- Third Quarter 2020 Consolidated Net Revenue of $393.3 Million -
- MediBeacon Receives Additional Commitment for Funding of $20 Million -
NEW YORK, Nov. 09, 2020 (GLOBE NEWSWIRE) -- 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, 2020.
Third Quarter 2020 Highlights
- Net Loss attributable to common and participating preferred stockholders of $17.7 million, or $0.38 per share, compared to Net Loss of $7.5 million, or $0.16 per fully diluted share, in the year-ago quarter.
- Total Adjusted EBITDA, excluding Insurance, of $11.9 million, compared to $11.8 million in the year-ago quarter.
Subsequent Events
- Commenced $65 million common stock rights offering.
- Pansend Life Sciences portfolio company MediBeacon received a commitment from Huadong Medicine Company Limited (“Huadong”) for an additional $20 million in non-dilutive funding over the next two years to pursue Class 1 status in China, allowing the device to immediately enter the Chinese hospital system.
- Completed sale of Telecommunications subsidiary, PTGi-International Carrier Services, Inc.
“We continued to take the necessary steps to position ourselves to improve our capital structure for the long term,” stated Wayne Barr, Jr., HC2’s interim Chief Executive Officer. “During the quarter, we completed the consolidation of our headquarters, significantly reducing ongoing corporate expenses, and last month, we commenced a $65 million rights offering that is partially backstopped by our Chairman Avie Glazer’s fund Lancer Capital. The Board and our management team collectively believe this is the best path forward to strengthen our balance sheet ahead of a potential refinancing of our 11.5% Notes, and the partial backstop clearly aligns our Chairman with our stockholders.”
“We also continued to navigate through the ongoing challenging environment and, accounting for the impact of COVID, reported solid results at our segments during the quarter,” added Mr. Barr. “Our Clean Energy segment increased Adjusted EBITDA by 61% compared to the prior-year period, while pre-orders of R2 Technologies' 'Glacial Rx' skin lightening and brightening system are strong, and we are looking forward to the full commercial launch early next year. In addition, MediBeacon received an additional funding commitment from Huadong, further validating the value we believe that is inherent at our Life Sciences segment. We remain focused on enhancing our capital structure for the long-term as we continue to evaluate all strategic options across our portfolio to unlock value for our stockholders.”
Third Quarter Financial Highlights
- Net Revenue: For the third quarter of 2020, HC2 consolidated net revenue was $393.3 million, compared to $427.5 million for the year-ago quarter. Lower revenues from our Telecommunications, Infrastructure (formerly Construction) and Spectrum (formerly Broadcasting) segments, as well as our Insurance segment, net of eliminations, were partially offset by an increase in revenue from our Clean Energy segment.
| NET REVENUE by OPERATING SEGMENT | |||||||||||||||||||||||
| (in millions) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| 2020 | 2019 | Increase / (Decrease) | 2020 | 2019 | Increase / (Decrease) | ||||||||||||||||||
| Infrastructure | $ | 160.8 | $ | 168.4 | $ | (7.6 | ) | $ | 509.6 | $ | 556.2 | $ | (46.6 | ) | |||||||||
| Clean Energy | 10.3 | 8.7 | 1.6 | 31.0 | 19.3 | 11.7 | |||||||||||||||||
| Telecommunications | 136.4 | 162.2 | (25.8 | ) | 430.1 | 507.0 | (76.9 | ) | |||||||||||||||
| Insurance | 78.9 | 80.4 | (1.5 | ) | 223.2 | 251.3 | (28.1 | ) | |||||||||||||||
| Spectrum | 9.7 | 10.0 | (0.3 | ) | 29.3 | 29.8 | (0.5 | ) | |||||||||||||||
| Eliminations (1) | (2.8 | ) | (2.2 | ) | (0.6 | ) | (8.1 | ) | (7.9 | ) | (0.2 | ) | |||||||||||
| Consolidated HC2 | $ | 393.3 | $ | 427.5 | $ | (34.2 | ) | $ | 1,215.1 | $ | 1,355.7 | $ | (140.6 | ) | |||||||||
(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, 2020 and 2019, inclusive of transactions between entities under common control, which are eliminated or are reclassified in consolidation.
- Net Income / (Loss): For the third quarter of 2020, HC2 reported Net Loss attributable to common stock and participating preferred stockholders of $17.7 million, or $0.38 per share, compared to $7.5 million, or $0.16 per share, in the year-ago quarter.
| NET INCOME (LOSS) by OPERATING SEGMENT | |||||||||||||||||||||||
| (in millions) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| 2020 | 2019 | Increase / (Decrease) | 2020 | 2019 | Increase / (Decrease) | ||||||||||||||||||
| Infrastructure | $ | 2.5 | $ | 7.0 | $ | (4.5 | ) | $ | 4.0 | $ | 18.0 | $ | (14.0 | ) | |||||||||
| Clean Energy | (3.4 | ) | (0.1 | ) | (3.3 | ) | (2.4 | ) | (1.4 | ) | (1.0 | ) | |||||||||||
| Telecommunications | 2.4 | (0.3 | ) | 2.7 | 2.9 | 0.7 | 2.2 | ||||||||||||||||
| Insurance | 12.7 | 10.5 | 2.2 | 24.1 | 74.6 | (50.5 | ) | ||||||||||||||||
| Life Sciences | (4.3 | ) | 5.6 | (9.9 | ) | (8.7 | ) | 1.6 | (10.3 | ) | |||||||||||||
| Spectrum | (15.7 | ) | (6.2 | ) | (9.5 | ) | (26.6 | ) | (14.1 | ) | (12.5 | ) | |||||||||||
| Other and Eliminations | 0.2 | 2.4 | (2.2 | ) | 4.2 | (2.3 | ) | 6.5 | |||||||||||||||
| Non-operating Corporate | (9.7 | ) | (23.9 | ) | 14.2 | (79.7 | ) | (70.0 | ) | (9.7 | ) | ||||||||||||
| Consolidating Eliminations attributable to HC2 Holdings Insurance Segment(1) | (2.0 | ) | (2.1 | ) | 0.1 | (5.1 | ) | (7.6 | ) | 2.5 | |||||||||||||
| Net loss attributable to HC2 Holdings, Inc. | $ | (17.3 | ) | $ | (7.1 | ) | $ | (10.2 | ) | $ | (87.3 | ) | $ | (0.5 | ) | $ | (86.8 | ) | |||||
| Less: Preferred dividends, deemed dividends, and repurchase gains | 0.4 | 0.4 | — | 1.2 | (0.4 | ) | 1.6 | ||||||||||||||||
| Net loss attributable to common stock and participating preferred stockholders | $ | (17.7 | ) | $ | (7.5 | ) | $ | (10.2 | ) | $ | (88.5 | ) | $ | (0.1 | ) | $ | (88.4 | ) | |||||
(1) The Insurance segment results are inclusive of realized and unrealized gains and net investment income for the three and nine months ended September 30, 2020 and 2019, inclusive of transactions between entities under common control, which are eliminated or are reclassified in consolidation.
- Adjusted EBITDA: For the third quarter of 2020, Total Adjusted EBITDA, which excludes the Insurance segment, totaled $11.9 million, comparable with the year-ago quarter. Reduced losses from Spectrum, improvements at Clean Energy and lower Non-operating Corporate expenses were offset by decreased contributions from Infrastructure and Telecommunications as well as increased losses at the Life Sciences segment.
| ADJUSTED EBITDA by OPERATING SEGMENT | |||||||||||||||||||||||
| (in millions) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| 2020 | 2019 | Increase / (Decrease) | 2020 | 2019 | Increase / (Decrease) | ||||||||||||||||||
| Infrastructure | $ | 17.7 | $ | 19.4 | $ | (1.7 | ) | $ | 45.8 | $ | 54.9 | $ | (9.1 | ) | |||||||||
| Clean Energy | 3.7 | 2.3 | 1.4 | 11.7 | 4.6 | 7.1 | |||||||||||||||||
| Telecommunications | 0.4 | 0.8 | (0.4 | ) | 1.0 | 2.4 | (1.4 | ) | |||||||||||||||
| Life Sciences | (5.9 | ) | (4.0 | ) | (1.9 | ) | (14.6 | ) | (8.7 | ) | (5.9 | ) | |||||||||||
| Spectrum | (0.2 | ) | (1.9 | ) | 1.7 | (2.3 | ) | (5.3 | ) | 3.0 | |||||||||||||
| Other and Eliminations | (0.1 | ) | (0.1 | ) | — | (0.8 | ) | 2.4 | (3.2 | ) | |||||||||||||
| Non-operating Corporate | (3.7 | ) | (4.7 | ) | 1.0 | (12.3 | ) | (15.2 | ) | 2.9 | |||||||||||||
| Total Adjusted EBITDA | $ | 11.9 | $ | 11.8 | $ | 0.1 | $ | 28.5 | $ | 35.1 | $ | (6.6 | ) | ||||||||||
- Balance Sheet: As of September 30, 2020, HC2 had consolidated cash, cash equivalents and investments of $4.7 billion, which includes cash and investments associated with HC2’s Insurance segment. Excluding the Insurance segment, consolidated cash was $48.9 million, of which $8.9 million was at the HC2 corporate level.
Third Quarter 2020 Segment Highlights
- Infrastructure
| – | The Company continues to review strategic alternatives for DBM, including a subsidiary refinancing. | |
| – | For the third quarter of 2020, DBM reported Net Income of $2.5 million, compared to $7.0 million for the year-ago quarter. Adjusted EBITDA was $17.7 million, compared to $19.4 million in the year-ago quarter. DBM’s results for the quarter were impacted by the timing and mix of project backlog, as well as from the COVID-19 pandemic, which has resulted in delays in new project awards for both its commercial construction and industrial services businesses. | |
| – | DBM's total backlog was approximately $435.9 million as of September 30, 2020, compared to $475.3 million for the year-ago quarter. Taking into consideration awarded, but not yet signed contracts, backlog would have been approximately $640 million at the end of the third quarter of 2020, compared to $833 million at the end of the third quarter of 2019. |
- Clean Energy
| – | For the third quarter of 2020, Beyond6 (f/k/a “American Natural Gas, Inc.” or “ANG”) reported a Net Loss of $3.4 million, compared to $0.1 million for the year-ago quarter. Adjusted EBITDA increased to $3.7 million, compared to $2.3 million for the year-ago quarter, driven by the Alternative Fuel Tax Credit, which was not yet approved for 2019 in the year-ago quarter. |
- Spectrum
| – | Amended terms of its $81.2 million of privately placed notes (the “Notes”) and extended their maturity by one year to October 2021. Borrowing terms for the Notes remain largely unchanged, and, as agreed upon with the institutional lenders, Spectrum will begin the process of selling several non-core stations in select markets where there is redundant coverage to reduce outstanding principal. | |
| – | As of early November 2020, HC2’s Spectrum segment has 227 operational stations, of which approximately 200 are currently connected to the Company’s CentralCast system, in 97 Designated Market Areas (“DMAs”) across the United States and Puerto Rico, including active operating stations in 34 of the top 35 DMAs. The remaining silent license builds were mostly completed during the third quarter. |
- Life Sciences
| – | MediBeacon received a commitment from Huadong Medicine Company Limited (“Huadong”) for an additional $20 million in non-dilutive funding over the next two years to pursue Class 1 status in China, which will allow the device to immediately enter the Chinese hospital system. | |
| – | R2 Technologies (“R2”) commenced its pre-order process for ‘Glacial Rx’, its FDA-approved revolutionary CryoAesthetic technology, which promises physicians a new way to treat aesthetic and medical skin conditions, in advance of an early 2021 launch. | |
| – | As a reminder, both R2 and MediBeacon are fully funded for ongoing activities, and as a result, the Company currently does not anticipate a need for further capital investment from HC2. |
- Insurance
| – | The Company continues to review strategic alternatives for Continental, including a potential sale. | |
| – | As of September 30, 2020, Continental had $4.7 billion of cash and invested assets, $5.8 billion in total GAAP assets, and an estimated $374 million of total adjusted capital. | |
| – | For the third quarter of 2020, Continental reported Net Income of $12.7 million, compared to $10.5 million for the year-ago quarter. | |
| – | Pre-Tax Insurance AOI was $14.3 million for the third quarter of 2020, compared to $13.5 million for the year-ago quarter. The increase was due to favorable claims activity and reserve developments in the current period. This was partially offset by a reduction in net investment income due to a lower yield on invested assets, decreased holdings in preferred stocks and short term investments and unfavorable VOBA amortization largely due to lower policy terminations for the LTC policies acquired in 2018. |
Conference Call
HC2 Holdings, Inc. will host a live conference call to discuss its third quarter 2020 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: 13712462
Conference Replay*
Domestic Dial-In (Toll Free): 1-844-512-2921 or International Dial-In: 1-412-317-6671
Conference Number: 13712462
*Available approximately two hours after the end of the conference call through November 23, 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 Infrastructure, Clean Energy, Life Sciences, Spectrum, 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.
Contact
Investor Relations
Phone: (212) 235-2691
E-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 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; 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; discontinued operations; non-recurring items; costs associated with the COVID-19 pandemic, and acquisition and disposition costs.
Management recognizes that using Adjusted EBITDA as a performance measure has inherent limitations as an analytical tool as compared to net income (loss) or other GAAP financial measures, as these non-GAAP measures exclude certain items, including items that are recurring in nature, which may be meaningful to investors.
Adjusted Operating Income - Insurance
Adjusted Operating Income (“Insurance AOI”) and Pre-tax Adjusted Operating Income (“Pre-tax Insurance AOI”) for the Insurance segment are non-U.S. GAAP financial measures frequently used throughout the insurance industry and are economic measures the Insurance segment uses to evaluate its financial performance. Management believes that Insurance AOI and Pretax Insurance AOI measures provide investors with meaningful information for gaining an understanding of certain results and provide insight into an organization’s operating trends and facilitates comparisons between peer companies. However, Insurance AOI and Pre-tax Insurance AOI have certain limitations, and we may not calculate it the same as other companies in our industry. It should, therefore, be read together with the Company's results calculated in accordance with U.S. GAAP.
Similarly to Adjusted EBITDA, using Insurance AOI and Pre-tax Insurance AOI as performance measures have inherent limitations as an analytical tool as compared to income (loss) from operations or other U.S. GAAP financial measures, as these non-U.S. GAAP measures excludes certain items, including items that are recurring in nature, which may be meaningful to investors. As a result of the exclusions, Insurance AOI and Pre-tax Insurance AOI should not be considered in isolation and do not purport to be an alternative to income (loss) from operations or other U.S. GAAP financial measures as a measure of our operating performance.
Management defines Insurance AOI as Net income (loss) for the Insurance segment adjusted to exclude the impact of net investment gains (losses), including OTTI losses recognized in operations; asset impairment; intercompany elimination; bargain purchase gains; reinsurance gains; and acquisition costs. Management defines Pre-tax Insurance AOI as Insurance AOI adjusted to exclude the impact of income tax (benefit) expense recognized during the current period. Management believes that Insurance AOI and Pre-tax Insurance AOI provide meaningful financial metrics that help investors understand certain results and profitability. While these adjustments are an integral part of the overall performance of the Insurance segment, market conditions impacting these items can overshadow the underlying performance of the business. Accordingly, we believe using a measure which excludes their impact is effective in analyzing the trends of our operations.
Cautionary Statement Regarding Forward-Looking Statements
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This press release contains, and certain oral statements made by our representatives from time to time may contain, forward-looking statements, including, among others, statements related to the expected or potential impact of the novel coronavirus (COVID-19) pandemic, and the related responses of the government and HC2 on our business, financial condition and results of operations, and any such forward-looking statements, whether concerning the COVID-19 pandemic or otherwise, involve risks, assumptions and uncertainties. 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 entering definitive agreements in respect of and consummating potential divestitures of any of our subsidiaries, reducing debt and related interest expense at the holding company level with the net proceeds of such divestitures, 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, the severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic and of businesses’ and governments’ responses to the pandemic on HC2’s operations and personnel, and on commercial activity and demand across our businesses, HC2’s inability to predict the extent to which the COVID-19 pandemic and related impacts will continue to adversely impact HC2’s business operations, financial performance, results of operations, financial position, the prices of HC2’s securities and the achievement of HC2’s strategic objectives, and changes in macroeconomic and market conditions and market volatility (including developments and volatility arising from the COVID-19 pandemic), including interest rates, the value of securities and other financial assets, and the impact of such changes and volatility on HC2’s financial position. 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 definitive agreements for potential divestitures or other strategic transactions will be entered into with respect to any of our subsidiaries, that any such transactions will be consummated, or the timing, terms, conditions or net proceeds thereof. 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, | ||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||
| Revenue | $ | 317.2 | $ | 349.3 | $ | 1,000.0 | $ | 1,112.3 | |||||||
| Life, accident and health earned premiums, net | 28.6 | 28.9 | 86.8 | 88.7 | |||||||||||
| Net investment income | 46.7 | 51.2 | 147.1 | 152.6 | |||||||||||
| Net realized and unrealized gains (losses) on investments | 0.8 | (1.9 | ) | (18.8 | ) | 2.1 | |||||||||
| Net revenue | 393.3 | 427.5 | 1,215.1 | 1,355.7 | |||||||||||
| Operating expenses | |||||||||||||||
| Cost of revenue | 278.7 | 301.3 | 886.9 | 976.4 | |||||||||||
| Policy benefits, changes in reserves, and commissions | 59.6 | 66.1 | 195.0 | 166.8 | |||||||||||
| Selling, general and administrative | 45.2 | 50.7 | 145.6 | 143.8 | |||||||||||
| Depreciation and amortization | 2.4 | 2.2 | 4.1 | 3.7 | |||||||||||
| Other operating income (expense) | 9.5 | (0.3 | ) | 7.5 | (1.7 | ) | |||||||||
| Total operating expenses | 395.4 | 420.0 | 1,239.1 | 1,289.0 | |||||||||||
| (Loss) income from operations | (2.1 | ) | 7.5 | (24.0 | ) | 66.7 | |||||||||
| Interest expense | (19.7 | ) | (20.1 | ) | (62.4 | ) | (58.0 | ) | |||||||
| Loss on early extinguishment or restructuring of debt | (4.2 | ) | — | (13.4 | ) | — | |||||||||
| Loss from equity investees | (1.3 | ) | (1.3 | ) | (4.0 | ) | — | ||||||||
| Gain on bargain purchase | — | — | — | 1.1 | |||||||||||
| Other income (loss) | 7.3 | 6.1 | 74.1 | 4.7 | |||||||||||
| (Loss) income from continuing operations before income taxes | (20.0 | ) | (7.8 | ) | (29.7 | ) | 14.5 | ||||||||
| Income tax expense | (1.6 | ) | (1.1 | ) | (4.4 | ) | (6.2 | ) | |||||||
| (Loss) income from continuing operations | (21.6 | ) | (8.9 | ) | (34.1 | ) | 8.3 | ||||||||
| Income (loss) from discontinued operations (including loss on disposal of $39.3 million) | — | 0.6 | (60.0 | ) | (13.7 | ) | |||||||||
| Net loss | (21.6 | ) | (8.3 | ) | (94.1 | ) | (5.4 | ) | |||||||
| Net loss attributable to noncontrolling interest and redeemable noncontrolling interest | 4.3 | 1.2 | 6.8 | 4.9 | |||||||||||
| Net loss attributable to HC2 Holdings, Inc. | (17.3 | ) | (7.1 | ) | (87.3 | ) | (0.5 | ) | |||||||
| Less: Preferred dividends, deemed dividends and repurchase gains | 0.4 | 0.4 | 1.2 | (0.4 | ) | ||||||||||
| Net loss attributable to common stock and participating preferred stockholders | $ | (17.7 | ) | $ | (7.5 | ) | $ | (88.5 | ) | $ | (0.1 | ) | |||
| (Loss) income per share - continuing operations | |||||||||||||||
| Basic: | $ | (0.38 | ) | $ | (0.16 | ) | $ | (0.94 | ) | $ | 0.28 | ||||
| Diluted: | $ | (0.38 | ) | $ | (0.16 | ) | $ | (0.94 | ) | $ | 0.23 | ||||
| Loss per share - discontinued operations | |||||||||||||||
| Basic: | $ | — | $ | — | $ | (0.95 | ) | $ | (0.28 | ) | |||||
| Diluted: | $ | — | $ | — | $ | (0.95 | ) | $ | (0.21 | ) | |||||
| (Loss) income per share - Net (loss) income attributable to participating securities | |||||||||||||||
| Basic: | $ | (0.38 | ) | $ | (0.16 | ) | $ | (1.89 | ) | $ | — | ||||
| Diluted: | $ | (0.38 | ) | $ | (0.16 | ) | $ | (1.89 | ) | $ | 0.02 | ||||
| Weighted average common shares outstanding: | |||||||||||||||
| Basic: | 46.9 | 45.7 | 46.7 | 45.4 | |||||||||||
| Diluted: | 46.9 | 45.7 | 46.7 | 60.1 | |||||||||||
| HC2 HOLDINGS, INC. | |||||||
| CONDENSED CONSOLIDATED BALANCE SHEET | |||||||
| (in millions, except share amounts) | |||||||
| (Unaudited) | |||||||
| September 30, | December 31, | ||||||
| 2020 | 2019 | ||||||
| Assets | |||||||
| Investments: | |||||||
| Fixed maturity securities, available-for-sale at fair value | $ | 4,295.2 | $ | 4,028.9 | |||
| Equity securities | 74.2 | 92.5 | |||||
| Mortgage loans | 121.1 | 183.5 | |||||
| Policy loans | 18.2 | 19.1 | |||||
| Other invested assets | 60.7 | 68.1 | |||||
| Total investments | 4,569.4 | 4,392.1 | |||||
| Cash and cash equivalents | 163.6 | 228.8 | |||||
| Accounts receivable, net | 252.3 | 311.8 | |||||
| Recoverable from reinsurers | 961.4 | 953.7 | |||||
| Deferred tax asset | 1.8 | 2.7 | |||||
| Property, plant and equipment, net | 213.8 | 223.7 | |||||
| Goodwill | 112.7 | 112.5 | |||||
| Intangibles, net | 202.2 | 221.7 | |||||
| Assets held for sale | 5.6 | 323.3 | |||||
| Other assets | 205.6 | 188.0 | |||||
| Total assets | $ | 6,688.4 | $ | 6,958.3 | |||
| Liabilities, temporary equity and stockholders’ equity | |||||||
| Life, accident and health reserves | $ | 4,622.9 | $ | 4,567.1 | |||
| Annuity reserves | 230.9 | 236.4 | |||||
| Value of business acquired | 205.0 | 221.1 | |||||
| Accounts payable and other current liabilities | 298.6 | 306.2 | |||||
| Deferred tax liability | 113.2 | 83.7 | |||||
| Debt obligations | 646.4 | 773.6 | |||||
| Liabilities held for sale | 0.1 | 153.9 | |||||
| Other liabilities | 135.7 | 151.1 | |||||
| Total liabilities | 6,252.8 | 6,493.1 | |||||
| Commitments and contingencies | |||||||
| Temporary equity | |||||||
| Preferred stock | 15.9 | 10.3 | |||||
| Redeemable noncontrolling interest | 7.0 | 11.3 | |||||
| Total temporary equity | 22.9 | 21.6 | |||||
| Stockholders’ equity | |||||||
| Common stock, $0.001 par value | — | — | |||||
| Shares authorized: 80,000,000 at September 30, 2020 and December 31, 2019; | |||||||
| Shares issued: 48,413,438 and 46,810,676 at September 30, 2020 and December 31, 2019; | |||||||
| Shares outstanding: 47,303,687 and 46,067,852 at September 30, 2020 and December 31, 2019, respectively | |||||||
| Additional paid-in capital | 293.6 | 281.1 | |||||
| Treasury stock, at cost: 1,109,751 and 742,824 shares at September 30, 2020 and December 31, 2019, respectively | (4.2 | ) | (3.3 | ) | |||
| Accumulated deficit | (184 | ) | (96.7 | ) | |||
| Accumulated other comprehensive income (loss) | 266.4 | 168.7 | |||||
| Total HC2 Holdings, Inc. stockholders’ equity | 371.8 | 349.8 | |||||
| Noncontrolling interest | 40.9 | 93.8 | |||||
| Total stockholders’ equity | 412.7 | 443.6 | |||||
| Total liabilities, temporary equity and stockholders’ equity | $ | 6,688.4 | $ | 6,958.3 | |||
| HC2 HOLDINGS, INC. | |||||||||||||||||||||||||||||||
| RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA | |||||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||||
| (in millions) | Three Months Ended September 30, 2020 | ||||||||||||||||||||||||||||||
| Infrastructure | Clean Energy | Telecom | Life Sciences | Spectrum | Other and Eliminations | Non-operating Corporate | HC2 | ||||||||||||||||||||||||
| Net loss attributable to HC2 Holdings, Inc. | $ | (17.3 | ) | ||||||||||||||||||||||||||||
| Less: Net income attributable to HC2 Holdings Insurance segment | 12.7 | ||||||||||||||||||||||||||||||
| Less: Consolidating eliminations attributable to HC2 Holdings Insurance segment | (2.0 | ) | |||||||||||||||||||||||||||||
| Net Income (loss) attributable to HC2 Holdings, Inc., excluding Insurance segment | $ | 2.5 | $ | (3.4 | ) | $ | 2.4 | $ | (4.3 | ) | $ | (15.7 | ) | $ | 0.2 | $ | (9.7 | ) | $ | (28.0 | ) | ||||||||||
| Adjustments to reconcile net income (loss) to Adjusted EBITDA: | |||||||||||||||||||||||||||||||
| Depreciation and amortization | 2.7 | 2.2 | 0.1 | — | 1.7 | — | 0.1 | 6.8 | |||||||||||||||||||||||
| Depreciation and amortization (included in cost of revenue) | 2.3 | — | — | — | — | — | — | 2.3 | |||||||||||||||||||||||
| Other operating (income) expenses | (0.3 | ) | — | — | 0.1 | 9.7 | — | — | 9.5 | ||||||||||||||||||||||
| Interest expense | 2.1 | 0.6 | — | — | 3.6 | — | 13.4 | 19.7 | |||||||||||||||||||||||
| Other (income) expense, net | (0.1 | ) | 0.7 | (2.1 | ) | 0.1 | 1.4 | (0.5 | ) | (6.7 | ) | (7.2 | ) | ||||||||||||||||||
| Loss on early extinguishment of debt | — | 5.0 | — | — | — | — | — | 5.0 | |||||||||||||||||||||||
| Income tax (benefit) expense | 1.4 | — | — | — | — | 0.1 | (2.3 | ) | (0.8 | ) | |||||||||||||||||||||
| Noncontrolling interest | 0.1 | (1.4 | ) | — | (1.8 | ) | (1.1 | ) | (0.1 | ) | — | (4.3 | ) | ||||||||||||||||||
| Bonus to be settled in equity | — | — | — | — | — | — | (0.1 | ) | (0.1 | ) | |||||||||||||||||||||
| Share-based payment expense | — | — | — | — | 0.1 | — | 0.7 | 0.8 | |||||||||||||||||||||||
| Discontinued Operations | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
| Non-recurring items | 0.4 | — | — | — | — | — | 0.1 | 0.5 | |||||||||||||||||||||||
| Covid-19 Costs | 6.4 | — | — | — | — | — | — | 6.4 | |||||||||||||||||||||||
| Acquisition and disposition costs | 0.2 | — | — | — | 0.1 | 0.2 | 0.8 | 1.3 | |||||||||||||||||||||||
| Adjusted EBITDA | $ | 17.7 | $ | 3.7 | $ | 0.4 | $ | (5.9 | ) | $ | (0.2 | ) | $ | (0.1 | ) | $ | (3.7 | ) | $ | 11.9 | |||||||||||
| (in millions) | Three Months Ended September 30, 2019 | ||||||||||||||||||||||||||||||||
| Infrastructure | Clean Energy | Telecom | Life Sciences | Spectrum | Other and Eliminations | Non-operating 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 | $ | (0.1 | ) | $ | (0.3 | ) | $ | 5.6 | $ | (6.2 | ) | $ | 2.4 | $ | (23.9 | ) | $ | (15.5 | ) | ||||||||||||
| Adjustments to reconcile net income (loss) to Adjusted EBITDA: | |||||||||||||||||||||||||||||||||
| Depreciation and amortization | 3.9 | 2.0 | 0.1 | — | 1.8 | — | 0.1 | 7.9 | |||||||||||||||||||||||||
| Depreciation and amortization (included in cost of revenue) | 2.2 | — | — | — | — | — | — | 2.2 | |||||||||||||||||||||||||
| Other operating (income) expenses | — | (0.2 | ) | 0.8 | — | (0.8 | ) | — | — | (0.2 | ) | ||||||||||||||||||||||
| Interest expense | 2.3 | 1.0 | — | — | 2.4 | — | 14.4 | 20.1 | |||||||||||||||||||||||||
| Net loss (gain) on contingent consideration | — | — | (0.1 | ) | — | — | — | — | (0.1 | ) | |||||||||||||||||||||||
| Other (income) expense, net | (0.1 | ) | (0.3 | ) | — | (8.2 | ) | 0.9 | 0.1 | 2.7 | (4.9 | ) | |||||||||||||||||||||
| Foreign currency (gain) loss (included in cost of revenue) | — | — | 0.1 | — | — | — | — | 0.1 | |||||||||||||||||||||||||
| Income tax (benefit) expense | 2.9 | — | — | — | — | — | (2.8 | ) | 0.1 | ||||||||||||||||||||||||
| Noncontrolling interest | 0.5 | (0.1 | ) | — | (1.4 | ) | (1.1 | ) | 0.9 | — | (1.2 | ) | |||||||||||||||||||||
| Share-based payment expense | — | — | — | — | 0.1 | — | 1.5 | 1.6 | |||||||||||||||||||||||||
| Discontinued operations | — | — | — | — | — | (3.5 | ) | 2.9 | (0.6 | ) | |||||||||||||||||||||||
| Non-recurring items | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Acquisition and disposition costs | 0.7 | — | 0.2 | — | 1.0 | — | 0.4 | 2.3 | |||||||||||||||||||||||||
| Adjusted EBITDA | $ | 19.4 | $ | 2.3 | $ | 0.8 | $ | (4.0 | ) | $ | (1.9 | ) | $ | (0.1 | ) | $ | (4.7 | ) | $ | 11.8 | |||||||||||||
| HC2 HOLDINGS, INC. | |||||||||||||||||||||||||||||||
| RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA | |||||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||||
| (in millions) | Nine Months Ended September 30, 2020 | ||||||||||||||||||||||||||||||
| Infrastructure | Clean Energy | Telecom | Life Sciences | Spectrum | Other and Eliminations | Non-operating Corporate | HC2 | ||||||||||||||||||||||||
| Net loss attributable to HC2 Holdings, Inc. | $ | (87.3 | ) | ||||||||||||||||||||||||||||
| Less: Net income attributable to HC2 Holdings Insurance segment | 24.1 | ||||||||||||||||||||||||||||||
| Less: Consolidating eliminations attributable to HC2 Holdings Insurance segment | (5.1 | ) | |||||||||||||||||||||||||||||
| Net Income (loss) attributable to HC2 Holdings, Inc., excluding Insurance segment | $ | 4.0 | $ | (2.4 | ) | $ | 2.9 | $ | (8.7 | ) | $ | (26.6 | ) | $ | 4.2 | $ | (79.7 | ) | $ | (106.3 | ) | ||||||||||
| Adjustments to reconcile net income (loss) to Adjusted EBITDA: | |||||||||||||||||||||||||||||||
| Depreciation and amortization | 8.0 | 6.3 | 0.3 | 0.1 | 5.1 | — | 0.1 | 19.9 | |||||||||||||||||||||||
| Depreciation and amortization (included in cost of revenue) | 6.9 | — | — | — | — | — | — | 6.9 | |||||||||||||||||||||||
| Other operating (income) expenses | (0.2 | ) | — | — | 0.1 | 7.6 | — | — | 7.5 | ||||||||||||||||||||||
| Interest expense | 6.5 | 3.0 | — | — | 10.3 | — | 42.7 | 62.5 | |||||||||||||||||||||||
| Other (income) expense, net | — | 0.8 | (2.4 | ) | (2.2 | ) | 4.0 | (71.8 | ) | (0.1 | ) | (71.7 | ) | ||||||||||||||||||
| Loss on early extinguishment of debt | — | 5.0 | — | — | — | — | 9.2 | 14.2 | |||||||||||||||||||||||
| Income tax (benefit) expense | 2.5 | — | — | — | — | 7.4 | 1.7 | 11.6 | |||||||||||||||||||||||
| Noncontrolling interest | 0.2 | (1.0 | ) | — | (4.0 | ) | (3.5 | ) | 1.5 | — | (6.8 | ) | |||||||||||||||||||
| Bonus to be settled in equity | — | — | — | — | — | — | (0.5 | ) | (0.5 | ) | |||||||||||||||||||||
| Share-based payment expense | — | — | — | 0.1 | 0.3 | — | 2.2 | 2.6 | |||||||||||||||||||||||
| Discontinued Operations | — | — | — | — | — | 56.2 | 3.8 | 60.0 | |||||||||||||||||||||||
| Non-recurring items | 2.2 | — | — | — | — | — | 5.3 | 7.5 | |||||||||||||||||||||||
| Covid-19 costs | 15.2 | — | — | — | — | — | — | 15.2 | |||||||||||||||||||||||
| Acquisition and disposition costs | 0.5 | — | 0.2 | — | 0.5 | 1.7 | 3.0 | 5.9 | |||||||||||||||||||||||
| Adjusted EBITDA | $ | 45.8 | $ | 11.7 | $ | 1.0 | $ | (14.6 | ) | $ | (2.3 | ) | $ | (0.8 | ) | $ | (12.3 | ) | $ | 28.5 | |||||||||||
| (in millions) | Nine Months Ended September 30, 2019 | ||||||||||||||||||||||||||||||
| Infrastructure | Clean Energy | Telecom | Life Sciences | Spectrum | Other & Elimination | Non-operating 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 | $ | (1.4 | ) | $ | 0.7 | $ | 1.6 | $ | (14.1 | ) | $ | (2.3 | ) | $ | (70.0 | ) | $ | (67.5 | ) | ||||||||||
| Adjustments to reconcile net income (loss) to Adjusted EBITDA: | |||||||||||||||||||||||||||||||
| Depreciation and amortization | 11.8 | 4.9 | 0.3 | 0.1 | 4.7 | — | 0.1 | 21.9 | |||||||||||||||||||||||
| Depreciation and amortization (included in cost of revenue) | 6.7 | — | — | — | — | — | — | 6.7 | |||||||||||||||||||||||
| Other operating (income) expenses | (0.1 | ) | (0.1 | ) | 1.3 | — | (2.7 | ) | — | — | (1.6 | ) | |||||||||||||||||||
| Interest expense | 7.0 | 1.9 | — | — | 6.3 | — | 43.1 | 58.3 | |||||||||||||||||||||||
| Net loss (gain) on contingent consideration | — | — | (0.3 | ) | — | — | — | — | (0.3 | ) | |||||||||||||||||||||
| Other (income) expense, net | 0.1 | (0.1 | ) | — | (8.3 | ) | 1.3 | (0.1 | ) | 3.7 | (3.4 | ) | |||||||||||||||||||
| Foreign currency (gain) loss (included in cost of revenue) | — | — | 0.1 | — | — | — | — | 0.1 | |||||||||||||||||||||||
| Income tax (benefit) expense | 8.0 | — | — | — | 0.1 | — | (5.3 | ) | 2.8 | ||||||||||||||||||||||
| Noncontrolling interest | 1.4 | (0.7 | ) | — | (2.2 | ) | (2.7 | ) | (0.7 | ) | — | (4.9 | ) | ||||||||||||||||||
| Bonus to be settled in equity | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
| Share-based payment expense | — | — | — | 0.1 | 0.5 | — | 4.0 | 4.6 | |||||||||||||||||||||||
| Discontinued operations | — | — | — | — | — | 5.5 | 8.2 | 13.7 | |||||||||||||||||||||||
| Non-recurring items | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
| Acquisition and disposition costs | 2.0 | 0.1 | 0.3 | — | 1.3 | — | 1.0 | 4.7 | |||||||||||||||||||||||
| Adjusted EBITDA | $ | 54.9 | $ | 4.6 | $ | 2.4 | $ | (8.7 | ) | $ | (5.3 | ) | $ | 2.4 | $ | (15.2 | ) | $ | 35.1 | ||||||||||||
| HC2 HOLDINGS, INC. | |||||||||||||||||||||||
| RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED OPERATING INCOME ("INSURANCE AOI") | |||||||||||||||||||||||
| AND PRE-TAX OPERATING INCOME ("PRE-TAX INSURANCE AOI") | |||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| The table below shows the adjustments made to the reported Net income (loss) of the Insurance segment to calculate Insurance AOI and Pre-tax Insurance AOI. | |||||||||||||||||||||||
| (in millions) | Three Months Ended September 30, | Nine months ended September 30, | |||||||||||||||||||||
| 2020 | 2019 | Increase / (Decrease) | 2020 | 2019 | Increase / (Decrease) | ||||||||||||||||||
| Net income - Insurance segment | $ | 12.7 | $ | 10.5 | $ | 2.2 | $ | 24.1 | $ | 74.6 | $ | (50.5 | ) | ||||||||||
| Effect of investment losses (gains) (1) | (1.1 | ) | 1.9 | (3.0 | ) | 18.3 | (3.6 | ) | 21.9 | ||||||||||||||
| Gain on bargain purchase | — | — | — | — | (1.1 | ) | 1.1 | ||||||||||||||||
| Acquisition costs | 0.1 | 0.2 | (0.1 | ) | 0.1 | 2.0 | (1.9 | ) | |||||||||||||||
| Insurance AOI | 11.7 | 12.6 | (0.9 | ) | 42.5 | 71.9 | (29.4 | ) | |||||||||||||||
| Income tax expense (benefit) | 2.6 | 0.9 | 1.7 | (7.0 | ) | 3.3 | (10.3 | ) | |||||||||||||||
| Pre-tax Insurance AOI | $ | 14.3 | $ | 13.5 | $ | 0.8 | $ | 35.5 | $ | 75.2 | $ | (39.7 | ) | ||||||||||
(1) The Insurance segment results are inclusive of realized and unrealized gains and net investment income for the three and nine months ended September 30, 2020 and 2019, inclusive of transactions between entities under common control, which are eliminated or are reclassified in consolidation.