HC2 Holdings, Inc. (“HC2” or the “Company”) (NYSE: HCHC), a
diversified holding company, announced today its consolidated
results for the third quarter ended September 30, 2019.
Third Quarter 2019
Highlights
- Consolidated net revenue of $475.7
million, compared to $501.4 million in the year-ago quarter.
- Net loss attributable to common and
participating preferred stockholders of $7.5 million, or $0.16 per
fully diluted share, compared to net income of $152.8 million, or
$2.97 per fully diluted share, in the year-ago quarter. Third
quarter 2018 net income benefited from approximately $171.0 million
in pre-tax one-time gains related to an acquisition at the
Insurance segment and from our investment in Inseego Corp.
- Adjusted EBITDA for Core Operating
Subsidiaries* increased 30% to $34.2 million, compared to $26.3
million in the year-ago quarter.
- Total Adjusted EBITDA, excluding
Insurance, increased 72% to $23.6 million, compared to $13.7
million in the year-ago quarter.
- Pre-tax Adjusted Operating Income
for Insurance segment of $13.5 million, compared to Pre-tax AOI
loss of $11.3 million in the year-ago quarter.* “Core Operating
Subsidiaries” consists of HC2’s Construction, Marine Services,
Energy and Telecommunications segments.
Subsequent to Quarter End
- Marine Services (“Global Marine
Group” or “GMG”) agreed to a sale of its stake in Huawei Marine
Networks Co., Limited (“HMN”) to Hengtong Optic-Electric Co Ltd.
(“Hengtong”).
- Broadcasting (HC2 Broadcasting
Holdings, Inc. and certain of its operating subsidiaries (together,
“HC2 Broadcasting”)) completed the issuance of $78.7 million of new
notes, which have a blended PIK coupon rate of 9.6% and mature in
October 2020, to retire HC2 Broadcasting's existing notes due 2019,
as well as fund pending acquisitions, working capital and general
corporate purposes.
“We’ve made significant progress in recent weeks
with respect to the sale of Global Marine and the refinancing of
Broadcasting,” stated Philip Falcone, HC2’s Chairman, Chief
Executive Officer and President. “With the sale agreement of Global
Marine Group's stake in the HMN joint venture, we again prove the
value creation inherent within our large portfolio of assets. The
HMN sale provides us with further momentum in the ongoing sales
process of our majority stake in GMG, which will position us to
commence de-levering our balance sheet and offers an opportunity to
reduce our cost of capital. At Broadcasting, we recently
completed a financing package which allows us to re-focus on our
over-the-air strategy by completing the build-out of our broadcast
distribution platform. As we bring more stations online and
make progress towards our goal of reaching 80% of U.S. household
coverage, we expect additional networks will be attracted to our
platform, which is key to our strategy of growing our Broadcasting
revenue and profitability over the longer term.”
“Operationally, our third quarter saw us perform
strongly as we increased core Adjusted EBITDA by 30% from the
prior-year period,” continued Mr. Falcone. “Not only did
Construction benefit from consistently successful project execution
and strong results at GrayWolf Industrial, on an adjusted basis,
backlog reached a record $833 million, taking into consideration
awarded, but not yet signed contracts. Our Insurance segment
produced another quarter of excellent results and has now generated
over $75 million in Pre-Tax AOI thus far in 2019, an impressive
performance considering we formed the platform just four years
ago. Furthermore, our Energy segment has seen a seamless
integration of the recently acquired ampCNG stations with a near
100% uptime, and we’re very pleased with the results we’ve seen so
far. Overall, we remain excited about the opportunities
present throughout our platform - from the consistent and strong
cash flows generated at our Construction and Insurance segments, to
the longer-term growth opportunities at our Broadcasting and Energy
segments, along with the potential to unlock considerable value at
Life Sciences, HC2 is poised to build meaningful value as we move
forward.”
Global Marine Strategic Alternatives Update
As previously disclosed, Global Marine Group,
HC2's Marine Services segment, agreed to a sale of its stake in
HMN, its 49% joint venture with Huawei Technologies Co., Ltd.
(“Huawei”), to Hengtong. The sale of GMG's interest values
HMN at $285 million, and GMG's 49% stake at approximately $140
million.
Under the agreement, GMG is selling 30%
ownership of HMN to Hengtong at closing and will retain a 19%
interest under a two-year put option agreement, which it will be
able to exercise in 2022 at the greater of the current $285 million
equity valuation or fair market value at that time. Hengtong
is also purchasing Huawei's full 51% stake and will own 81% of the
joint venture upon the closing of both sales, and 100% upon the
exercise of GMG's put option. Completion of the sale is
expected by the first quarter of 2020, subject to customary closing
conditions, with proceeds delivered to GMG at that time.
After satisfaction of any pending obligations and in concert with
any sale of Global Marine Systems Limited (“GMSL”), HC2's share of
the net proceeds from the HMN sale will be utilized to reduce debt
at the HC2 holding company level.
HC2 continues to make progress with respect to a
potential sale for its majority stake in GMG, including, without
limitation, its operating subsidiary GMSL. 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 HMN transaction will be completed as proposed or
at all, or that the exploration of any other strategic alternative,
including a potential sale of GMG, will result in a consummated
transaction or other alternative. Neither HC2 nor GMG 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.
Third Quarter Financial Highlights
- Net Revenue: For
the third quarter of 2019, HC2 consolidated net revenue was $475.7
million, compared to $501.4 million for the year-ago quarter.
Lower revenue in Construction, Telecommunications and Broadcasting
segments were partially offset by increases in revenue from the
Insurance segment, net of eliminations, as well as from the Energy
and Marine Services segments.
NET
REVENUE by OPERATING SEGMENT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
|
|
Increase / |
|
|
|
|
|
Increase / |
|
2019 |
|
2018 |
|
(Decrease) |
|
2019 |
|
2018 |
|
(Decrease) |
Construction |
$ |
168.4 |
|
|
$ |
195.3 |
|
|
$ |
(26.9 |
) |
|
$ |
556.2 |
|
|
$ |
531.2 |
|
|
$ |
25.0 |
|
Marine Services |
48.2 |
|
|
44.8 |
|
|
3.4 |
|
|
130.0 |
|
|
149.9 |
|
|
(19.9 |
) |
Energy |
8.7 |
|
|
4.6 |
|
|
4.1 |
|
|
19.3 |
|
|
16.2 |
|
|
3.1 |
|
Telecommunications |
162.2 |
|
|
187.8 |
|
|
(25.6 |
) |
|
507.0 |
|
|
580.6 |
|
|
(73.6 |
) |
Total Core Operating
Subsidiaries |
$ |
387.5 |
|
|
$ |
432.5 |
|
|
$ |
(45.0 |
) |
|
$ |
1,212.5 |
|
|
$ |
1,277.9 |
|
|
$ |
(65.4 |
) |
Insurance |
80.4 |
|
|
77.2 |
|
|
3.2 |
|
|
251.3 |
|
|
161.1 |
|
|
90.2 |
|
Broadcasting |
10.0 |
|
|
12.0 |
|
|
(2.0 |
) |
|
29.8 |
|
|
33.7 |
|
|
(3.9 |
) |
Other |
— |
|
|
0.3 |
|
|
(0.3 |
) |
|
— |
|
|
3.7 |
|
|
(3.7 |
) |
Eliminations (1) |
(2.2 |
) |
|
(20.6 |
) |
|
18.4 |
|
|
(7.9 |
) |
|
(24.6 |
) |
|
16.7 |
|
Consolidated HC2 |
$ |
475.7 |
|
|
$ |
501.4 |
|
|
$ |
(25.7 |
) |
|
$ |
1,485.7 |
|
|
$ |
1,451.8 |
|
|
$ |
33.9 |
|
(1) The Insurance segment revenues are inclusive of realized
and unrealized gains and net investment income for the three and
nine months ended September 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 third quarter of 2019, HC2 reported
a Net Loss attributable to common stock and participating preferred
stockholders of $7.5 million, or $0.16 per fully diluted share,
compared to Net Income of $152.8 million, or $2.97 per fully
diluted share, in the year-ago quarter. Net Income for the
prior-year period included a bargain purchase gain of $109.1
million related to the acquisition of Humana Inc.'s long-term care
(“LTC”) business, a $44.2 million gain from our investment in
Inseego Corp. and a $17.7 million gain on the recapture of a
reinsurance treaty.
NET
INCOME (LOSS) by OPERATING SEGMENT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
|
|
Increase / |
|
|
|
|
|
Increase / |
|
2019 |
|
2018 |
|
(Decrease) |
|
2019 |
|
2018 |
|
(Decrease) |
Construction |
$ |
7.0 |
|
|
$ |
9.2 |
|
|
$ |
(2.2 |
) |
|
$ |
18.0 |
|
|
$ |
20.1 |
|
|
$ |
(2.1 |
) |
Marine Services |
2.6 |
|
|
(0.5 |
) |
|
3.1 |
|
|
(1.9 |
) |
|
4.1 |
|
|
(6.0 |
) |
Energy |
(0.1 |
) |
|
(0.6 |
) |
|
0.5 |
|
|
(1.4 |
) |
|
(0.6 |
) |
|
(0.8 |
) |
Telecommunications |
(0.3 |
) |
|
1.3 |
|
|
(1.6 |
) |
|
0.7 |
|
|
3.4 |
|
|
(2.7 |
) |
Total Core Operating
Subsidiaries |
$ |
9.2 |
|
|
$ |
9.4 |
|
|
$ |
(0.2 |
) |
|
$ |
15.4 |
|
|
$ |
27.0 |
|
|
$ |
(11.6 |
) |
Insurance |
10.5 |
|
|
141.1 |
|
|
(130.6 |
) |
|
74.6 |
|
|
142.9 |
|
|
(68.3 |
) |
Life Sciences |
5.6 |
|
|
(2.6 |
) |
|
8.2 |
|
|
1.6 |
|
|
67.5 |
|
|
(65.9 |
) |
Broadcasting |
(6.2 |
) |
|
(4.7 |
) |
|
(1.5 |
) |
|
(14.1 |
) |
|
(29.2 |
) |
|
15.1 |
|
Other |
(0.2 |
) |
|
4.5 |
|
|
(4.7 |
) |
|
(0.4 |
) |
|
3.8 |
|
|
(4.2 |
) |
Non-operating Corporate |
(23.9 |
) |
|
(17.3 |
) |
|
(6.6 |
) |
|
(70.0 |
) |
|
(57.2 |
) |
|
(12.8 |
) |
Eliminations (1) |
(2.1 |
) |
|
23.1 |
|
|
(25.2 |
) |
|
(7.6 |
) |
|
19.0 |
|
|
(26.6 |
) |
Net income (loss) attributable
to HC2 Holdings, Inc. |
$ |
(7.1 |
) |
|
$ |
153.5 |
|
|
$ |
(160.6 |
) |
|
$ |
(0.5 |
) |
|
$ |
173.8 |
|
|
$ |
(174.3 |
) |
Less: Preferred dividends,
deemed dividends, and repurchase gains |
0.4 |
|
|
0.7 |
|
|
(0.3 |
) |
|
(0.4 |
) |
|
2.1 |
|
|
(2.5 |
) |
Net income (loss) attributable
to common stock and participating preferred stockholders |
$ |
(7.5 |
) |
|
$ |
152.8 |
|
|
$ |
(160.3 |
) |
|
$ |
(0.1 |
) |
|
$ |
171.7 |
|
|
$ |
(171.8 |
) |
(1) The
Insurance segment is inclusive of realized and unrealized gains and
net investment income for the three and nine months ended September
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” increased 30% to a combined $34.2 million for the
third quarter of 2019, compared to $26.3 million for the year-ago
quarter, as significant improvements at Construction, Marine
Services and Energy were partially offset by reduced contributions
at Telecommunications.For the third quarter of 2019, Total HC2
Adjusted EBITDA, which excludes the Insurance segment, increased
72% to $23.6 million, compared to Adjusted EBITDA of $13.7 million
for the year-ago quarter, due primarily to the increase in Core
Operating Subsidiaries Adjusted EBITDA, as well as reduced losses
at Broadcasting and lower recurring expenses at the Non-operating
Corporate segment.
ADJUSTED
EBITDA by OPERATING SEGMENT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
|
|
Increase / |
|
|
|
|
|
Increase / |
|
2019 |
|
2018 |
|
(Decrease) |
|
2019 |
|
2018 |
|
(Decrease) |
Construction |
$ |
19.4 |
|
|
$ |
15.9 |
|
|
$ |
3.5 |
|
|
$ |
54.9 |
|
|
$ |
41.5 |
|
|
$ |
13.4 |
|
Marine Services |
11.7 |
|
|
7.9 |
|
|
3.8 |
|
|
21.4 |
|
|
25.8 |
|
|
(4.4 |
) |
Energy |
2.3 |
|
|
1.0 |
|
|
1.3 |
|
|
4.6 |
|
|
4.7 |
|
|
(0.1 |
) |
Telecommunications |
0.8 |
|
|
1.5 |
|
|
(0.7 |
) |
|
2.4 |
|
|
3.8 |
|
|
(1.4 |
) |
Total Core Operating
Subsidiaries |
$ |
34.2 |
|
|
$ |
26.3 |
|
|
$ |
7.9 |
|
|
$ |
83.3 |
|
|
$ |
75.8 |
|
|
$ |
7.5 |
|
Life Sciences |
(4.0 |
) |
|
(3.0 |
) |
|
(1.0 |
) |
|
(8.7 |
) |
|
(12.2 |
) |
|
3.5 |
|
Broadcasting |
(1.9 |
) |
|
(2.4 |
) |
|
0.5 |
|
|
(5.3 |
) |
|
(13.7 |
) |
|
8.4 |
|
Other and Eliminations |
— |
|
|
(1.0 |
) |
|
1.0 |
|
|
— |
|
|
(2.2 |
) |
|
2.2 |
|
Non-operating Corporate |
(4.7 |
) |
|
(6.2 |
) |
|
1.5 |
|
|
(15.2 |
) |
|
(18.3 |
) |
|
3.1 |
|
Total HC2 Adjusted EBITDA |
$ |
23.6 |
|
|
$ |
13.7 |
|
|
$ |
9.9 |
|
|
$ |
54.1 |
|
|
$ |
29.4 |
|
|
$ |
24.7 |
|
- Balance Sheet: As
of September 30, 2019, HC2 had consolidated cash, cash equivalents
and investments of $4.6 billion, which includes cash and
investments associated with HC2’s Insurance segment.
Excluding the Insurance segment, consolidated cash was $80.3
million, of which $7.7 million was at the HC2 corporate level.
Third Quarter 2019 Segment
Highlights
- Construction– For
the third quarter of 2019, DBM Global Inc. (“DBM”) reported Net
Income of $7.0 million, compared to $9.2 million for the year-ago
quarter. Adjusted EBITDA increased 22% year-over-year to
$19.4 million, driven by positive project execution and
contributions from GrayWolf Industrial.– DBM's total backlog was
approximately $475.3 million as of September 30, 2019, compared to
$615.4 million for the year-ago quarter. Taking into
consideration awarded, but not yet signed contracts, backlog would
have been approximately $833.0 million at the end of the third
quarter 2019, compared to $632.0 million at the end of the third
quarter 2018.
- Insurance– As of
September 30, 2019, Continental Insurance Group (“Continental”) had
$4.5 billion of cash and invested assets, $5.6 billion in total
GAAP assets, and an estimated $334 million of total adjusted
capital.– For the third quarter of 2019, Continental reported Net
Income of $10.5 million, compared to $141.1 million for the
year-ago quarter. Net Income for the prior-year period
included a bargain purchase gain related to the acquisition of
Humana Inc.'s LTC business, a gain from the Company's equity
investment in Inseego Corp. and a gain on the recapture of a
reinsurance treaty.– Pre-tax Insurance AOI was $13.5 million for
the third quarter of 2019, compared to a Pre-tax Insurance AOI loss
of $11.3 million for the year-ago quarter. The increase was
primarily driven by the incremental net investment income and
policy premiums from the 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 a rotation
into additional fixed rate 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.
- Energy– For the
third quarter of 2019, American Natural Gas (“ANG”) reported Net
Loss of $0.1 million, compared to $0.6 million for the year-ago
quarter. Adjusted EBITDA increased 130% year-over-year to
$2.3 million, driven by contributions from ANG's June 2019
acquisition of ampCNG's stations, which added 20 CNG fueling
stations to ANG's nationwide network.
- Broadcasting– In
October, HC2 Broadcasting completed the issuance of $78.7 million
of new notes, which have a blended PIK coupon rate of 9.6% and
mature in October 2020. Net proceeds from the financing were
used to retire HC2 Broadcasting's existing notes due 2019, as well
as fund pending acquisitions, working capital and general corporate
purposes.– As of late October 2019, HC2’s Broadcasting segment has
184 operational stations, including 9 full-power stations, 52 Class
A stations and 123 LPTV stations in over 130 U.S. markets,
including 9 of the top 10 markets across the United States.
In addition, Broadcasting has 350 silent licenses and construction
permits, a portion of which will be built out over the next couple
of years.
- Marine Services–
Total backlog for Global Marine was approximately $398.7 million as
of September 30, 2019, inclusive of $103.1 million of installation
projects, compared to total backlog of $357.7 million as of
September 30, 2018, inclusive of $32.5 million of installation
projects. Installation project backlog increased by $70.6
million compared to the year-ago quarter.
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 to be between $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 third 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): 1-877-705-6003
International Dial-In: 1-201-493-6725
Participant Entry Number: 13695394
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: 13695394
*Available approximately two hours after the end of the
conference call through November 19, 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
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.
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 September 30, |
|
Nine Months Ended September 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Revenue |
$ |
397.5 |
|
|
$ |
444.8 |
|
|
$ |
1,242.3 |
|
|
$ |
1,315.3 |
|
Life, accident and health
earned premiums, net |
28.9 |
|
|
25.4 |
|
|
88.7 |
|
|
65.3 |
|
Net investment income |
51.2 |
|
|
31.7 |
|
|
152.6 |
|
|
68.8 |
|
Net realized and unrealized
(losses) gains on investments |
(1.9 |
) |
|
(0.5 |
) |
|
2.1 |
|
|
2.4 |
|
Net revenue |
475.7 |
|
|
501.4 |
|
|
1,485.7 |
|
|
1,451.8 |
|
Operating expenses |
|
|
|
|
|
|
|
Cost of revenue |
337.0 |
|
|
402.9 |
|
|
1,075.9 |
|
|
1,179.2 |
|
Policy benefits, changes in reserves, and commissions |
66.1 |
|
|
66.5 |
|
|
166.8 |
|
|
134.1 |
|
Selling, general and administrative |
54.4 |
|
|
50.9 |
|
|
159.4 |
|
|
160.0 |
|
Depreciation and amortization |
8.6 |
|
|
6.2 |
|
|
23.1 |
|
|
25.0 |
|
Other operating income |
— |
|
|
(0.8 |
) |
|
(1.6 |
) |
|
(2.9 |
) |
Total operating expenses |
466.1 |
|
|
525.7 |
|
|
1,423.6 |
|
|
1,495.4 |
|
Income (loss) from operations |
9.6 |
|
|
(24.3 |
) |
|
62.1 |
|
|
(43.6 |
) |
Interest expense |
(24.0 |
) |
|
(17.5 |
) |
|
(69.3 |
) |
|
(54.0 |
) |
Gain on sale and
deconsolidation of subsidiary |
— |
|
|
3.0 |
|
|
— |
|
|
105.1 |
|
Income from equity
investees |
0.3 |
|
|
8.1 |
|
|
1.5 |
|
|
13.7 |
|
Gain on bargain purchase |
— |
|
|
109.1 |
|
|
1.1 |
|
|
109.1 |
|
Other income, net |
6.8 |
|
|
63.9 |
|
|
5.4 |
|
|
64.0 |
|
(Loss) income from continuing operations |
(7.3 |
) |
|
142.3 |
|
|
0.8 |
|
|
194.3 |
|
Income tax (expense)
benefit |
(1.0 |
) |
|
9.2 |
|
|
(6.2 |
) |
|
(1.9 |
) |
Net (loss) income |
(8.3 |
) |
|
151.5 |
|
|
(5.4 |
) |
|
192.4 |
|
Net loss (income) attributable
to noncontrolling interest and redeemable noncontrolling
interest |
1.2 |
|
|
2.0 |
|
|
4.9 |
|
|
(18.6 |
) |
Net (loss) income attributable to HC2 Holdings, Inc. |
(7.1 |
) |
|
153.5 |
|
|
(0.5 |
) |
|
173.8 |
|
Less: Preferred dividends,
deemed dividends, and repurchase gains |
0.4 |
|
|
0.7 |
|
|
(0.4 |
) |
|
2.1 |
|
Net (loss) income attributable to common stock and participating
preferred stockholders |
$ |
(7.5 |
) |
|
$ |
152.8 |
|
|
$ |
(0.1 |
) |
|
$ |
171.7 |
|
|
|
|
|
|
|
|
|
(Loss) income per common
share |
|
|
|
|
|
|
|
Basic |
$ |
(0.16 |
) |
|
$ |
3.09 |
|
|
$ |
— |
|
|
$ |
3.48 |
|
Diluted |
$ |
(0.16 |
) |
|
$ |
2.97 |
|
|
$ |
— |
|
|
$ |
3.38 |
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
Basic |
45.7 |
|
|
44.3 |
|
|
45.4 |
|
|
44.2 |
|
Diluted |
45.7 |
|
|
46.2 |
|
|
45.4 |
|
|
45.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS,
INC.CONDENSED CONSOLIDATED BALANCE
SHEET(in millions, except share
amounts)(Unaudited)
|
|
|
|
|
September 30, |
|
December 31, |
|
2019 |
|
2018 |
Assets |
|
|
|
Investments: |
|
|
|
Fixed maturity securities, available-for-sale at fair value |
$ |
3,975.5 |
|
|
$ |
3,391.6 |
|
Equity securities |
104.3 |
|
|
200.5 |
|
Mortgage loans |
165.7 |
|
|
137.6 |
|
Policy loans |
19.1 |
|
|
19.8 |
|
Other invested assets |
84.4 |
|
|
72.5 |
|
Total investments |
4,349.0 |
|
|
3,822.0 |
|
Cash and cash equivalents |
276.9 |
|
|
325.0 |
|
Accounts receivable, net |
293.3 |
|
|
379.2 |
|
Recoverable from reinsurers |
947.9 |
|
|
1,000.2 |
|
Deferred tax asset |
2.0 |
|
|
2.1 |
|
Property, plant and equipment, net |
405.8 |
|
|
376.3 |
|
Goodwill |
177.1 |
|
|
171.7 |
|
Intangibles, net |
223.7 |
|
|
219.2 |
|
Other assets |
269.8 |
|
|
208.1 |
|
Total assets |
$ |
6,945.5 |
|
|
$ |
6,503.8 |
|
|
|
|
|
Liabilities, temporary
equity and stockholders’ equity |
|
|
|
Life, accident and health reserves |
$ |
4,543.5 |
|
|
$ |
4,562.1 |
|
Annuity reserves |
236.9 |
|
|
245.2 |
|
Value of business acquired |
226.1 |
|
|
244.6 |
|
Accounts payable and other current liabilities |
329.1 |
|
|
344.9 |
|
Deferred tax liability |
83.7 |
|
|
30.3 |
|
Debt obligations |
820.4 |
|
|
743.9 |
|
Other liabilities |
183.1 |
|
|
110.8 |
|
Total liabilities |
6,422.8 |
|
|
6,281.8 |
|
Commitments and
contingencies |
|
|
|
Temporary equity |
|
|
|
Preferred stock |
10.3 |
|
|
20.3 |
|
Redeemable noncontrolling interest |
11.0 |
|
|
8.0 |
|
Total temporary equity |
21.3 |
|
|
28.3 |
|
Stockholders’ equity |
|
|
|
Common stock, $.001 par value |
— |
|
|
— |
|
Shares authorized: 80,000,000 at September 30, 2019 and December
31, 2018; |
|
|
|
Shares issued: 46,554,499 and 45,391,397 at September 30, 2019 and
December 31, 2018; |
|
|
|
Shares outstanding: 45,850,584 and 44,907,818 at September 30, 2019
and December 31, 2018, respectively |
|
|
|
Additional paid-in capital |
272.6 |
|
|
260.5 |
|
Treasury stock, at cost: 703,915 and 483,579 shares at September
30, 2019 and December 31, 2018, respectively |
(3.2 |
) |
|
(2.6 |
) |
Accumulated deficit |
(62.0 |
) |
|
(57.2 |
) |
Accumulated other comprehensive income (loss) |
197.4 |
|
|
(112.6 |
) |
Total HC2 Holdings, Inc.
stockholders’ equity |
404.8 |
|
|
88.1 |
|
Noncontrolling interest |
96.6 |
|
|
105.6 |
|
Total stockholders’
equity |
501.4 |
|
|
193.7 |
|
Total liabilities, temporary
equity and stockholders’ equity |
$ |
6,945.5 |
|
|
$ |
6,503.8 |
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS,
INC.RECONCILIATION OF NET INCOME (LOSS) TO
ADJUSTED EBITDA(Unaudited)
|
|
(in millions) |
Three Months Ended September 30, 2019 |
|
Core Operating Subsidiaries |
|
Early Stage & Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
Marine |
|
|
|
|
|
Life |
|
|
|
Other & |
|
operating |
|
Total |
|
Construction |
|
Services |
|
Energy |
|
Telecom |
|
Sciences |
|
Broadcasting |
|
Elimination |
|
Corporate |
|
HC2 |
Net Loss attributable to HC2 Holdings, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(7.1 |
) |
Less: Net Income attributable
to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.5 |
|
Less: Consolidating
eliminations attributable to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2.1 |
) |
Net Income (loss) attributable
to HC2 Holdings, Inc., excluding Insurance segment |
$ |
7.0 |
|
|
$ |
2.6 |
|
|
$ |
(0.1 |
) |
|
$ |
(0.3 |
) |
|
$ |
5.6 |
|
|
$ |
(6.2 |
) |
|
$ |
(0.2 |
) |
|
$ |
(23.9 |
) |
|
$ |
(15.5 |
) |
Adjustments to reconcile net
income (loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
3.9 |
|
|
6.4 |
|
|
2.0 |
|
|
0.1 |
|
|
— |
|
|
1.8 |
|
|
— |
|
|
0.1 |
|
|
14.3 |
|
Depreciation and amortization (included in cost of revenue) |
2.2 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2.2 |
|
Amortization of equity method fair value adjustment at
acquisition |
— |
|
|
(0.4 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(0.4 |
) |
Other operating (income) expense |
— |
|
|
0.2 |
|
|
(0.2 |
) |
|
0.8 |
|
|
— |
|
|
(0.8 |
) |
|
— |
|
|
— |
|
|
— |
|
Gain on sale and deconsolidation of subsidiary |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Interest expense |
2.3 |
|
|
1.2 |
|
|
1.0 |
|
|
— |
|
|
— |
|
|
2.4 |
|
|
— |
|
|
17.1 |
|
|
24.0 |
|
Other (income) expense, net |
(0.1 |
) |
|
(1.1 |
) |
|
(0.3 |
) |
|
— |
|
|
(8.2 |
) |
|
0.9 |
|
|
0.2 |
|
|
2.9 |
|
|
(5.7 |
) |
Loss on early extinguishment or restructuring of debt |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Net loss on contingent consideration |
— |
|
|
— |
|
|
— |
|
|
(0.1 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(0.1 |
) |
Foreign currency (gain) loss (included in cost of revenue) |
— |
|
|
0.1 |
|
|
— |
|
|
0.1 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.2 |
|
Income tax (benefit) expense |
2.9 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(2.8 |
) |
|
0.1 |
|
Noncontrolling interest |
0.5 |
|
|
0.9 |
|
|
(0.1 |
) |
|
— |
|
|
(1.4 |
) |
|
(1.1 |
) |
|
— |
|
|
— |
|
|
(1.2 |
) |
Bonus to be settled in equity |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Share-based payment expense |
— |
|
|
0.5 |
|
|
— |
|
|
— |
|
|
— |
|
|
0.1 |
|
|
— |
|
|
1.5 |
|
|
2.1 |
|
Non-recurring items |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Acquisition and disposition costs |
0.7 |
|
|
1.3 |
|
|
— |
|
|
0.2 |
|
|
— |
|
|
1.0 |
|
|
— |
|
|
0.4 |
|
|
3.6 |
|
Adjusted EBITDA |
$ |
19.4 |
|
|
$ |
11.7 |
|
|
$ |
2.3 |
|
|
$ |
0.8 |
|
|
$ |
(4.0 |
) |
|
$ |
(1.9 |
) |
|
$ |
— |
|
|
$ |
(4.7 |
) |
|
$ |
23.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Core Operating Subsidiaries |
$ |
34.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS,
INC.RECONCILIATION OF NET INCOME (LOSS) TO
ADJUSTED EBITDA(Unaudited)
|
(in millions) |
Three Months Ended September 30, 2018 |
|
Core Operating Subsidiaries |
|
Early Stage & Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
Marine |
|
|
|
|
|
Life |
|
|
|
Other & |
|
operating |
|
Total |
|
Construction |
|
Services |
|
Energy |
|
Telecom |
|
Sciences |
|
Broadcasting |
|
Elimination |
|
Corporate |
|
HC2 |
Net Income attributable to HC2 Holdings, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
153.5 |
|
Less: Net Income attributable
to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141.1 |
|
Less: Consolidating
eliminations attributable to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.1 |
|
Net Income (loss) attributable
to HC2 Holdings, Inc., excluding Insurance segment |
$ |
9.2 |
|
|
$ |
(0.5 |
) |
|
$ |
(0.6 |
) |
|
$ |
1.3 |
|
|
$ |
(2.6 |
) |
|
$ |
(4.7 |
) |
|
$ |
4.5 |
|
|
$ |
(17.3 |
) |
|
$ |
(10.7 |
) |
Adjustments to reconcile net
income (loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
1.9 |
|
|
6.9 |
|
|
1.4 |
|
|
0.1 |
|
|
— |
|
|
0.8 |
|
|
— |
|
|
— |
|
|
11.1 |
|
Depreciation and amortization (included in cost of revenue) |
1.8 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1.8 |
|
Amortization of equity method fair value adjustment at
acquisition |
— |
|
|
(0.4 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(0.4 |
) |
Other operating (income) expense |
(0.7 |
) |
|
(0.1 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(0.8 |
) |
Gain on sale and deconsolidation of subsidiary |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1.5 |
) |
|
— |
|
|
(1.5 |
) |
Interest expense |
0.6 |
|
|
1.2 |
|
|
0.4 |
|
|
— |
|
|
— |
|
|
0.5 |
|
|
— |
|
|
14.6 |
|
|
17.3 |
|
Other (income) expense, net |
(2.0 |
) |
|
(0.2 |
) |
|
0.1 |
|
|
— |
|
|
— |
|
|
0.4 |
|
|
(3.6 |
) |
|
1.5 |
|
|
(3.8 |
) |
Loss on early extinguishment or restructuring of debt |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Net loss on contingent consideration |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Foreign currency (gain) loss (included in cost of revenue) |
— |
|
|
0.2 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.2 |
|
Income tax (benefit) expense |
3.8 |
|
|
0.1 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(6.4 |
) |
|
(2.5 |
) |
Noncontrolling interest |
0.8 |
|
|
— |
|
|
(0.3 |
) |
|
— |
|
|
(0.5 |
) |
|
(1.5 |
) |
|
(0.4 |
) |
|
— |
|
|
(1.9 |
) |
Bonus to be settled in equity |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.2 |
|
|
0.2 |
|
Share-based payment expense |
— |
|
|
0.5 |
|
|
— |
|
|
— |
|
|
0.1 |
|
|
1.7 |
|
|
— |
|
|
1.0 |
|
|
3.3 |
|
Non-recurring items |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Acquisition and disposition costs |
0.5 |
|
|
0.2 |
|
|
— |
|
|
0.1 |
|
|
— |
|
|
0.4 |
|
|
— |
|
|
0.2 |
|
|
1.4 |
|
Adjusted EBITDA |
$ |
15.9 |
|
|
$ |
7.9 |
|
|
$ |
1.0 |
|
|
$ |
1.5 |
|
|
$ |
(3.0 |
) |
|
$ |
(2.4 |
) |
|
$ |
(1.0 |
) |
|
$ |
(6.2 |
) |
|
$ |
13.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Core Operating Subsidiaries |
$ |
26.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS,
INC.RECONCILIATION OF NET INCOME (LOSS) TO
ADJUSTED EBITDA(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
Nine Months Ended September 30, 2019 |
|
Core Operating Subsidiaries |
|
Early Stage & Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
Marine |
|
|
|
|
|
Life |
|
|
|
Other & |
|
operating |
|
Total |
|
Construction |
|
Services |
|
Energy |
|
Telecom |
|
Sciences |
|
Broadcasting |
|
Elimination |
|
Corporate |
|
HC2 |
Net Loss attributable to HC2
Holdings, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(0.5 |
) |
Less: Net Income attributable
to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74.6 |
|
Less: Consolidating
eliminations attributable to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7.6 |
) |
Net Income (loss) attributable
to HC2 Holdings, Inc., excluding Insurance segment |
$ |
18.0 |
|
|
$ |
(1.9 |
) |
|
$ |
(1.4 |
) |
|
$ |
0.7 |
|
|
$ |
1.6 |
|
|
$ |
(14.1 |
) |
|
$ |
(0.4 |
) |
|
$ |
(70.0 |
) |
|
$ |
(67.5 |
) |
Adjustments to reconcile net
income (loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
11.8 |
|
|
19.4 |
|
|
4.9 |
|
|
0.3 |
|
|
0.1 |
|
|
4.7 |
|
|
— |
|
|
0.1 |
|
|
41.3 |
|
Depreciation and amortization (included in cost of revenue) |
6.7 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
6.7 |
|
Amortization of equity method fair value adjustment at
acquisition |
— |
|
|
(1.1 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1.1 |
) |
Other operating (income) expense |
(0.1 |
) |
|
— |
|
|
(0.1 |
) |
|
1.3 |
|
|
— |
|
|
(2.7 |
) |
|
— |
|
|
— |
|
|
(1.6 |
) |
Gain on sale and deconsolidation of subsidiary |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Interest expense |
7.0 |
|
|
3.3 |
|
|
1.9 |
|
|
— |
|
|
— |
|
|
6.3 |
|
|
— |
|
|
51.1 |
|
|
69.6 |
|
Other (income) expense, net |
0.1 |
|
|
(1.4 |
) |
|
(0.1 |
) |
|
— |
|
|
(8.3 |
) |
|
1.3 |
|
|
0.4 |
|
|
3.9 |
|
|
(4.1 |
) |
Loss on early extinguishment or restructuring of debt |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Net loss on contingent consideration |
— |
|
|
— |
|
|
— |
|
|
(0.3 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(0.3 |
) |
Foreign currency (gain) loss (included in cost of revenue) |
— |
|
|
0.4 |
|
|
— |
|
|
0.1 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.5 |
|
Income tax (benefit) expense |
8.0 |
|
|
0.1 |
|
|
— |
|
|
— |
|
|
— |
|
|
0.1 |
|
|
— |
|
|
(5.3 |
) |
|
2.9 |
|
Noncontrolling interest |
1.4 |
|
|
(0.7 |
) |
|
(0.7 |
) |
|
— |
|
|
(2.2 |
) |
|
(2.7 |
) |
|
— |
|
|
— |
|
|
(4.9 |
) |
Bonus to be settled in equity |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Share-based payment expense |
— |
|
|
1.3 |
|
|
— |
|
|
— |
|
|
0.1 |
|
|
0.5 |
|
|
— |
|
|
4.0 |
|
|
5.9 |
|
Non-recurring items |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Acquisition and disposition costs |
2.0 |
|
|
2.0 |
|
|
0.1 |
|
|
0.3 |
|
|
— |
|
|
1.3 |
|
|
— |
|
|
1.0 |
|
|
6.7 |
|
Adjusted EBITDA |
$ |
54.9 |
|
|
$ |
21.4 |
|
|
$ |
4.6 |
|
|
$ |
2.4 |
|
|
$ |
(8.7 |
) |
|
$ |
(5.3 |
) |
|
$ |
— |
|
|
$ |
(15.2 |
) |
|
$ |
54.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Core Operating Subsidiaries |
$ |
83.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS,
INC.RECONCILIATION OF NET INCOME (LOSS) TO
ADJUSTED EBITDA(Unaudited)
|
|
(in millions) |
Nine Months Ended September 30, 2018 |
|
Core Operating Subsidiaries |
|
Early Stage & Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
Marine |
|
|
|
|
|
Life |
|
|
|
Other & |
|
operating |
|
Total |
|
Construction |
|
Services |
|
Energy |
|
Telecom |
|
Sciences |
|
Broadcasting |
|
Elimination |
|
Corporate |
|
HC2 |
Net Income attributable to HC2 Holdings, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
173.8 |
|
Less: Net Income attributable
to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
142.9 |
|
Less: Consolidating
eliminations attributable to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19.0 |
|
Net Income (loss) attributable
to HC2 Holdings, Inc., excluding Insurance segment |
$ |
20.1 |
|
|
$ |
4.1 |
|
|
$ |
(0.6 |
) |
|
$ |
3.4 |
|
|
$ |
67.5 |
|
|
$ |
(29.2 |
) |
|
$ |
3.8 |
|
|
$ |
(57.2 |
) |
|
$ |
11.9 |
|
Adjustments to reconcile net
income (loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
5.0 |
|
|
20.1 |
|
|
4.1 |
|
|
0.2 |
|
|
0.1 |
|
|
2.3 |
|
|
0.1 |
|
|
0.1 |
|
|
32.0 |
|
Depreciation and amortization (included in cost of revenue) |
5.1 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
5.1 |
|
Amortization of equity method fair value adjustment at
acquisition |
— |
|
|
(1.1 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1.1 |
) |
Other operating (income) expenses |
(0.3 |
) |
|
(2.8 |
) |
|
0.1 |
|
|
— |
|
|
— |
|
|
0.1 |
|
|
— |
|
|
— |
|
|
(2.9 |
) |
Gain on sale and deconsolidation of subsidiary |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(102.1 |
) |
|
— |
|
|
(1.6 |
) |
|
— |
|
|
(103.7 |
) |
Interest expense |
1.5 |
|
|
3.7 |
|
|
1.2 |
|
|
— |
|
|
— |
|
|
7.7 |
|
|
— |
|
|
39.8 |
|
|
53.9 |
|
Other (income) expense, net |
(1.9 |
) |
|
(1.3 |
) |
|
0.2 |
|
|
— |
|
|
0.1 |
|
|
0.4 |
|
|
(3.4 |
) |
|
1.0 |
|
|
(4.9 |
) |
Loss on early extinguishment or restructuring of debt |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2.5 |
|
|
— |
|
|
— |
|
|
2.5 |
|
Net loss on contingent consideration |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Foreign currency (gain) loss (included in cost of revenue) |
— |
|
|
(0.4 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(0.4 |
) |
Income tax (benefit) expense |
9.0 |
|
|
0.2 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(0.3 |
) |
|
(7.0 |
) |
|
1.9 |
|
Noncontrolling interest |
1.6 |
|
|
1.7 |
|
|
(0.3 |
) |
|
— |
|
|
19.5 |
|
|
(2.8 |
) |
|
(1.1 |
) |
|
— |
|
|
18.6 |
|
Bonus to be settled in equity |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.5 |
|
|
0.5 |
|
Share-based payment expense |
— |
|
|
1.4 |
|
|
— |
|
|
— |
|
|
0.2 |
|
|
2.3 |
|
|
0.3 |
|
|
3.9 |
|
|
8.1 |
|
Non-recurring items |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Acquisition and disposition costs |
1.4 |
|
|
0.2 |
|
|
— |
|
|
0.2 |
|
|
2.5 |
|
|
3.0 |
|
|
— |
|
|
0.6 |
|
|
7.9 |
|
Adjusted EBITDA |
$ |
41.5 |
|
|
$ |
25.8 |
|
|
$ |
4.7 |
|
|
$ |
3.8 |
|
|
$ |
(12.2 |
) |
|
$ |
(13.7 |
) |
|
$ |
(2.2 |
) |
|
$ |
(18.3 |
) |
|
$ |
29.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Core Operating Subsidiaries |
$ |
75.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS,
INC.RECONCILIATION OF NET INCOME
TOINSURANCE AOI AND PRE-TAX INSURANCE
AOI(Unaudited)
The table below shows the adjustments made to the
reported Net income of the Insurance segment to calculate Insurance
AOI and Pre-tax Insurance AOI.
(in millions) |
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
|
|
Increase / |
|
|
|
|
|
Increase / |
|
2019 |
|
2018 |
|
(Decrease) |
|
2019 |
|
2018 |
|
(Decrease) |
Net income - Insurance segment |
$ |
10.5 |
|
|
$ |
141.1 |
|
|
$ |
(130.6 |
) |
|
$ |
74.6 |
|
|
$ |
142.9 |
|
|
$ |
(68.3 |
) |
Effect of investment (gains)
(1) |
1.9 |
|
|
(20.1 |
) |
|
22.0 |
|
|
(3.6 |
) |
|
(27.1 |
) |
|
23.5 |
|
Bargain purchase gain |
— |
|
|
(109.1 |
) |
|
109.1 |
|
|
(1.1 |
) |
|
(109.1 |
) |
|
108.0 |
|
Reinsurance gain |
— |
|
|
(17.8 |
) |
|
17.8 |
|
|
— |
|
|
(17.8 |
) |
|
17.8 |
|
Acquisition costs |
0.2 |
|
|
1.3 |
|
|
(1.1 |
) |
|
2.0 |
|
|
2.4 |
|
|
(0.4 |
) |
Insurance AOI |
12.6 |
|
|
(4.6 |
) |
|
17.2 |
|
|
71.9 |
|
|
(8.7 |
) |
|
80.6 |
|
Income tax expense (benefit) |
0.9 |
|
|
(6.7 |
) |
|
7.6 |
|
|
3.3 |
|
|
— |
|
|
3.3 |
|
Pre-tax Insurance AOI |
$ |
13.5 |
|
|
$ |
(11.3 |
) |
|
$ |
24.8 |
|
|
$ |
75.2 |
|
|
$ |
(8.7 |
) |
|
$ |
83.9 |
|
(1) The Insurance segment revenues are inclusive of realized
and unrealized gains and net investment income for the three and
nine months ended September 30, 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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