NEW YORK, Aug. 09, 2016 (GLOBE NEWSWIRE) -- HC2 Holdings, Inc. (“HC2”) (NYSE MKT:HCHC), a diversified holding company that focuses on acquiring, operating and growing businesses that it considers to be under or fairly valued, today announced its consolidated results for the second quarter ended on June 30, 2016.
“I am pleased with today’s announcement, as we continued to execute well during the second quarter evidenced by the strength and stability of our core operating subsidiaries driving sequential growth,” said Philip Falcone, HC2’s Chairman, President and Chief Executive Officer. “This quarter’s results further demonstrate the power of our model, which combines a diverse portfolio of cash generating businesses, a strong capital base and significant upside potential in our early stage investments. In the second half of 2016, we will focus on continuing our positive momentum via capital structure and liquidity optimization, active management and expansion of our portfolio.”
Second Quarter Financial Highlights:
Additional Second Quarter Highlights and Recent Developments
Non-GAAP Financial Measures
In this release, HC2 refers to certain financial measures that are not presented in accordance with U.S. generally accepted accounting principles (“GAAP”), including Core Operating Subsidiary Adjusted EBITDA, Total Adjusted EBITDA (excluding the Insurance segment) and Adjusted EBITDA for its operating segments. Management believes that Adjusted EBITDA measures provide investors with meaningful information for gaining an understanding of the Company’s results as it is frequently used by the financial community to provide insight into an organization’s operating trends and facilitates comparisons between peer companies, because interest, taxes, depreciation, amortization and the other items for which adjustments are made as noted in the definition of Adjusted EBITDA below can differ greatly between organizations as a result of differing capital structures and tax strategies. In addition, management uses Adjusted EBITDA measures in evaluating certain of the Company’s segments performance because they eliminate the effects of considerable amounts of non-cash depreciation and amortization and items not within the control of the Company’s operations managers. While management believes that these non-US GAAP measurements are useful as supplemental information, such adjusted results are not intended to replace our US GAAP financial results and should be read together with HC2’s results reported under GAAP.
Management defines Adjusted EBITDA as Net income (loss) adjusted to exclude the impact of asset impairment expense; gain (loss) on sale or disposal of assets; lease termination costs; interest expense; loss on early extinguishment or restructuring of debt; other income (expense), net; foreign currency transaction gain (loss); income tax (benefit) expense; gain (loss) from discontinued operations; non-controlling interest; share-based compensation expense; acquisition related and other non-recurring items and depreciation and amortization. A reconciliation of Adjusted EBITDA to net income is included in the financial tables at the end of this release.
Conference Call
HC2 Holdings, Inc. will host a live conference call to discuss its second quarter 2016 financial results and operations today, Tuesday, August 9, 2016 at 5:30 p.m. ET. Dial-in instructions for the conference call and the replay are as follows:
Live Call
Dial-In (Toll Free): 1-866-395-3893
International Dial-In: 1-678-509-7540
Participant Entry Number: 49610865
Alternatively, a live webcast of the conference call can be accessed by interested parties through the Investor Relations section of the HC2 Website, www.HC2.com.
Conference Replay*
Domestic Dial-In (Toll Free): 1-855-859-2056
International Dial-In: 1-404-537-3406
Conference Number: 49610865
*Available approximately two hours after the end of the conference call through September, 30, 2016.
Cautionary Statement Regarding Forward-Looking Statements
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: This 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 statements regarding our expectation regarding building shareholder value. Such statements are based on the beliefs and assumptions of HC2's management and the management of HC2's subsidiaries. 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 reports on Forms 10-K, 10-Q and 8-K. Such important factors include, without limitation, issues related to the restatement of our financial statements; the fact that we have historically identified material weaknesses in our internal control over financial reporting, and any inability to remediate future material weaknesses; capital market conditions; the ability of HC2's subsidiaries 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 to identify any suitable future acquisition 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 of HC2. 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 Securities and Exchange Commission (“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 HC2 undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
For information on HC2 Holdings, Inc., please contact Andrew G. Backman - Managing Director - Investor Relations & Public Relations - abackman@hc2.com - 212-339-5836
HC2 HOLDINGS, INC. | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Services revenue | $ | 197,372 | $ | 147,841 | $ | 379,481 | $ | 221,559 | ||||||||
Sales revenue | 125,759 | 133,141 | 246,256 | 261,231 | ||||||||||||
Life, accident and health earned premiums, net | 20,037 | — | 39,971 | — | ||||||||||||
Net investment income | 13,707 | — | 27,786 | — | ||||||||||||
Net realized gains (losses) on investments | 2,418 | — | (2,457 | ) | — | |||||||||||
Net revenue | 359,293 | 280,982 | 691,037 | 482,790 | ||||||||||||
Operating expenses | ||||||||||||||||
Cost of revenue - services | 183,193 | 134,589 | 358,066 | 196,509 | ||||||||||||
Cost of revenue - sales | 101,290 | 110,909 | 200,967 | 221,445 | ||||||||||||
Policy benefits, changes in reserves, and commissions | 29,189 | — | 63,328 | — | ||||||||||||
Selling, general and administrative | 35,614 | 26,476 | 71,916 | 49,988 | ||||||||||||
Depreciation and amortization | 5,887 | 5,478 | 11,484 | 10,733 | ||||||||||||
(Gain) loss on sale or disposal of assets | (1,837 | ) | 498 | (950 | ) | 971 | ||||||||||
Lease termination costs | 338 | — | 338 | — | ||||||||||||
Total operating expenses | 353,674 | 277,950 | 705,149 | 479,646 | ||||||||||||
Income (loss) from operations | 5,619 | 3,032 | (14,112 | ) | 3,144 | |||||||||||
Interest expense | (10,569 | ) | (10,125 | ) | (20,895 | ) | (18,825 | ) | ||||||||
Other income (expense), net | 430 | (2,344 | ) | 540 | (2,571 | ) | ||||||||||
Income (loss) from equity investees | 6,035 | 1,429 | 2,101 | (1,259 | ) | |||||||||||
Gain (loss) from continuing operations before income taxes | 1,515 | (8,008 | ) | (32,366 | ) | (19,511 | ) | |||||||||
Income tax benefit (expense) | (224 | ) | (2,678 | ) | 2,315 | 3,336 | ||||||||||
Gain (loss) from continuing operations | 1,291 | (10,686 | ) | (30,051 | ) | (16,175 | ) | |||||||||
Loss from discontinued operations | — | (11 | ) | — | (20 | ) | ||||||||||
Net income (loss) | 1,291 | (10,697 | ) | (30,051 | ) | (16,195 | ) | |||||||||
Less: Net (income) loss attributable to noncontrolling interest and redeemable noncontrolling interest | 644 | (204 | ) | 1,524 | 57 | |||||||||||
Net income (loss) attributable to HC2 Holdings, Inc. | 1,935 | (10,901 | ) | (28,527 | ) | (16,138 | ) | |||||||||
Less: Preferred stock dividends and accretion | 1,044 | 1,089 | 2,113 | 2,177 | ||||||||||||
Net income (loss) attributable to common stock and participating preferred stockholders | $ | 891 | $ | (11,990 | ) | $ | (30,640 | ) | $ | (18,315 | ) | |||||
Basic income (loss) per common share: | ||||||||||||||||
Income (loss) from continuing operations | $ | 0.02 | $ | (0.47 | ) | $ | (0.87 | ) | $ | (0.74 | ) | |||||
Loss from discontinued operations | — | — | — | — | ||||||||||||
Net income (loss) attributable to common stock and participating preferred stockholders | $ | 0.02 | $ | (0.47 | ) | $ | (0.87 | ) | $ | (0.74 | ) | |||||
Diluted income (loss) per common share: | ||||||||||||||||
Income (loss) from continuing operations | $ | 0.02 | $ | (0.47 | ) | $ | (0.87 | ) | $ | (0.74 | ) | |||||
Loss from discontinued operations | — | — | — | — | ||||||||||||
Net income (loss) attributable to common stock and participating preferred stockholders | $ | 0.02 | $ | (0.47 | ) | $ | (0.87 | ) | $ | (0.74 | ) | |||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 35,518 | 25,514 | 35,391 | 24,838 | ||||||||||||
Diluted | 35,643 | 25,514 | 35,391 | 24,838 |
HC2 HOLDINGS, INC. | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(in thousands, except share amounts) | ||||||||
(Unaudited) | ||||||||
June 30, 2016 | December 31, 2015 | |||||||
Assets | ||||||||
Investments: | ||||||||
Fixed maturity securities, available-for-sale at fair value | $ | 1,323,821 | $ | 1,231,841 | ||||
Equity securities, available-for-sale at fair value | 52,703 | 49,682 | ||||||
Mortgage loans | 4,165 | 1,252 | ||||||
Policy loans | 18,311 | 18,476 | ||||||
Other invested assets | 62,304 | 53,119 | ||||||
Total investments | 1,461,304 | 1,354,370 | ||||||
Cash and cash equivalents | 134,510 | 158,624 | ||||||
Restricted cash | 590 | 538 | ||||||
Accounts receivable (net of allowance for doubtful accounts of $1,516 and $794 at June 30, 2016 and December 31, 2015, respectively) | 221,295 | 210,853 | ||||||
Costs and recognized earnings in excess of billings on uncompleted contracts | 29,957 | 39,310 | ||||||
Inventory | 11,116 | 12,120 | ||||||
Recoverable from reinsurers | 526,158 | 522,562 | ||||||
Accrued investment income | 15,079 | 15,300 | ||||||
Deferred tax asset | 41,062 | 52,511 | ||||||
Property, plant and equipment, net | 243,497 | 214,466 | ||||||
Goodwill | 83,931 | 61,178 | ||||||
Intangibles, net | 36,909 | 29,409 | ||||||
Other assets | 38,801 | 65,206 | ||||||
Assets held for sale | 1,116 | 6,065 | ||||||
Total assets | $ | 2,845,325 | $ | 2,742,512 | ||||
Liabilities, temporary equity and stockholders’ equity | ||||||||
Life, accident and health reserves | $ | 1,625,560 | $ | 1,591,937 | ||||
Annuity reserves | 256,014 | 260,853 | ||||||
Value of business acquired | 49,699 | 50,761 | ||||||
Accounts payable and other current liabilities | 212,438 | 225,389 | ||||||
Billings in excess of costs and recognized earnings on uncompleted contracts | 43,098 | 21,201 | ||||||
Deferred tax liability | 11,514 | 4,281 | ||||||
Long-term obligations | 394,489 | 371,876 | ||||||
Pension liability | 21,419 | 25,156 | ||||||
Other liabilities | 9,896 | 17,793 | ||||||
Total liabilities | 2,624,127 | 2,569,247 | ||||||
Commitments and contingencies | ||||||||
Temporary equity: | ||||||||
Preferred stock, $.001 par value - 20,000,000 shares authorized; Series A - 28,308 and 29,172 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively; Series A-1 - 10,000 shares issued and outstanding at June 30, 2016 and December 31, 2015; Series A-2 - 14,000 shares issued and outstanding at June 30, 2016 and December 31, 2015 | 51,854 | 52,619 | ||||||
Redeemable noncontrolling interest | 2,811 | 3,122 | ||||||
Total temporary equity | 54,665 | 55,741 | ||||||
Stockholders’ equity: | ||||||||
Common stock, $.001 par value - 80,000,000 shares authorized; 35,605,957 and 35,281,375 shares issued and 35,574,331 and 35,249,749 shares outstanding at June 30, 2016 and December 31, 2015, respectively | 36 | 35 | ||||||
Additional paid-in capital | 218,478 | 209,477 | ||||||
Accumulated deficit | (108,256 | ) | (79,729 | ) | ||||
Treasury stock, at cost | (378 | ) | (378 | ) | ||||
Accumulated other comprehensive gain (loss) | 27,577 | (35,375 | ) | |||||
Total HC2 Holdings, Inc. stockholders’ equity before noncontrolling interest | 137,457 | 94,030 | ||||||
Noncontrolling interest | 29,076 | 23,494 | ||||||
Total stockholders’ equity | 166,533 | 117,524 | ||||||
Total liabilities, temporary equity and stockholders’ equity | $ | 2,845,325 | $ | 2,742,512 |
HC2 HOLDINGS, INC. | |||||||||||||||||||||||||||||||||
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA | |||||||||||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||||
Three Months Ended June 30, 2016 | |||||||||||||||||||||||||||||||||
Core Operating | Early Stage & Other | Non- operating Corporate | HC2** | ||||||||||||||||||||||||||||||
Manufacturing | Marine Services | Telecom | Utilities | Total Core Operating | Life Sciences | Other and Eliminations | |||||||||||||||||||||||||||
Net income (loss) | $ | 9,364 | $ | 6,002 | $ | 1,009 | $ | 68 | $ | 16,443 | $ | (2,004 | ) | $ | (2,608 | ) | $ | (7,603 | ) | $ | 4,228 | ||||||||||||
Adjustments to reconcile net income (loss) to Adjusted EBITDA: | |||||||||||||||||||||||||||||||||
Depreciation and amortization | 303 | 5,725 | 140 | 468 | 6,636 | 36 | 336 | — | 7,008 | ||||||||||||||||||||||||
Depreciation and amortization (included in cost of revenue)* | (206 | ) | — | — | — | (206 | ) | — | — | — | (206 | ) | |||||||||||||||||||||
(Gain) loss on sale or disposal of assets | (1,845 | ) | 7 | — | — | (1,838 | ) | — | 1 | — | (1,837 | ) | |||||||||||||||||||||
Lease termination costs | — | — | 338 | — | 338 | — | — | — | 338 | ||||||||||||||||||||||||
Interest expense | 303 | 1,285 | — | 14 | 1,602 | — | 1 | 8,966 | 10,569 | ||||||||||||||||||||||||
Other (income) expense, net | (32 | ) | 211 | 29 | (344 | ) | (136 | ) | — | (10 | ) | 465 | 319 | ||||||||||||||||||||
Foreign currency (gain) loss (included in cost of revenue) | — | (1,540 | ) | — | — | (1,540 | ) | — | — | — | (1,540 | ) | |||||||||||||||||||||
Income tax (benefit) expense | 4,524 | (212 | ) | — | — | 4,312 | — | 1 | (9,404 | ) | (5,091 | ) | |||||||||||||||||||||
Noncontrolling interest | 768 | 200 | — | 244 | 1,212 | (812 | ) | (1,044 | ) | — | (644 | ) | |||||||||||||||||||||
Share-based payment expense | — | 152 | — | 90 | 242 | 34 | 40 | 1,359 | 1,675 | ||||||||||||||||||||||||
Acquisition and nonrecurring items | — | — | 18 | — | 18 | — | 313 | 331 | |||||||||||||||||||||||||
Adjusted EBITDA | $ | 13,179 | $ | 11,830 | $ | 1,534 | $ | 540 | $ | 27,083 | $ | (2,746 | ) | $ | (3,283 | ) | $ | (5,904 | ) | $ | 15,150 |
Three Months Ended June 30, 2015 | |||||||||||||||||||||||||||||||||
Core Operating | Early Stage & Other | Non- operating Corporate | HC2** | ||||||||||||||||||||||||||||||
Manufacturing | Marine Services | Telecom | Utilities | Total Core Operating | Life Sciences | Other and Eliminations | |||||||||||||||||||||||||||
Net income (loss) | $ | 5,878 | $ | 9,398 | $ | 587 | $ | (134 | ) | $ | 15,729 | $ | (1,383 | ) | $ | (2,232 | ) | $ | (22,885 | ) | $ | (10,771 | ) | ||||||||||
Adjustments to reconcile net income (loss) to Adjusted EBITDA: | |||||||||||||||||||||||||||||||||
Depreciation and amortization | 499 | 4,324 | 98 | 397 | 5,318 | 1 | 159 | — | 5,478 | ||||||||||||||||||||||||
Depreciation and amortization (included in cost of revenue) | 1,932 | — | — | — | 1,932 | — | — | — | 1,932 | ||||||||||||||||||||||||
Loss on sale or disposal of assets | 498 | — | — | — | 498 | — | — | — | 498 | ||||||||||||||||||||||||
Interest expense | 366 | 963 | — | 11 | 1,340 | — | 1 | 8,784 | 10,125 | ||||||||||||||||||||||||
Other (income) expense, net | (6 | ) | (1,388 | ) | (469 | ) | (7 | ) | (1,870 | ) | — | (1,128 | ) | 5,342 | 2,344 | ||||||||||||||||||
Foreign currency (gain) loss (included in cost of revenue) | — | 2,758 | — | — | 2,758 | — | — | — | 2,758 | ||||||||||||||||||||||||
Income tax (benefit) expense | 4,335 | 38 | — | — | 4,373 | (9 | ) | (1,571 | ) | (115 | ) | 2,678 | |||||||||||||||||||||
Loss from discontinued operations | 11 | — | — | — | 11 | — | — | — | 11 | ||||||||||||||||||||||||
Noncontrolling interest | 499 | 310 | — | (129 | ) | 680 | (475 | ) | (1 | ) | — | 204 | |||||||||||||||||||||
Share-based payment expense | — | — | — | 2 | 2 | — | (2 | ) | 2,364 | 2,364 | |||||||||||||||||||||||
Acquisition and nonrecurring items | — | — | — | — | — | — | — | 1,969 | 1,969 | ||||||||||||||||||||||||
Adjusted EBITDA | $ | 14,012 | $ | 16,403 | $ | 216 | $ | 140 | $ | 30,771 | $ | (1,866 | ) | $ | (4,774 | ) | $ | (4,541 | ) | $ | 19,590 | ||||||||||||
(*) Includes depreciation adjustments from purchase accounting as fully described previously within the Second Quarter Financial Highlights.
(**) Excludes net loss from Insurance segment in the amount of $2.3 million and $0.1 million for the three months ended June 30, 2016 and 2015, respectively.
Three Months Ended March 31, 2016 | |||||||||||||||||||||||||||||||||
Core Operating | Early Stage & Other | Non- operating Corporate | HC2** | ||||||||||||||||||||||||||||||
Manufacturing | Marine Services | Telecom | Utilities | Total Core Operating | Life Sciences | Other and Eliminations | |||||||||||||||||||||||||||
Net income (loss) | $ | 4,384 | $ | (5,918 | ) | $ | 1,202 | $ | (27 | ) | $ | (359 | ) | $ | 1,298 | $ | (10,494 | ) | $ | (13,409 | ) | $ | (22,966 | ) | |||||||||
Adjustments to reconcile net income (loss) to Adjusted EBITDA: | |||||||||||||||||||||||||||||||||
Depreciation and amortization | 529 | 4,797 | 106 | 429 | 5,861 | 19 | 336 | — | 6,216 | ||||||||||||||||||||||||
Depreciation and amortization (included in cost of revenue) | 1,933 | — | — | — | 1,933 | — | — | — | 1,933 | ||||||||||||||||||||||||
(Gain) loss on sale or disposal of assets | 904 | (17 | ) | — | — | 887 | — | — | — | 887 | |||||||||||||||||||||||
Interest expense | 310 | 1,070 | — | 9 | 1,389 | — | — | 8,937 | 10,326 | ||||||||||||||||||||||||
Other (income) expense, net | (44 | ) | 612 | (1,025 | ) | (31 | ) | (488 | ) | (3,221 | ) | 6,006 | (1,611 | ) | 687 | ||||||||||||||||||
Foreign currency (gain) loss (included in cost of revenue) | — | (147 | ) | — | — | (147 | ) | — | — | — | (147 | ) | |||||||||||||||||||||
Income tax (benefit) expense | 3,445 | (640 | ) | — | — | 2,805 | — | — | (4,226 | ) | (1,422 | ) | |||||||||||||||||||||
Noncontrolling interest | 61 | (155 | ) | — | (22 | ) | (116 | ) | (720 | ) | (44 | ) | — | (880 | ) | ||||||||||||||||||
Share-based payment expense | — | 609 | — | 14 | 623 | 22 | 159 | 2,386 | 3,191 | ||||||||||||||||||||||||
Acquisition and nonrecurring items | — | 266 | — | 27 | 293 | — | 2,201 | 2,494 | |||||||||||||||||||||||||
Adjusted EBITDA | $ | 11,522 | $ | 477 | $ | 283 | $ | 399 | $ | 12,681 | $ | (2,602 | ) | $ | (4,037 | ) | $ | (5,722 | ) | $ | 319 | ||||||||||||
(**) Excludes net loss from Insurance segment in the amount of $7.5 million for the three months ended March 31, 2016.