HC2 Holdings, Inc. (“HC2” or the “Company”) (NYSE: HCHC), a
diversified holding company, announced today its consolidated
results for the fourth quarter and full year ended December 31,
2019.
|
Fourth Quarter 2019 Highlights |
| |
• |
Net Loss attributable to common and participating preferred
stockholders of $31.4 million, or $0.66 per fully diluted share,
compared to Net Loss of $16.1 million, or $0.36 per fully diluted
share, in the year-ago quarter. |
| |
• |
Adjusted EBITDA for Core Operating Subsidiaries* increased 53% to
$43.5 million, compared to $28.5 million in the year-ago
quarter. |
| |
• |
Adjusted EBITDA, excluding Insurance, increased 143% to $36.7
million, compared to $15.1 million in the year-ago quarter. |
| |
• |
Marine Services (“Global Marine Group” or “GMG”) agreed to a sale
of its 49% stake in Huawei Marine Networks Co., Limited (“HMN”) to
Hengtong Optic-Electric Co Ltd. (“Hengtong”). |
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* “Core Operating Subsidiaries” consists of HC2’s Construction,
Marine Services, Energy and Telecommunications segments. |
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Full Year 2019 Highlights |
| |
• |
Net Loss attributable to common and participating preferred
stockholders of $31.5 million, or $0.66 per fully diluted share,
compared to Net Income of $155.6 million, or $2.90 per fully
diluted share in 2018. |
| |
• |
Adjusted EBITDA for Core Operating Subsidiaries* increased 21% to
$126.8 million, compared to $104.4 million in 2018. |
| |
• |
Adjusted EBITDA, excluding Insurance, increased 104% to $90.8
million, compared to $44.5 million in 2018. |
| |
• |
Broadcasting completed issuance of new financing to retire existing
notes, fund acquisitions and enable additional build-out of its
distribution platform. |
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• |
Energy subsidiary, American Natural Gas (“ANG”), completed its
acquisition of 20 compressed natural gas (“CNG”) stations. |
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• |
Pansend Life Sciences portfolio companies, R2 Technologies and
MediBeacon, received equity investments and entered into exclusive
agreements with Huadong Medicine related to Greater China and the
Asia-Pacific regions. |
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Subsequent Events |
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• |
Announced and completed sale of GMG, excluding stake in HMN,
receiving net proceeds of $99 million. |
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• |
Entered into advanced discussions to divest Continental Insurance
Group Ltd. and Continental General Insurance Company (collectively,
“Continental Insurance”) and announced the Company was exploring
strategic options for DBM Global, Inc. (“DBM Global”), including a
potential sale. |
“We continue to make considerable progress on
our most important strategic initiatives of monetizing assets and
further reducing debt,” stated Philip Falcone, HC2’s Chairman,
Chief Executive Officer and President. “Completing the sale
of GMG was a significant step in this process, and we were very
pleased with the outcome of the sale. We are now set to
continue de-leveraging our balance sheet and further execute on our
strategic goals as we continue to evaluate numerous
opportunities to realize the inherent value within our portfolio of
assets. This includes Continental Insurance, which we believe
is well-positioned for divestiture and where ongoing discussions
continue to advance, and DBM Global, where we continue to explore
our strategic options. This is a pivotal time for the Company
and for our shareholders, as we remain committed to accelerating
our debt reduction plan and further closing the gap between our
market value and the net asset value of our underlying portfolio
companies.”
“Operationally, an excellent fourth quarter of
2019 capped off a very strong year for HC2, with nearly every
segment posting improved results,” added Mr. Falcone. “Our
Construction segment continued to perform well, driven by
consistently successful project execution and contributions from
GrayWolf Industrial. Also, with the retroactive renewal of
the U.S. alternative fuels tax credit and completion of the
integration of the 20 ampCNG stations recently acquired, our Energy
segment is poised for a strong 2020. We have also made
considerable progress in the build-out of our Broadcasting
platform, surpassing the 200 station count, and added notable
high-quality content providers to our lineup, including beIN SPORTS
XTRA, Cheddar News and CBS Television Distribution’s new DABL
network. Importantly, not only did we reduce corporate
expenses year-over-year, we will also realize significant
annualized interest savings as a result of note redemptions funded
by the proceeds from GMG and HMN transactions. Overall, it
was a solid year of performance that underscored the underlying
value across the HC2 platform. As we look to 2020, we’re
excited about the opportunities we see ahead and remain acutely
focused on our key strategic priorities to build substantial
long-term shareholder value.”
Global Marine Update
As previously disclosed, a subsidiary of Global
Marine Holdings LLC, in which HC2 holds an approximate 73% equity
interest, completed the sale of 100% of GMG to an investment
affiliate of J.F. Lehman & Company LLC. The sale includes
GMG’s operating subsidiary, Global Marine Systems Limited, along
with several joint ventures.
HC2 received net proceeds of $99 million from
the sale. The net proceeds were used to repay HC2’s $15
million secured revolving line of credit and will be used to redeem
approximately $77 million of HC2’s 11.5% Senior Secured Notes (the
“11.5% Notes”) due 2021 at a redemption price of 104.5% of the
principal amount in the second quarter of 2020.
HC2, through an indirect subsidiary, expects to
close on the sale of 30% interest in the HMN joint venture early in
the second quarter 2020. Upon closing of the joint venture
sale and subject to customary purchase price adjustments,
approximately $85 million of net proceeds, less transaction fees
and taxes, will be paid (of which HC2 will be entitled to
approximately 73%), with the remaining 19% interest held by an
indirect subsidiary of HC2 under a two-year put option. Net
proceeds received from the closing of the joint venture sale will
be used to redeem additional “11.5% Notes” at a redemption price of
104.5% of the principal amount in the second quarter of 2020.
Update on Strategic Initiatives to Monetize Assets and
Further Reduce Debt
As previously announced, the Company remains in
advanced discussions for the potential divestiture of its
100%-owned indirect subsidiaries, Continental Insurance.
Additionally, the Company has retained Jefferies LLC to explore
strategic options for DBM Global Inc., including a potential
sale. Net proceeds from any potential divestitures will be
used to reduce debt at the holding company level.
No assurances can be given that definitive
agreements for these potential divestitures will be entered into
with respect to the disposition of either Continental Insurance or
DBM Global, that any transactions will be consummated, or the
timing, terms, conditions or net proceeds thereof. The
Company does not intend to comment further on developments
regarding these potential divestitures or related market
speculation unless and until HC2 otherwise deems further disclosure
is appropriate or required.
|
Fourth Quarter Financial Highlights |
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• |
Net Revenue: For the fourth quarter of 2019, HC2
consolidated net revenue was $498.4 million, compared to $524.9
million for the year-ago quarter. Lower revenues from the
Construction, Telecommunications and Marine Services segments were
partially offset by increases in revenue from the Insurance
segment, net of eliminations, and the Energy segment. |
| NET
REVENUE by OPERATING SEGMENT |
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| (in millions) |
Three Months Ended December 31, |
|
Year Ended December 31, |
| |
|
|
|
|
Increase / |
|
|
|
|
|
Increase / |
| |
2019 |
|
2018 |
|
(Decrease) |
|
2019 |
|
2018 |
|
(Decrease) |
|
Construction |
$ |
157.1 |
|
|
|
$ |
185.1 |
|
|
|
$ |
(28.0 |
) |
|
|
$ |
713.3 |
|
|
|
$ |
716.4 |
|
|
|
$ |
(3.1 |
) |
|
| Marine Services |
42.5 |
|
|
|
44.4 |
|
|
|
(1.9 |
) |
|
|
172.5 |
|
|
|
194.3 |
|
|
|
(21.8 |
) |
|
| Energy |
19.7 |
|
|
|
4.6 |
|
|
|
15.1 |
|
|
|
39.0 |
|
|
|
20.7 |
|
|
|
18.3 |
|
|
| Telecommunications |
189.1 |
|
|
|
213.0 |
|
|
|
(23.9 |
) |
|
|
696.1 |
|
|
|
793.6 |
|
|
|
(97.5 |
) |
|
| Total Core Operating Subsidiaries |
$ |
408.4 |
|
|
|
$ |
447.1 |
|
|
|
$ |
(38.7 |
) |
|
|
$ |
1,620.9 |
|
|
|
$ |
1,725.0 |
|
|
|
$ |
(104.1 |
) |
|
| Insurance |
80.3 |
|
|
|
56.0 |
|
|
|
24.3 |
|
|
|
331.6 |
|
|
|
217.1 |
|
|
|
114.5 |
|
|
| Broadcasting |
12.0 |
|
|
|
11.7 |
|
|
|
0.3 |
|
|
|
41.8 |
|
|
|
45.4 |
|
|
|
(3.6 |
) |
|
| Other |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3.7 |
|
|
|
(3.7 |
) |
|
| Eliminations (1) |
(2.3 |
) |
|
|
10.1 |
|
|
|
(12.4 |
) |
|
|
(10.2 |
) |
|
|
(14.5 |
) |
|
|
4.3 |
|
|
| Consolidated HC2 |
$ |
498.4 |
|
|
|
$ |
524.9 |
|
|
|
$ |
(26.5 |
) |
|
|
$ |
1,984.1 |
|
|
|
$ |
1,976.7 |
|
|
|
$ |
7.4 |
|
|
| (1) The
Insurance segment revenues are inclusive of realized and unrealized
gains (losses) and net investment income for the quarter and year
ended December 31, 2019 and 2018, which are related to transactions
between entities under common control that are eliminated or are
reclassified in consolidation. |
|
|
• |
Net Income / (Loss): For the fourth quarter
of 2019, HC2 reported a Net Loss attributable to common stock and
participating preferred stockholders of $31.4 million, or $0.66 per
fully diluted share, compared to Net Loss of $16.1 million, or
$0.36 per fully diluted share, in the year-ago quarter.
During the fourth quarter of 2019, the Company recognized a
non-cash goodwill impairment charge of $47.3 million at our
Insurance segment attributable to several factors that occurred in
the quarter. |
| NET
INCOME (LOSS) by OPERATING SEGMENT |
|
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|
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|
|
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|
|
|
|
|
| (in millions) |
Three Months Ended December 31, |
|
Year Ended December 31, |
| |
|
|
|
|
Increase / |
|
|
|
|
|
Increase / |
| |
2019 |
|
2018 |
|
(Decrease) |
|
2019 |
|
2018 |
|
(Decrease) |
|
Construction |
$ |
6.7 |
|
|
|
$ |
7.6 |
|
|
|
$ |
(0.9 |
) |
|
|
$ |
24.7 |
|
|
|
$ |
27.7 |
|
|
|
$ |
(3.0 |
) |
|
| Marine Services |
(0.7 |
) |
|
|
(3.8 |
) |
|
|
3.1 |
|
|
|
(2.6 |
) |
|
|
0.3 |
|
|
|
(2.9 |
) |
|
| Energy |
5.6 |
|
|
|
(0.3 |
) |
|
|
5.9 |
|
|
|
4.2 |
|
|
|
(0.9 |
) |
|
|
5.1 |
|
|
| Telecommunications |
(2.1 |
) |
|
|
1.2 |
|
|
|
(3.3 |
) |
|
|
(1.4 |
) |
|
|
4.6 |
|
|
|
(6.0 |
) |
|
| Total Core Operating Subsidiaries |
$ |
9.5 |
|
|
|
$ |
4.7 |
|
|
|
$ |
4.8 |
|
|
|
$ |
24.9 |
|
|
|
$ |
31.7 |
|
|
|
$ |
(6.8 |
) |
|
| Insurance |
(15.2 |
) |
|
|
22.4 |
|
|
|
(37.6 |
) |
|
|
59.4 |
|
|
|
165.2 |
|
|
|
(105.8 |
) |
|
| Life Sciences |
(1.8 |
) |
|
|
(2.4 |
) |
|
|
0.6 |
|
|
|
(0.2 |
) |
|
|
65.2 |
|
|
|
(65.4 |
) |
|
| Broadcasting |
(4.4 |
) |
|
|
(5.3 |
) |
|
|
0.9 |
|
|
|
(18.5 |
) |
|
|
(34.5 |
) |
|
|
16.0 |
|
|
| Other |
(0.2 |
) |
|
|
(6.6 |
) |
|
|
6.4 |
|
|
|
(0.6 |
) |
|
|
(2.9 |
) |
|
|
2.3 |
|
|
| Non-operating Corporate |
(17.6 |
) |
|
|
(24.7 |
) |
|
|
7.1 |
|
|
|
(87.6 |
) |
|
|
(81.9 |
) |
|
|
(5.7 |
) |
|
| Eliminations (1) |
(1.3 |
) |
|
|
0.1 |
|
|
|
(1.4 |
) |
|
|
(8.9 |
) |
|
|
19.2 |
|
|
|
(28.1 |
) |
|
| Net (loss) income attributable to HC2 Holdings, Inc. |
$ |
(31.0 |
) |
|
|
$ |
(11.8 |
) |
|
|
$ |
(19.2 |
) |
|
|
$ |
(31.5 |
) |
|
|
$ |
162.0 |
|
|
|
$ |
(193.5 |
) |
|
| Less: Preferred dividends, deemed dividends, and repurchase
gains |
0.4 |
|
|
|
4.3 |
|
|
|
(3.9 |
) |
|
|
— |
|
|
|
6.4 |
|
|
|
(6.4 |
) |
|
| Net (loss) income attributable to common stock and
participating preferred stockholders |
$ |
(31.4 |
) |
|
|
$ |
(16.1 |
) |
|
|
$ |
(15.3 |
) |
|
|
$ |
(31.5 |
) |
|
|
$ |
155.6 |
|
|
|
$ |
(187.1 |
) |
|
|
(1) The Insurance segment is inclusive of realized and
unrealized gains (losses) and net investment income for the quarter
and year ended December 31, 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 53% to $43.5 million for the
fourth quarter of 2019, compared to $28.5 million for the year-ago
quarter, as improvements at Energy, Marine Services, and
Construction were partially offset by reduced contributions from
Telecommunications. |
|
|
|
|
| |
|
For the fourth quarter of 2019, Total HC2 Adjusted EBITDA, which
excludes the Insurance segment, grew 143% to $36.7 million,
compared to Adjusted EBITDA of $15.1 million for the year-ago
quarter. The improvement was primarily due to the increase
from Core Operating Subsidiaries Adjusted EBITDA, as well as from
improvements at Broadcasting and Non-operating Corporate, which had
a significant reduction in Corporate expenses as compared to the
year-ago quarter. |
| ADJUSTED
EBITDA by OPERATING SEGMENT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in millions) |
Three Months Ended December 31, |
|
Year Ended December 31, |
| |
|
|
|
|
Increase / |
|
|
|
|
|
Increase / |
| |
2019 |
|
2018 |
|
(Decrease) |
|
2019 |
|
2018 |
|
(Decrease) |
|
Construction |
$ |
20.8 |
|
|
|
$ |
19.4 |
|
|
|
$ |
1.4 |
|
|
|
$ |
75.7 |
|
|
|
$ |
60.9 |
|
|
|
$ |
14.8 |
|
|
| Marine Services |
9.3 |
|
|
|
6.9 |
|
|
|
2.4 |
|
|
|
30.7 |
|
|
|
32.7 |
|
|
|
(2.0 |
) |
|
| Energy |
12.4 |
|
|
|
0.8 |
|
|
|
11.6 |
|
|
|
17.0 |
|
|
|
5.5 |
|
|
|
11.5 |
|
|
| Telecommunications |
1.0 |
|
|
|
1.4 |
|
|
|
(0.4 |
) |
|
|
3.4 |
|
|
|
5.3 |
|
|
|
(1.9 |
) |
|
| Total Core Operating Subsidiaries |
$ |
43.5 |
|
|
|
$ |
28.5 |
|
|
|
$ |
15.0 |
|
|
|
$ |
126.8 |
|
|
|
$ |
104.4 |
|
|
|
$ |
22.4 |
|
|
| Life Sciences |
(3.1 |
) |
|
|
(2.7 |
) |
|
|
(0.4 |
) |
|
|
(11.8 |
) |
|
|
(14.9 |
) |
|
|
3.1 |
|
|
| Broadcasting |
(1.0 |
) |
|
|
(3.2 |
) |
|
|
2.2 |
|
|
|
(6.3 |
) |
|
|
(16.9 |
) |
|
|
10.6 |
|
|
| Other and Eliminations |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2.2 |
) |
|
|
2.2 |
|
|
| Non-operating Corporate |
(2.7 |
) |
|
|
(7.5 |
) |
|
|
4.8 |
|
|
|
(17.9 |
) |
|
|
(25.9 |
) |
|
|
8.0 |
|
|
| Total HC2 Adjusted EBITDA |
$ |
36.7 |
|
|
|
$ |
15.1 |
|
|
|
$ |
21.6 |
|
|
|
$ |
90.8 |
|
|
|
$ |
44.5 |
|
|
|
$ |
46.3 |
|
|
|
|
• |
Balance Sheet: As of December 31, 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 $68.5 million, of which
$11.6 million was at the HC2 corporate level. |
|
|
|
|
|
|
|
Fourth Quarter 2019 Segment Highlights |
|
|
|
|
|
|
|
|
• |
Construction |
|
|
|
|
– |
For the fourth quarter of 2019, DBM reported Net Income of $6.7
million, compared to $7.6 million for the year-ago quarter.
Adjusted EBITDA grew 7% year-over-year to $20.8 million, driven by
positive project execution and contributions from GrayWolf
Industrial. |
|
|
|
|
|
|
|
|
|
|
– |
DBM's total backlog was approximately $497.7 million as of December
31, 2019, compared to $528.5 million for the year-ago
quarter. Taking into consideration awarded, but not yet
signed contracts, backlog would have been approximately $826
million at the end of the fourth quarter 2019, compared to $707
million at the end of the fourth quarter 2018. |
|
|
|
|
|
|
|
|
|
|
– |
Due to the ongoing process to explore strategic options for its DBM
subsidiary and the ongoing economic environment, the Company is not
providing 2020 Adjusted EBITDA outlook for the Construction
segment. |
|
|
|
|
|
|
|
|
• |
Energy |
|
|
|
|
– |
For the fourth quarter of 2019, ANG reported Net Income of $5.6
million, compared to Net Loss of $0.3 million for the year-ago
quarter. Adjusted EBITDA increased to $12.4 million compared
to $0.8 million for the year-ago quarter, driven by retroactive
recognition of the alternative fuel tax credit for 2018 and 2019
that was signed into legislation in December 2019, as well as
contributions from ANG’s June 2019 acquisition of ampCNG’s
stations, which added 20 CNG fueling stations to ANG’s nationwide
network. |
|
|
|
|
|
|
|
|
• |
Broadcasting |
|
|
|
|
– |
As of early March 2020, HC2’s Broadcasting segment has 210
operational stations, including 10 full-power stations, 49 Class A
stations and 151 LPTV stations in 91 Designated Market Areas across
the United States and Puerto Rico. In addition, Broadcasting
has 242 silent licenses and construction permits, a portion of
which are expected to be selectively built and licensed over the
next 24 months. |
| |
|
|
|
|
| |
• |
Insurance |
| |
|
|
– |
As of December 31, 2019, Continental had $4.5 billion of cash and
invested assets, $5.6 billion in total GAAP assets, and $338.2
million of total adjusted capital. |
| |
|
|
|
|
| |
|
|
– |
For the fourth quarter of 2019, Continental reported Net Loss of
$15.2 million, compared to Net Income of $22.4 million for the
year-ago quarter. During the fourth quarter of 2019,
Continental recognized a non-cash goodwill impairment charge of
$47.3 million attributable to several factors that occurred in the
quarter. Excluding the impact of the impairment charge, the
Insurance segment would have recorded Net Income of $32.1 million
for the quarter. |
| |
|
|
|
|
| |
|
|
– |
Pre-Tax Insurance AOI was $10.5 million for the fourth quarter of
2019, compared to Pre-Tax Insurance AOI of $9.3 million for the
year-ago quarter. The increase was primarily driven by the
KIC block acquisition, which caused an increase in net investment
income from invested cash received in the acquisition, partially
offset by unfavorable claims activity on the block from the
year-ago quarter. |
Conference Call
HC2 Holdings, Inc. will host a live conference
call to discuss its fourth quarter and fiscal year 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 Webcast and Call
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.
Domestic Dial-In (Toll Free): 1-877-705-6003 or International
Dial-In: 1-201-493-6725
Participant Entry Number: 13700114
Conference Replay*
Domestic Dial-In (Toll Free): 1-844-512-2921 or International
Dial-In: 1-412-317-6671
Conference Number: 13700114
*Available approximately two hours after the end of the
conference call through March 30, 2020.
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 multiple reportable segments,
including Construction, Energy, Telecommunications, Life Sciences,
Broadcasting, Insurance and Other. HC2's largest operating
subsidiary is DBM Global Inc., a family of companies providing
fully integrated structural and steel construction services.
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, and FCC reimbursements; asset impairment
expense, 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; 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 StatementsSafe 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, any statements
regarding our expectations regarding building shareholder value,
future cash flow, longer-term growth and invested assets, the
timing and effects of redeeming the 11.5% Notes, reducing HC2's
leverage and interest expense, and the timing or prospects of any
refinancing of HC2's remaining corporate debt. Such
statements are based on the beliefs and assumptions of HC2’s
management and the management of HC2’s subsidiaries and portfolio
companies. The Company believes these judgments are
reasonable, but you should understand that these statements are not
guarantees of performance or results, and the Company’s actual
results could differ materially from those expressed or implied in
the forward-looking statements due to a variety of important
factors, both positive and negative, that may be revised or
supplemented in subsequent statements and reports filed with the
Securities and Exchange Commission (“SEC”), including in our
reports on Forms 10-K, 10-Q, and 8-K. Such important factors
include, without limitation, issues related to the restatement of
our financial statements; the fact that we have historically
identified material weaknesses in our internal control over
financial reporting, and any inability to remediate future material
weaknesses; capital market conditions, including the ability of HC2
and HC2’s subsidiaries to raise capital; the ability of HC2’s
subsidiaries and portfolio companies to generate sufficient net
income and cash flows to make upstream cash distributions;
volatility in the trading price of HC2 common stock; the ability of
HC2 and its subsidiaries and portfolio companies to identify any
suitable future acquisition or disposition opportunities; our
ability to realize efficiencies, cost savings, income and margin
improvements, growth, economies of scale and other anticipated
benefits of strategic transactions; difficulties related to the
integration of financial reporting of acquired or target
businesses; difficulties completing pending and future acquisitions
and dispositions; effects of litigation, indemnification claims,
and other contingent liabilities; changes in regulations and tax
laws; and risks that may affect the performance of the operating
subsidiaries and portfolio companies of HC2. Although HC2
believes its expectations and assumptions regarding its future
operating performance are reasonable, there can be no assurance
that the expectations reflected herein will be achieved.
There can be no assurance that the HMN transaction will be
completed as proposed or at all. 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)
| |
Three Months Ended December 31, |
|
Years Ended December 31, |
| |
2019 |
|
2018 |
|
2019 |
|
2018 |
| |
(unaudited) |
|
(unaudited) |
|
|
|
|
|
Revenue |
$ |
420.4 |
|
|
|
$ |
458.8 |
|
|
|
$ |
1,662.7 |
|
|
|
$ |
1,774.1 |
|
|
| Life, accident and health
earned premiums, net |
28.2 |
|
|
|
29.1 |
|
|
|
116.9 |
|
|
|
94.4 |
|
|
| Net investment income |
51.2 |
|
|
|
47.8 |
|
|
|
203.8 |
|
|
|
116.6 |
|
|
| Net realized and unrealized
gains (losses) on investments |
(1.4 |
) |
|
|
(10.8 |
) |
|
|
0.7 |
|
|
|
(8.4 |
) |
|
|
Net revenue |
498.4 |
|
|
|
524.9 |
|
|
|
1,984.1 |
|
|
|
1,976.7 |
|
|
| Operating expenses |
|
|
|
|
|
|
|
|
Cost of revenue |
349.0 |
|
|
|
406.0 |
|
|
|
1,424.9 |
|
|
|
1,585.2 |
|
|
|
Policy benefits, changes in reserves, and commissions |
67.6 |
|
|
|
63.2 |
|
|
|
234.4 |
|
|
|
197.3 |
|
|
|
Selling, general and administrative |
54.9 |
|
|
|
58.4 |
|
|
|
214.3 |
|
|
|
218.4 |
|
|
|
Depreciation and amortization |
8.9 |
|
|
|
6.7 |
|
|
|
32.0 |
|
|
|
31.7 |
|
|
|
Asset impairment expense |
50.6 |
|
|
|
0.6 |
|
|
|
55.0 |
|
|
|
1.0 |
|
|
|
Other operating income |
0.4 |
|
|
|
2.2 |
|
|
|
(5.6 |
) |
|
|
(1.1 |
) |
|
|
Total operating expenses |
531.4 |
|
|
|
537.1 |
|
|
|
1,955.0 |
|
|
|
2,032.5 |
|
|
|
Income (loss) from operations |
(33.0 |
) |
|
|
(12.2 |
) |
|
|
29.1 |
|
|
|
(55.8 |
) |
|
| Interest expense |
(25.8 |
) |
|
|
(21.7 |
) |
|
|
(95.1 |
) |
|
|
(75.7 |
) |
|
| Gain on sale and
deconsolidation of subsidiary |
— |
|
|
|
— |
|
|
|
— |
|
|
|
105.1 |
|
|
| Income from equity
investees |
0.7 |
|
|
|
1.7 |
|
|
|
2.2 |
|
|
|
15.4 |
|
|
| Gain on bargain purchase |
— |
|
|
|
6.3 |
|
|
|
1.1 |
|
|
|
115.4 |
|
|
| Other income |
0.6 |
|
|
|
13.9 |
|
|
|
6.0 |
|
|
|
77.9 |
|
|
|
(Loss) income from continuing operations |
(57.5 |
) |
|
|
(12.0 |
) |
|
|
(56.7 |
) |
|
|
182.3 |
|
|
| Income tax benefit
(expense) |
26.8 |
|
|
|
(0.5 |
) |
|
|
20.6 |
|
|
|
(2.4 |
) |
|
|
Net (loss) income |
(30.7 |
) |
|
|
(12.5 |
) |
|
|
(36.1 |
) |
|
|
179.9 |
|
|
| Net loss (income) attributable
to noncontrolling interest and redeemable noncontrolling
interest |
(0.3 |
) |
|
|
0.7 |
|
|
|
4.6 |
|
|
|
(17.9 |
) |
|
|
Net (loss) income attributable to HC2 Holdings, Inc. |
(31.0 |
) |
|
|
(11.8 |
) |
|
|
(31.5 |
) |
|
|
162.0 |
|
|
| Less: Preferred dividends,
deemed dividends, and repurchase gains |
0.4 |
|
|
|
4.3 |
|
|
|
— |
|
|
|
6.4 |
|
|
|
Net (loss) income attributable to common stock and participating
preferred stockholders |
$ |
(31.4 |
) |
|
|
$ |
(16.1 |
) |
|
|
$ |
(31.5 |
) |
|
|
$ |
155.6 |
|
|
| |
|
|
|
|
|
|
|
| (Loss) income per common
share |
|
|
|
|
|
|
|
|
Basic |
$ |
(0.66 |
) |
|
|
$ |
(0.36 |
) |
|
|
$ |
(0.66 |
) |
|
|
$ |
3.14 |
|
|
|
Diluted |
$ |
(0.66 |
) |
|
|
$ |
(0.36 |
) |
|
|
$ |
(0.66 |
) |
|
|
$ |
2.90 |
|
|
| |
|
|
|
|
|
|
|
| Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
45.0 |
|
|
|
44.5 |
|
|
|
44.8 |
|
|
|
44.3 |
|
|
|
Diluted |
45.0 |
|
|
|
44.5 |
|
|
|
44.8 |
|
|
|
46.8 |
|
|
HC2 HOLDINGS,
INC.CONDENSED CONSOLIDATED BALANCE
SHEET(in millions, except share
amounts)
| |
December 31, |
|
December 31, |
| |
2019 |
|
2018 |
| Assets |
|
|
|
|
Investments: |
|
|
|
|
Fixed maturity securities, available-for-sale at fair value |
$ |
4,028.9 |
|
|
|
$ |
3,391.6 |
|
|
|
Equity securities |
92.5 |
|
|
|
200.5 |
|
|
|
Mortgage loans |
183.5 |
|
|
|
137.6 |
|
|
|
Policy loans |
19.1 |
|
|
|
19.8 |
|
|
|
Other invested assets |
85.0 |
|
|
|
72.5 |
|
|
|
Total investments |
4,409.0 |
|
|
|
3,822.0 |
|
|
|
Cash and cash equivalents |
239.0 |
|
|
|
325.0 |
|
|
|
Accounts receivable, net |
337.8 |
|
|
|
379.2 |
|
|
|
Recoverable from reinsurers |
953.7 |
|
|
|
1,000.2 |
|
|
|
Deferred tax asset |
2.7 |
|
|
|
2.1 |
|
|
|
Property, plant and equipment, net |
405.8 |
|
|
|
376.3 |
|
|
|
Goodwill |
126.8 |
|
|
|
171.7 |
|
|
|
Intangibles, net |
227.0 |
|
|
|
219.2 |
|
|
|
Other assets |
256.5 |
|
|
|
208.1 |
|
|
| Total assets |
$ |
6,958.3 |
|
|
|
$ |
6,503.8 |
|
|
| |
|
|
|
| Liabilities, temporary
equity and stockholders’ equity |
|
|
|
|
Life, accident and health reserves |
$ |
4,567.1 |
|
|
|
$ |
4,562.1 |
|
|
|
Annuity reserves |
236.4 |
|
|
|
245.2 |
|
|
|
Value of business acquired |
221.1 |
|
|
|
244.6 |
|
|
|
Accounts payable and other current liabilities |
339.6 |
|
|
|
344.9 |
|
|
|
Deferred tax liability |
83.7 |
|
|
|
30.3 |
|
|
|
Debt obligations |
839.3 |
|
|
|
743.9 |
|
|
|
Other liabilities |
205.9 |
|
|
|
110.8 |
|
|
| Total liabilities |
6,493.1 |
|
|
|
6,281.8 |
|
|
| Commitments and
contingencies |
|
|
|
| Temporary equity |
|
|
|
|
Preferred stock |
10.3 |
|
|
|
20.3 |
|
|
|
Redeemable noncontrolling interest |
11.3 |
|
|
|
8.0 |
|
|
| Total temporary equity |
21.6 |
|
|
|
28.3 |
|
|
| Stockholders’ equity |
|
|
|
|
Common stock, $.001 par value |
— |
|
|
|
— |
|
|
|
Shares authorized: 80,000,000 at December 31, 2019 and December 31,
2018; |
|
|
|
|
Shares issued: 46,810,676 and 45,391,397 at December 31, 2019 and
December 31, 2018; |
|
|
|
|
Shares outstanding: 46,067,852 and 44,907,818 at December 31, 2019
and December 31, 2018, respectively |
|
|
|
|
Additional paid-in capital |
281.1 |
|
|
|
260.5 |
|
|
|
Treasury stock, at cost: 742,824 and 483,579 shares at December 31,
2019 and December 31, 2018, respectively |
(3.3 |
) |
|
|
(2.6 |
) |
|
|
Accumulated deficit |
(96.7 |
) |
|
|
(57.2 |
) |
|
|
Accumulated other comprehensive income (loss) |
168.7 |
|
|
|
(112.6 |
) |
|
| Total HC2 Holdings, Inc.
stockholders’ equity |
349.8 |
|
|
|
88.1 |
|
|
|
Noncontrolling interest |
93.8 |
|
|
|
105.6 |
|
|
| Total stockholders’
equity |
443.6 |
|
|
|
193.7 |
|
|
| Total liabilities, temporary
equity and stockholders’ equity |
$ |
6,958.3 |
|
|
|
$ |
6,503.8 |
|
|
HC2 HOLDINGS,
INC.RECONCILIATION OF NET INCOME (LOSS) TO
ADJUSTED EBITDA(unaudited)
| (in millions) |
Three Months ended December 31, 2019 |
| |
Core Operating Subsidiaries |
|
Early Stage & Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
| |
|
|
Marine |
|
|
|
|
|
Life |
|
|
|
Other & |
|
operating |
|
|
| |
Construction |
|
Services |
|
Energy |
|
Telecom |
|
Sciences |
|
Broadcasting |
|
Elimination |
|
Corporate |
|
HC2 |
| Net loss attributable to HC2
Holdings, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(31.0 |
) |
|
| Less: Net loss attributable to
HC2 Holdings Insurance Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15.2 |
) |
|
| Less: Consolidating
eliminations attributable to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.3 |
) |
|
| Net Income (loss) attributable
to HC2 Holdings, Inc., excluding Insurance Segment |
$ |
6.7 |
|
|
|
$ |
(0.7 |
) |
|
|
$ |
5.6 |
|
|
|
$ |
(2.1 |
) |
|
|
$ |
(1.8 |
) |
|
|
$ |
(4.4 |
) |
|
|
$ |
(0.2 |
) |
|
|
$ |
(17.6 |
) |
|
|
$ |
(14.5 |
) |
|
| Adjustments to reconcile net
income (loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
3.7 |
|
|
|
6.3 |
|
|
|
2.0 |
|
|
|
— |
|
|
|
0.2 |
|
|
|
1.6 |
|
|
|
— |
|
|
|
— |
|
|
|
13.8 |
|
|
|
Depreciation and amortization (included in cost of revenue) |
2.4 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2.4 |
|
|
|
Amortization of equity method fair value adjustment at
acquisition |
— |
|
|
|
(0.4 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.4 |
) |
|
|
Asset impairment expense |
— |
|
|
|
— |
|
|
|
— |
|
|
|
3.2 |
|
|
|
— |
|
|
|
0.1 |
|
|
|
— |
|
|
|
— |
|
|
|
3.3 |
|
|
|
Other operating (income) expenses |
0.6 |
|
|
|
— |
|
|
|
0.1 |
|
|
|
— |
|
|
|
— |
|
|
|
(0.3 |
) |
|
|
— |
|
|
|
— |
|
|
|
0.4 |
|
|
|
Interest expense |
2.3 |
|
|
|
1.4 |
|
|
|
1.6 |
|
|
|
— |
|
|
|
— |
|
|
|
3.3 |
|
|
|
— |
|
|
|
17.3 |
|
|
|
25.9 |
|
|
|
Other (income) expense, net |
(1.7 |
) |
|
|
0.6 |
|
|
|
1.4 |
|
|
|
— |
|
|
|
(0.3 |
) |
|
|
1.4 |
|
|
|
0.2 |
|
|
|
(1.6 |
) |
|
|
— |
|
|
|
Net loss (gain) on contingent consideration |
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.1 |
) |
|
|
Foreign currency (gain) loss (included in cost of revenue) |
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.1 |
) |
|
|
Income tax (benefit) expense |
2.9 |
|
|
|
(0.5 |
) |
|
|
(0.8 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1.6 |
) |
|
|
— |
|
|
|
(2.8 |
) |
|
|
(2.8 |
) |
|
|
Noncontrolling interest |
0.6 |
|
|
|
(0.5 |
) |
|
|
2.5 |
|
|
|
— |
|
|
|
(1.2 |
) |
|
|
(1.1 |
) |
|
|
— |
|
|
|
— |
|
|
|
0.3 |
|
|
|
Share-based payment expense |
— |
|
|
|
0.3 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
|
|
— |
|
|
|
1.5 |
|
|
|
1.9 |
|
|
|
Non-recurring items |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Acquisition and disposition costs |
3.3 |
|
|
|
2.8 |
|
|
|
— |
|
|
|
0.1 |
|
|
|
— |
|
|
|
(0.1 |
) |
|
|
— |
|
|
|
0.5 |
|
|
|
6.6 |
|
|
|
Adjusted EBITDA |
$ |
20.8 |
|
|
|
$ |
9.3 |
|
|
|
$ |
12.4 |
|
|
|
$ |
1.0 |
|
|
|
$ |
(3.1 |
) |
|
|
$ |
(1.0 |
) |
|
|
$ |
— |
|
|
|
$ |
(2.7 |
) |
|
|
$ |
36.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Core Operating Subsidiaries |
$ |
43.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS,
INC.RECONCILIATION OF NET INCOME (LOSS) TO
ADJUSTED EBITDA(unaudited)
| (in millions) |
Three Months Ended December 31, 2018 |
| |
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. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(11.8 |
) |
|
| Less: Net Income attributable
to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22.4 |
|
|
| Less: Consolidating
eliminations attributable to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1 |
|
|
| Net Income (loss) attributable
to HC2 Holdings, Inc., excluding Insurance segment |
$ |
7.6 |
|
|
|
$ |
(3.8 |
) |
|
|
$ |
(0.3 |
) |
|
|
$ |
1.2 |
|
|
|
$ |
(2.4 |
) |
|
|
$ |
(5.3 |
) |
|
|
$ |
(6.6 |
) |
|
|
$ |
(24.7 |
) |
|
|
$ |
(34.3 |
) |
|
| Adjustments to reconcile net
income (loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
2.4 |
|
|
|
7.1 |
|
|
|
1.4 |
|
|
|
— |
|
|
|
0.1 |
|
|
|
1.1 |
|
|
|
— |
|
|
|
— |
|
|
|
12.1 |
|
|
|
Depreciation and amortization (included in cost of revenue) |
1.9 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1.9 |
|
|
|
Amortization of equity method fair value adjustment at
acquisition |
— |
|
|
|
(0.4 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.4 |
) |
|
|
Asset impairment expense |
— |
|
|
|
— |
|
|
|
0.4 |
|
|
|
— |
|
|
|
— |
|
|
|
0.2 |
|
|
|
— |
|
|
|
— |
|
|
|
0.6 |
|
|
|
Other operating (income) expenses |
0.1 |
|
|
|
2.1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2.2 |
|
|
|
Interest expense |
1.1 |
|
|
|
1.1 |
|
|
|
0.4 |
|
|
|
— |
|
|
|
— |
|
|
|
1.8 |
|
|
|
— |
|
|
|
17.3 |
|
|
|
21.7 |
|
|
|
Loss on early extinguishment or restructuring of debt |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
|
|
— |
|
|
|
2.5 |
|
|
|
2.6 |
|
|
|
Net loss (gain) on contingent consideration |
— |
|
|
|
0.8 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.8 |
|
|
|
Other (income) expense, net |
(0.7 |
) |
|
|
(0.5 |
) |
|
|
0.1 |
|
|
|
0.1 |
|
|
|
(0.1 |
) |
|
|
1.1 |
|
|
|
7.9 |
|
|
|
(5.7 |
) |
|
|
2.2 |
|
|
|
Foreign currency (gain) loss (included in cost of revenue) |
— |
|
|
|
0.5 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.5 |
|
|
|
Income tax (benefit) expense |
2.9 |
|
|
|
— |
|
|
|
(1.1 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1.0 |
) |
|
|
(1.3 |
) |
|
|
0.4 |
|
|
|
(0.1 |
) |
|
|
Noncontrolling interest |
0.6 |
|
|
|
(1.7 |
) |
|
|
(0.1 |
) |
|
|
— |
|
|
|
(0.4 |
) |
|
|
0.9 |
|
|
|
— |
|
|
|
— |
|
|
|
(0.7 |
) |
|
|
Bonus to be settled in equity |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1.5 |
|
|
|
1.5 |
|
|
|
Share-based payment expense |
— |
|
|
|
0.5 |
|
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
|
|
(0.7 |
) |
|
|
— |
|
|
|
1.0 |
|
|
|
0.9 |
|
|
|
Non-recurring items |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Acquisition and disposition costs |
3.5 |
|
|
|
1.2 |
|
|
|
— |
|
|
|
0.1 |
|
|
|
— |
|
|
|
(1.4 |
) |
|
|
— |
|
|
|
0.2 |
|
|
|
3.6 |
|
|
|
Adjusted EBITDA |
$ |
19.4 |
|
|
|
$ |
6.9 |
|
|
|
$ |
0.8 |
|
|
|
$ |
1.4 |
|
|
|
$ |
(2.7 |
) |
|
|
$ |
(3.2 |
) |
|
|
$ |
— |
|
|
|
$ |
(7.5 |
) |
|
|
$ |
15.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Core Operating Subsidiaries |
$ |
28.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS,
INC.RECONCILIATION OF NET INCOME (LOSS) TO
ADJUSTED EBITDA
| (in millions) |
Year ended December 31, 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. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(31.5 |
) |
|
| Less: Net Income attributable
to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59.4 |
|
|
| Less: Consolidating
eliminations attributable to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8.9 |
) |
|
| Net Income (loss) attributable
to HC2 Holdings, Inc., excluding Insurance segment |
$ |
24.7 |
|
|
|
$ |
(2.6 |
) |
|
|
$ |
4.2 |
|
|
|
$ |
(1.4 |
) |
|
|
$ |
(0.2 |
) |
|
|
$ |
(18.5 |
) |
|
|
$ |
(0.6 |
) |
|
|
$ |
(87.6 |
) |
|
|
$ |
(82.0 |
) |
|
| Adjustments to reconcile net
income (loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
15.5 |
|
|
|
25.7 |
|
|
|
6.9 |
|
|
|
0.3 |
|
|
|
0.3 |
|
|
|
6.3 |
|
|
|
— |
|
|
|
0.1 |
|
|
|
55.1 |
|
|
|
Depreciation and amortization (included in cost of revenue) |
9.1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
9.1 |
|
|
|
Amortization of equity method fair value adjustment at
acquisition |
— |
|
|
|
(1.5 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1.5 |
) |
|
|
Asset impairment expense |
— |
|
|
|
0.6 |
|
|
|
— |
|
|
|
4.5 |
|
|
|
— |
|
|
|
2.6 |
|
|
|
— |
|
|
|
— |
|
|
|
7.7 |
|
|
|
Other operating (income) expenses |
0.5 |
|
|
|
(0.6 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5.5 |
) |
|
|
— |
|
|
|
— |
|
|
|
(5.6 |
) |
|
|
Interest expense |
9.3 |
|
|
|
4.7 |
|
|
|
3.5 |
|
|
|
— |
|
|
|
— |
|
|
|
9.6 |
|
|
|
— |
|
|
|
68.4 |
|
|
|
95.5 |
|
|
|
Other (income) expense, net |
(1.6 |
) |
|
|
(0.8 |
) |
|
|
1.3 |
|
|
|
— |
|
|
|
(8.6 |
) |
|
|
2.7 |
|
|
|
0.6 |
|
|
|
2.3 |
|
|
|
(4.1 |
) |
|
|
Net loss (gain) on contingent consideration |
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.4 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.4 |
) |
|
|
Foreign currency (gain) loss (included in cost of revenue) |
— |
|
|
|
0.4 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.4 |
|
|
|
Income tax (benefit) expense |
10.9 |
|
|
|
(0.4 |
) |
|
|
(0.8 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1.5 |
) |
|
|
— |
|
|
|
(8.1 |
) |
|
|
0.1 |
|
|
|
Noncontrolling interest |
2.0 |
|
|
|
(1.2 |
) |
|
|
1.8 |
|
|
|
— |
|
|
|
(3.4 |
) |
|
|
(3.8 |
) |
|
|
— |
|
|
|
— |
|
|
|
(4.6 |
) |
|
|
Share-based payment expense |
— |
|
|
|
1.6 |
|
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
|
|
0.6 |
|
|
|
— |
|
|
|
5.5 |
|
|
|
7.8 |
|
|
|
Non-recurring items |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Acquisition and disposition costs |
5.3 |
|
|
|
4.8 |
|
|
|
0.1 |
|
|
|
0.4 |
|
|
|
— |
|
|
|
1.2 |
|
|
|
— |
|
|
|
1.5 |
|
|
|
13.3 |
|
|
|
Adjusted EBITDA |
$ |
75.7 |
|
|
|
$ |
30.7 |
|
|
|
$ |
17.0 |
|
|
|
$ |
3.4 |
|
|
|
$ |
(11.8 |
) |
|
|
$ |
(6.3 |
) |
|
|
$ |
— |
|
|
|
$ |
(17.9 |
) |
|
|
$ |
90.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Core Operating Subsidiaries |
$ |
126.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS,
INC.RECONCILIATION OF NET INCOME (LOSS) TO
ADJUSTED EBITDA
| (in millions) |
Year ended December 31, 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. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
162.0 |
|
|
| Less: Net Income attributable
to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
165.2 |
|
|
| Less: Consolidating
eliminations attributable to HC2 Holdings Insurance segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19.2 |
|
|
| Net Income (loss) attributable
to HC2 Holdings, Inc., excluding Insurance Segment |
$ |
27.7 |
|
|
|
$ |
0.3 |
|
|
|
$ |
(0.9 |
) |
|
|
$ |
4.6 |
|
|
|
$ |
65.2 |
|
|
|
$ |
(34.5 |
) |
|
|
$ |
(2.9 |
) |
|
|
$ |
(81.9 |
) |
|
|
$ |
(22.4 |
) |
|
| Adjustments to reconcile net
income (loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
7.4 |
|
|
|
27.2 |
|
|
|
5.5 |
|
|
|
0.3 |
|
|
|
0.2 |
|
|
|
3.3 |
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
44.1 |
|
|
|
Depreciation and amortization (included in cost of revenue) |
7.0 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7.0 |
|
|
|
Amortization of equity method fair value adjustment at
acquisition |
— |
|
|
|
(1.5 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1.5 |
) |
|
|
Asset impairment expense |
— |
|
|
|
— |
|
|
|
0.7 |
|
|
|
— |
|
|
|
— |
|
|
|
0.3 |
|
|
|
— |
|
|
|
— |
|
|
|
1.0 |
|
|
|
Other operating (income) expenses |
(0.2 |
) |
|
|
(0.7 |
) |
|
|
(0.2 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1.1 |
) |
|
|
Interest expense |
2.6 |
|
|
|
4.8 |
|
|
|
1.6 |
|
|
|
— |
|
|
|
— |
|
|
|
9.5 |
|
|
|
— |
|
|
|
57.1 |
|
|
|
75.6 |
|
|
|
Loss on early extinguishment or restructuring of debt |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2.6 |
|
|
|
— |
|
|
|
2.5 |
|
|
|
5.1 |
|
|
|
Net loss (gain) on contingent consideration |
— |
|
|
|
0.8 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.8 |
|
|
|
Other (income) expense, net |
(2.6 |
) |
|
|
(1.8 |
) |
|
|
0.3 |
|
|
|
0.1 |
|
|
|
— |
|
|
|
1.5 |
|
|
|
4.6 |
|
|
|
(4.8 |
) |
|
|
(2.7 |
) |
|
|
Gain on sale and deconsolidation of subsidiary |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(102.1 |
) |
|
|
— |
|
|
|
(1.6 |
) |
|
|
— |
|
|
|
(103.7 |
) |
|
|
Foreign currency (gain) loss (included in cost of revenue) |
— |
|
|
|
0.1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
|
|
Income tax (benefit) expense |
11.9 |
|
|
|
0.2 |
|
|
|
(1.1 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1.0 |
) |
|
|
(1.6 |
) |
|
|
(6.6 |
) |
|
|
1.8 |
|
|
|
Noncontrolling interest |
2.2 |
|
|
|
— |
|
|
|
(0.4 |
) |
|
|
— |
|
|
|
19.1 |
|
|
|
(1.9 |
) |
|
|
(1.1 |
) |
|
|
— |
|
|
|
17.9 |
|
|
|
Bonus to be settled in equity |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2.0 |
|
|
|
2.0 |
|
|
|
Share-based payment expense |
— |
|
|
|
1.9 |
|
|
|
— |
|
|
|
— |
|
|
|
0.2 |
|
|
|
1.6 |
|
|
|
0.3 |
|
|
|
5.0 |
|
|
|
9.0 |
|
|
|
Non-recurring items |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Acquisition and disposition costs |
4.9 |
|
|
|
1.4 |
|
|
|
— |
|
|
|
0.3 |
|
|
|
2.5 |
|
|
|
1.7 |
|
|
|
— |
|
|
|
0.7 |
|
|
|
11.5 |
|
|
|
Adjusted EBITDA |
$ |
60.9 |
|
|
|
$ |
32.7 |
|
|
|
$ |
5.5 |
|
|
|
$ |
5.3 |
|
|
|
$ |
(14.9 |
) |
|
|
$ |
(16.9 |
) |
|
|
$ |
(2.2 |
) |
|
|
$ |
(25.9 |
) |
|
|
$ |
44.5 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Core Operating Subsidiaries |
$ |
104.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS,
INC.RECONCILIATION OF NET INCOME (LOSS) TO
ADJUSTED OPERATING INCOME ("INSURANCE AOI")AND
PRE-TAX OPERATING INCOME ("PRE-TAX INSURANCE AOI")
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.
| |
(unaudited) |
|
|
| (in millions) |
Three Months Ended December 31, |
|
Years Ended December 31, |
| |
|
|
|
|
Increase / |
|
|
|
|
|
Increase / |
| |
2019 |
|
2018 |
|
(Decrease) |
|
2019 |
|
2018 |
|
(Decrease) |
|
Net income (loss) - Insurance segment |
$ |
(15.2 |
) |
|
|
$ |
22.4 |
|
|
|
$ |
(37.6 |
) |
|
|
$ |
59.4 |
|
|
|
$ |
165.2 |
|
|
|
$ |
(105.8 |
) |
|
| Effect of investment (gains)
(1) |
1.7 |
|
|
|
21.5 |
|
|
|
(19.8 |
) |
|
|
(1.9 |
) |
|
|
(5.6 |
) |
|
|
3.7 |
|
|
| Asset impairment expense |
47.3 |
|
|
|
— |
|
|
|
47.3 |
|
|
|
47.3 |
|
|
|
— |
|
|
|
47.3 |
|
|
| Gain on bargain purchase |
— |
|
|
|
(6.3 |
) |
|
|
6.3 |
|
|
|
(1.1 |
) |
|
|
(115.4 |
) |
|
|
114.3 |
|
|
| Gain on reinsurance
recaptures |
— |
|
|
|
(29.2 |
) |
|
|
29.2 |
|
|
|
— |
|
|
|
(47.0 |
) |
|
|
47.0 |
|
|
| Acquisition costs |
0.1 |
|
|
|
0.3 |
|
|
|
(0.2 |
) |
|
|
2.1 |
|
|
|
2.8 |
|
|
|
(0.7 |
) |
|
|
Insurance AOI |
33.9 |
|
|
|
8.7 |
|
|
|
25.2 |
|
|
|
105.8 |
|
|
|
— |
|
|
|
105.8 |
|
|
|
Income tax expense (benefit) |
(23.4 |
) |
|
|
0.6 |
|
|
|
(24.0 |
) |
|
|
(20.1 |
) |
|
|
0.6 |
|
|
|
(20.7 |
) |
|
|
Pre-tax Insurance AOI |
$ |
10.5 |
|
|
|
$ |
9.3 |
|
|
|
$ |
1.2 |
|
|
|
$ |
85.7 |
|
|
|
$ |
0.6 |
|
|
|
$ |
85.1 |
|
|
| (1) The
Insurance segment revenues are inclusive of realized and unrealized
gains (losses) and net investment income for the quarter and year
ended December 31, 2019 and 2018. Such adjustments are related to
transactions between entities under common control that are
eliminated or are reclassified in consolidation. |
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