions) |
|
Six months ended June 30, 2019 |
|
|
Core Operating Subsidiaries |
|
Early Stage & Other |
|
|
|
Total HC2 |
|
|
Construction |
|
Marine Services |
|
Energy |
|
Telecom |
|
Life Sciences |
|
Broadcasting |
|
Other & Elimination |
|
Non-operating Corporate |
|
Net Income attributable to HC2
Holdings, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6.6 |
|
Less: Net Income attributable
to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64.1 |
|
Less: Consolidating
eliminations attributable to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5.5 |
) |
Net Income (loss) attributable
to HC2 Holdings, Inc., excluding Insurance segment |
|
$ |
11.0 |
|
|
$ |
(4.5 |
) |
|
$ |
(1.3 |
) |
|
$ |
1.0 |
|
|
$ |
(4.0 |
) |
|
$ |
(7.9 |
) |
|
$ |
(0.2 |
) |
|
$ |
(46.1 |
) |
|
$ |
(52.0 |
) |
Adjustments to reconcile net
income (loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
7.9 |
|
|
13.0 |
|
|
2.9 |
|
|
0.2 |
|
|
0.1 |
|
|
2.9 |
|
|
— |
|
|
— |
|
|
27.0 |
|
Depreciation and amortization (included in cost of revenue) |
|
4.5 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
4.5 |
|
Amortization of equity method fair value adjustment at
acquisition |
|
— |
|
|
(0.7 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(0.7 |
) |
Other operating (income) expenses |
|
(0.1 |
) |
|
(0.2 |
) |
|
0.1 |
|
|
0.5 |
|
|
— |
|
|
(1.9 |
) |
|
— |
|
|
— |
|
|
(1.6 |
) |
Interest expense |
|
4.7 |
|
|
2.1 |
|
|
0.9 |
|
|
— |
|
|
— |
|
|
3.9 |
|
|
— |
|
|
34.0 |
|
|
45.6 |
|
Net loss on contingent consideration |
|
— |
|
|
— |
|
|
— |
|
|
(0.2 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(0.2 |
) |
Other (income) expense, net |
|
0.2 |
|
|
(0.3 |
) |
|
0.2 |
|
|
— |
|
|
(0.1 |
) |
|
0.4 |
|
|
0.2 |
|
|
1.0 |
|
|
1.6 |
|
Foreign currency (gain) loss (included in cost of revenue) |
|
— |
|
|
0.3 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.3 |
|
Income tax (benefit) expense |
|
5.1 |
|
|
0.1 |
|
|
— |
|
|
— |
|
|
— |
|
|
0.1 |
|
|
— |
|
|
(2.5 |
) |
|
2.8 |
|
Noncontrolling interest |
|
0.9 |
|
|
(1.6 |
) |
|
(0.6 |
) |
|
— |
|
|
(0.8 |
) |
|
(1.6 |
) |
|
— |
|
|
— |
|
|
(3.7 |
) |
Share-based payment expense |
|
— |
|
|
0.8 |
|
|
— |
|
|
— |
|
|
0.1 |
|
|
0.4 |
|
|
— |
|
|
2.5 |
|
|
3.8 |
|
Non-recurring costs |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Acquisition and disposition costs |
|
1.3 |
|
|
0.7 |
|
|
0.1 |
|
|
0.1 |
|
|
— |
|
|
0.3 |
|
|
— |
|
|
0.6 |
|
|
3.1 |
|
Adjusted EBITDA |
|
$ |
35.5 |
|
|
$ |
9.7 |
|
|
$ |
2.3 |
|
|
$ |
1.6 |
|
|
$ |
(4.7 |
) |
|
$ |
(3.4 |
) |
|
$ |
— |
|
|
$ |
(10.5 |
) |
|
$ |
30.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Core Operating Subsidiaries |
|
$ |
49.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS, INC.
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED
EBITDA (Unaudited)
|
|
|
(in millions) |
|
Six months ended June 30, 2018 |
|
|
Core Operating Subsidiaries |
|
Early Stage & Other |
|
|
|
Total HC2 |
|
|
Construction |
|
Marine Services |
|
Energy |
|
Telecom |
|
Life Sciences |
|
Broadcasting |
|
Other & Elimination |
|
Non-operating Corporate |
|
Net Income attributable to HC2
Holdings, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
20.4 |
|
Less: Net Income attributable
to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.8 |
|
Less: Consolidating
eliminations attributable to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4.0 |
) |
Net Income (loss) attributable
to HC2 Holdings, Inc., excluding Insurance Segment |
|
$ |
10.8 |
|
|
$ |
4.6 |
|
|
$ |
— |
|
|
$ |
2.1 |
|
|
$ |
70.2 |
|
|
$ |
(24.5 |
) |
|
$ |
(0.7 |
) |
|
$ |
(39.9 |
) |
|
$ |
22.6 |
|
Adjustments to reconcile net
income (loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
3.2 |
|
|
13.3 |
|
|
2.7 |
|
|
0.2 |
|
|
0.1 |
|
|
1.4 |
|
|
— |
|
|
— |
|
|
20.9 |
|
Depreciation and amortization (included in cost of revenue) |
|
3.2 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3.2 |
|
Amortization of equity method fair value adjustment at
acquisition |
|
— |
|
|
(0.7 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(0.7 |
) |
Other operating (income) expenses |
|
0.4 |
|
|
(2.7 |
) |
|
0.1 |
|
|
— |
|
|
— |
|
|
0.1 |
|
|
— |
|
|
— |
|
|
(2.1 |
) |
Interest expense |
|
0.9 |
|
|
2.5 |
|
|
0.7 |
|
|
— |
|
|
— |
|
|
7.2 |
|
|
— |
|
|
25.2 |
|
|
36.5 |
|
Loss on early extinguishment or restructuring of debt |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2.5 |
|
|
— |
|
|
— |
|
|
2.5 |
|
Gain on sale and deconsolidation of subsidiary |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(102.1 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(102.1 |
) |
Other (income) expense, net |
|
— |
|
|
(1.0 |
) |
|
0.1 |
|
|
— |
|
|
0.1 |
|
|
— |
|
|
0.2 |
|
|
(0.5 |
) |
|
(1.1 |
) |
Foreign currency (gain) loss (included in cost of revenue) |
|
— |
|
|
(0.5 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(0.5 |
) |
Income tax (benefit) expense |
|
5.2 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(0.3 |
) |
|
(0.5 |
) |
|
4.4 |
|
Noncontrolling interest |
|
0.9 |
|
|
1.6 |
|
|
— |
|
|
— |
|
|
19.9 |
|
|
(1.3 |
) |
|
(0.6 |
) |
|
— |
|
|
20.5 |
|
Bonus to be settled in equity |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.4 |
|
|
0.4 |
|
Share-based payment expense |
|
— |
|
|
0.9 |
|
|
— |
|
|
— |
|
|
0.1 |
|
|
0.7 |
|
|
0.2 |
|
|
2.9 |
|
|
4.8 |
|
Non-recurring items |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Acquisition and disposition costs |
|
0.9 |
|
|
— |
|
|
— |
|
|
0.1 |
|
|
2.5 |
|
|
2.6 |
|
|
— |
|
|
0.4 |
|
|
6.5 |
|
Adjusted EBITDA |
|
$ |
25.5 |
|
|
$ |
18.0 |
|
|
$ |
3.6 |
|
|
$ |
2.4 |
|
|
$ |
(9.2 |
) |
|
$ |
(11.3 |
) |
|
$ |
(1.2 |
) |
|
$ |
(12.0 |
) |
|
$ |
15.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Core Operating Subsidiaries |
|
$ |
49.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 June 30, |
|
Six Months Ended June 30, |
|
|
2019 |
|
2018 |
|
Increase / (Decrease) |
|
2019 |
|
2018 |
|
Increase / (Decrease) |
Net income (loss) - Insurance
segment |
|
$ |
30.3 |
|
|
$ |
0.6 |
|
|
$ |
29.7 |
|
|
$ |
64.1 |
|
|
$ |
1.8 |
|
|
$ |
62.3 |
|
Effect of investment (gains)
(1) |
|
0.5 |
|
|
(4.5 |
) |
|
5.0 |
|
|
(5.5 |
) |
|
(7.0 |
) |
|
1.5 |
|
Bargain Purchase Gain |
|
(1.1 |
) |
|
— |
|
|
(1.1 |
) |
|
(1.1 |
) |
|
— |
|
|
(1.1 |
) |
Acquisition costs |
|
1.6 |
|
|
0.8 |
|
|
0.8 |
|
|
1.8 |
|
|
1.1 |
|
|
0.7 |
|
Insurance AOI |
|
31.3 |
|
|
(3.1 |
) |
|
34.4 |
|
|
59.3 |
|
|
(4.1 |
) |
|
63.4 |
|
Income tax expense (benefit) |
|
1.7 |
|
|
3.6 |
|
|
(1.9 |
) |
|
2.4 |
|
|
6.8 |
|
|
(4.4 |
) |
Pre-tax Insurance AOI |
|
$ |
33.0 |
|
|
$ |
0.5 |
|
|
$ |
32.5 |
|
|
$ |
61.7 |
|
|
$ |
2.7 |
|
|
$ |
59.0 |
|
|
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(1) The Insurance segment revenues are
inclusive of realized and unrealized gains and net investment
income for the three and six months ended June 30, 2019 and 2018.
Such adjustments are related to transactions between entities under
common control which are eliminated or are reclassified in
consolidation.
HC2 (NYSE:HCHC)
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