HC2 Holdings, Inc. (“HC2”) (NYSE:HCHC), a diversified holding
company, announced today its consolidated results for the fourth
quarter and full year 2017, which ended on December 31, 2017.
“For HC2, 2017 ended much as it began, having
met key milestones and realized accomplishments for the business
across our portfolio,” said Philip Falcone, HC2's Chairman,
President and Chief Executive Officer. “In the fourth quarter, our
core businesses continued to execute and expand their capabilities
through targeted acquisitions, including two tuck-in acquisitions
by DBM Global - CanDraft VSI and Mountain States Steel - that
position the company well in what we believe is an attractive
bridge market segment. DBM has continued to win major
contract awards, as evidenced by their record year-end backlog of
$723 million. Global Marine also had a strong year, not only
through its core operating business, but also its Huawei Marine
joint venture. During the quarter, Global Marine completed
its strategic acquisition of Fugro's trenching and cable laying
business, creating an even more effective operating platform for
delivering services to its offshore power and oil & gas
customers. During 2017, Global Marine secured the renewal of
the remaining two of its three long-term submarine cable
maintenance contracts, confirming the company's leading position in
this space, and finished the year with a near-record backlog of
$445 million. We continue to take steps to help Global Marine
remain a leader in all of its target markets, including the rapidly
growing global offshore power market which we believe has
tremendous long-term growth potential.”
Mr. Falcone continued, “During the fourth
quarter, American Natural Gas signed its first renewable natural
gas supply agreement, opened new fueling stations in Tennessee and
New York, and completed the integration and upgrade of fueling
stations throughout the U.S. to support an efficient, expedient and
reliable customer experience. PTGi ICS continued to execute
its global growth initiative with new account representatives in
Latin America, Eastern Europe and Russia and paid its sixth
consecutive cash dividend to HC2. Our Continental Insurance
subsidiary announced its intent to acquire Humana's approximately
$2.3 billion long-term care insurance business, KMG America
Corporation, positioning the company for what we believe will be
future growth as a credible counterparty for similar long-term care
transactions. Additionally, as we continue to build out our
nation-wide network of over-the-air broadcast television stations,
we acquired the Spanish-language broadcast network Azteca America,
in addition to numerous television broadcast licenses from
Northstar Media, capitalizing on what we believe are significant
opportunities created by the changing media landscape.”
Mr. Falcone concluded, “Our work and
accomplishments during the past year position HC2 for an exciting
2018, in which our priorities will be to further optimize the HC2
capital structure, including a global refinancing of our 11% Senior
Secured Notes, a monetization within the diverse HC2 portfolio and
the continued expansion of our over-the-air broadcast television
strategy. I could not be prouder of our entire team and feel
more confident than ever in our long-term opportunities.”
Fourth Quarter & Full Year Financial
Highlights
- Net Revenue: For the fourth quarter of 2017,
HC2 recorded consolidated total net revenue of $458.5 million, as
compared to $454.0 million for the year-ago quarter and $1,634.1
million for the full year 2017, as compared to $1,558.1 million for
the full year 2016.
|
REVENUE by OPERATING SEGMENT |
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
Three Months Ended December 31, |
|
Years Ended December 31, |
|
2017 |
|
2016 |
|
Change |
|
2017 |
|
2016 |
|
Change |
Construction |
$ |
175,665 |
|
|
$ |
129,694 |
|
|
$ |
45,971 |
|
|
$ |
578,989 |
|
|
$ |
502,658 |
|
|
$ |
76,331 |
|
Marine Services |
46,071 |
|
|
45,565 |
|
|
506 |
|
|
169,453 |
|
|
161,864 |
|
|
7,589 |
|
Energy |
4,114 |
|
|
2,279 |
|
|
1,835 |
|
|
16,415 |
|
|
6,430 |
|
|
9,985 |
|
Telecommunications |
181,683 |
|
|
226,795 |
|
|
(45,112 |
) |
|
701,898 |
|
|
735,043 |
|
|
(33,145 |
) |
Total Core Operating
Subsidiaries |
$ |
407,533 |
|
|
$ |
404,333 |
|
|
$ |
3,200 |
|
|
$ |
1,466,755 |
|
|
$ |
1,405,995 |
|
|
$ |
60,760 |
|
Insurance |
39,545 |
|
|
42,610 |
|
|
(3,065 |
) |
|
151,577 |
|
|
142,457 |
|
|
9,120 |
|
Other |
11,417 |
|
|
7,060 |
|
|
4,357 |
|
|
15,791 |
|
|
9,674 |
|
|
6,117 |
|
Consolidated HC2 |
$ |
458,495 |
|
|
$ |
454,003 |
|
|
$ |
4,492 |
|
|
$ |
1,634,123 |
|
|
$ |
1,558,126 |
|
|
$ |
75,997 |
|
- Net Income (Loss): For the fourth quarter of
2017, HC2 reported a Net (Loss) attributable to common and
participating preferred stockholders of $(9.2) million or $(0.21)
per fully diluted share, as compared to Net (Loss) of $(67.3)
million or $(1.62) per fully diluted share for the fourth quarter
2016. For the year ended December 31, 2017, HC2 reported a
Net (Loss) attributable to common and participating preferred
stockholders of $(49.7) million or $(1.16) per fully diluted share,
as compared to a Net (Loss) of $(105.4) million or $(2.83) per
fully diluted share for the full year 2016.
- Adjusted EBITDA: Adjusted EBITDA for “Core
Operating Subsidiaries,” which includes HC2's Construction, Marine
Services, Energy and Telecom segments, was a combined $32.4 million
for the fourth quarter of 2017, as compared to $37.9 million for
the year-ago quarter, due primarily to timing associated with
several large scale projects in the Construction segment. For
the full year ended December 31, 2017, Adjusted EBITDA for “Core
Operating Subsidiaries” was $105.5 million, as compared to $109.1
million for the full year 2016, again due primarily to timing of
projects in the Construction segment.For the fourth quarter of
2017, Total Adjusted EBITDA (excluding the Insurance segment),
which includes results from Core Operating Subsidiaries, Life
Sciences, Other, and Non-operating Corporate segments, was $19.7
million, as compared to $26.5 million for the year-ago
quarter. For the full year ended December 31, 2017, Total
Adjusted EBITDA (excluding the Insurance segment), was $50.8
million, as compared to $60.2 million for the full year 2016.
Fourth quarter and full year 2017 Total Adjusted EBITDA was driven
by timing of projects in the Construction segment and scaling of
operations across the Life Sciences segment, offset primarily by a
decrease in losses in the Other segment and an improvement in
Marine Services, primarily attributable to its Huawei Marine joint
venture.
|
ADJUSTED EBITDA by OPERATING SEGMENT |
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
Three Months Ended December 31, |
|
Years Ended December 31, |
|
2017 |
|
2016 |
|
Change |
|
2017 |
|
2016 |
|
Change |
Construction |
$ |
15,112 |
|
|
$ |
20,664 |
|
|
$ |
(5,552 |
) |
|
$ |
51,588 |
|
|
$ |
59,860 |
|
|
$ |
(8,272 |
) |
Marine Services |
15,269 |
|
|
14,809 |
|
|
460 |
|
|
44,027 |
|
|
41,176 |
|
|
2,851 |
|
Energy |
422 |
|
|
870 |
|
|
(448 |
) |
|
2,911 |
|
|
2,543 |
|
|
368 |
|
Telecommunications |
1,605 |
|
|
1,541 |
|
|
64 |
|
|
6,929 |
|
|
5,560 |
|
|
1,369 |
|
Total Core Operating
Subsidiaries |
$ |
32,408 |
|
|
$ |
37,884 |
|
|
$ |
(5,476 |
) |
|
$ |
105,455 |
|
|
$ |
109,139 |
|
|
$ |
(3,684 |
) |
Life Sciences |
(5,225 |
) |
|
(3,792 |
) |
|
(1,433 |
) |
|
(22,366 |
) |
|
(12,037 |
) |
|
(10,329 |
) |
Other |
1,297 |
|
|
928 |
|
|
369 |
|
|
(3,139 |
) |
|
(11,221 |
) |
|
8,082 |
|
Non-operating
Corporate |
(8,732 |
) |
|
(8,552 |
) |
|
(180 |
) |
|
(29,152 |
) |
|
(25,718 |
) |
|
(3,434 |
) |
Consolidated HC2 |
$ |
19,748 |
|
|
$ |
26,468 |
|
|
$ |
(6,720 |
) |
|
$ |
50,798 |
|
|
$ |
60,163 |
|
|
$ |
(9,365 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Balance Sheet: As of December 31, 2017, HC2
had consolidated cash, cash equivalents and investments of $1.6
billion, which includes cash and investments associated with HC2's
Insurance segment. Excluding the Insurance segment,
consolidated cash was $72.7 million, of which $29.4 million was at
the HC2 corporate level.
Fourth Quarter & Full Year Segment
Highlights
- Construction - For the fourth quarter of 2017,
HC2’s DBM Global Inc. (“DBMG”), reported Net Income of $9.2
million, as compared to $7.3 million for the year-ago
quarter. For the full year ended December 31, 2017, Net
Income was $23.6 million, as compared to $28.0 million for the full
year 2016. Adjusted EBITDA was $15.1 million for the fourth quarter
of 2017, as compared to $20.7 million for the year-ago
quarter. For the full year ended December 31, 2017, DBMG’s
Adjusted EBITDA was $51.6 million, as compared to $59.9 million for
the full year 2016. The quarter and full year decreases were
due primarily to timing associated with design changes on certain
large scale projects in 2017 and better-than-bid performance on
commercial projects in the year ago quarter.Backlog at the end of
the fourth quarter was a record $723 million, as compared to
approximately $503 million in the prior year quarter. Taking
into consideration awarded, but not yet signed contracts, backlog
would have been approximately $772 million. DBMG continues to
see a number of large opportunities in the commercial sector
totaling approximately $300 million in potential new projects that
could be awarded over the next several quarters.
- Marine Services - For the fourth quarter of
2017, Global Marine reported Net Income of $6.2 million, as
compared to $8.7 million for the year-ago quarter. For the
full year ended December 31, 2017, Net Income was $15.2 million, as
compared to $17.4 million for the full year 2016.Adjusted EBITDA
was $15.3 million for the fourth quarter of 2017, as compared to
$14.8 million for the year-ago quarter, due primarily to higher
telecom maintenance, offset partially by lower joint venture income
when compared to the year-ago fourth quarter. For the full year
ended December 31, 2017, Global Marine's Adjusted EBITDA was $44.0
million, as compared to $41.2 million for the full year 2016, due
primarily to an increase in the Huawei Marine joint venture net
income and higher telecom maintenance, partially offset by
recognized losses associated with two offshore power projects
during the year.
- Energy - For the fourth quarter of 2017,
American Natural Gas (“ANG”) reported Net Income of $1.5 million as
compared to Net (Loss) $(0.06) million for the year-ago
quarter. For the full year ended December 31, 2017, Net
(Loss) was $(0.5) million, as compared to Net Income of $0.01
million for the full year 2016.Adjusted EBITDA was $0.4 million for
the fourth quarter of 2017, as compared to $0.9 million for the
year-ago quarter, as the company completed the integration and
upgrade of approximately 18 fueling stations across the company
which should allow ANG to ramp volumes and increase capacity
utilization across its nationwide network. For the full year
ended December 31, 2017, Adjusted EBITDA was $2.9 million, as
compared to $2.5 million for the full year 2016, due primarily to
the increased number of stations owned and/or operated versus the
prior year, offset by the non-renewal of certain alternative fuel
tax credits in 2017 and incremental costs associated with
integration of certain acquired stations. ANG currently owns
and/or operates 44 natural gas fueling stations, including stations
under development, in 15 states.
- Telecommunications - For the fourth quarter of
2017, Net Income for PTGi-ICS was Net Income of $1.3 million, as
compared to Net (Loss) of $(2.6) million for the year-ago
quarter. For the full year ended December 31, 2017, Net
Income was $6.2 million, as compared to $1.4 million for the full
year 2016. Adjusted EBITDA was $1.6 million for the fourth quarter
of 2017, essentially in line with $1.5 million in the year-ago
quarter. For the full year ended December 31, 2017, Adjusted
EBITDA was $6.9 million, as compared to $5.6 million for the full
year 2016, as PTGi ICS continued to focus on higher margin
wholesale telecom traffic.
- Insurance - As of December 31, 2017, the
Company's Insurance subsidiary had approximately $74.7 million of
statutory surplus, $86.4 million of total adjusted capital and $2.1
billion in total GAAP assets.
|
INSURANCE SEGMENT ADJUSTED OPERATING INCOME
("AOI") |
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
Three Months Ended December 31, |
|
Years Ended December 31, |
|
2017 |
|
2016 |
|
Change |
|
2017 |
|
2016 |
|
Change |
Insurance |
$ |
2,629 |
|
|
$ |
(6,901 |
) |
|
$ |
9,530 |
|
|
$ |
7,982 |
|
|
$ |
(15,933 |
) |
|
$ |
23,915 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income / (Loss) was Income of
$2.6 million for the fourth quarter of 2017, as compared to a Loss
of $(6.9) million in the year-ago quarter, due primarily to higher
net investment income and a reduction in deferred tax expense as
compared to the year-ago quarter. For the full year ended
December 31, 2017, Adjusted Operating Income / (Loss) was Income of
$8.0 million, as compared to a Loss of $(15.9) million for the
year-ago period, due primarily to higher net investment income and
reserve releases during 2017.
During the fourth quarter, Continental General
Insurance Company (“CGI”) signed a definitive agreement to acquire
Humana Inc.’s (NYSE:HUM) long-term care insurance business, KMG
America Corporation (“KMG”). As of September 30, 2017, KMG’s
subsidiary, Kanawha Insurance Company (“Kanawha”), had
approximately $150 million of Statutory Capital and Surplus with
approximately $2.3 billion of cash and invested assets. Once
the proposed transaction is completed, CGI’s insurance platform
will have approximately $3.5 billion in cash and invested
assets. The transaction is expected to close by the third
quarter of 2018 and is expected to be immediately accretive to
CGI's risk-based and statutory capital.
- Pansend Life Sciences - Companies in the
Pansend Life Sciences, LLC portfolio continued to ramp operations
and meet critical milestones during the fourth quarter and twelve
month period, including R2 Dermatology, MediBeacon and BeneVir, all
of which remain in discussions with various strategic parties.
- Other - The Company’s Other segment primarily
includes over-the-air broadcast television assets, a console and
mobile video game publisher and other investments. During the
fourth quarter, the Company’s broadcasting subsidiary, HC2
Broadcasting Holdings Inc., entered into a $75 million bridge loan
to primarily finance acquisitions in the over-the-air broadcast
television distribution market. Subsequent to quarter end,
the bridge loan was increased by $27 million. The Company
filed the $75 million bridge loan credit agreement and the
amendment to the credit agreement on a Form 8-K.As of February 23,
2018, through a series of transactions, HC2’s broadcasting
subsidiary had acquired 135 operational stations, including 4
full-power stations, 34 Class A stations and 97 LPTV
stations. In addition, HC2 Broadcasting has 476 silent
licenses and construction permits. The total HC2 Broadcasting
footprint, excluding construction permits, covers approximately 60
percent of the U.S. population, in over 100 U.S. markets, including
nine of the top ten markets across the United States.
- HC2 Corporate - The Company received a
combined $11.5 million in the fourth quarter and $36.0 million in
the full year 2017 of dividends and tax share from DBMG and
PTGi-ICS, respectively. During 2017, the Company secured financing
for new strategic acquisitions, including over-the-air broadcasting
assets, invested strategically across the existing platform,
including companies in the Pansend portfolio, where several key
milestones and accomplishments were achieved in 2017 and reduced
the cumulative outstanding preferred equity to $26.7 million as of
December 31, 2017.
Introduces 2018 Guidance for
Construction and Marine Services Segments
In order to provide additional visibility into
the Company’s two largest Adjusted EBITDA segment contributors,
Construction and Marine Services, the Company initiated a guidance
range reflecting its current expectations for full year 2018
Adjusted EBITDA, due in part to their strong backlog and
opportunity pipelines at year end 2017. While the complex
nature of certain large-scale DBM Global and Global Marine projects
could cause quarterly variability in their financial results, the
Company currently expects the following for the full year 2018:
- Construction: $60 million and $65 million of
Adjusted EBITDA
- Marine Services: $45 million and $50 million
of Adjusted EBITDA
The Company has provided 2018 guidance with
regard to the non-GAAP measures of Adjusted EBITDA. These measures
exclude from the corresponding GAAP financial measures the effect
of special items as described below under "Non-GAAP Financial
Measures." The Company has not provided a reconciliation of
such non-GAAP guidance to the most directly comparable GAAP measure
because it cannot predict and quantify with a reasonable degree of
confidence all of the special items that may occur during 2018.
HC2 does not guarantee future results of any
kind. The Company’s guidance is based on numerous assumptions about
future events and conditions and, therefore, could vary materially
from actual results, and is subject to risks and uncertainties,
including, without limitation, those factors outlined in the
“Forward Looking Statements” of this release and the “Risk Factors”
section of the Company’s annual and quarterly reports filed with
the Securities and Exchange Commission (“SEC”).
Conference Call
HC2 Holdings, Inc. will host a live conference call to discuss
its fourth quarter and full year 2017 financial results and
operations today, Wednesday, March 14, 2018, at 5:00 p.m. ET.
The Company will post an earnings supplemental presentation in the
Investor Relations section of the HC2 Website, www.hc2.com, to
accompany the conference call.
Dial-in instructions for the conference call and the replay are
as follows:
Live Call
Domestic Dial-In (Toll Free): 1-866-395-3893
International Dial-In: 1-678-509-7540
Participant Entry Number: 3278987
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: 3278987
*Available approximately two hours after the end of the
conference call through April 14, 2018.
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 seven reportable segments,
including Construction, Marine Services, Energy,
Telecommunications, Life Sciences, Insurance and Other. HC2's
largest operating subsidiaries include DBM Global Inc., a family of
companies providing fully integrated structural and steel
construction services, and Global Marine Systems Limited, a leading
provider of engineering and underwater services on submarine
cables. Founded in 1994, HC2 is headquartered in New York, New
York. Learn more about HC2 and its portfolio companies at
www.hc2.com.
For information on HC2 Holdings, Inc., please
contact Andrew G. Backman - Managing Director - Investor Relations
& Public Relations - abackman@hc2.com - 212-339-5836
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
and Adjusted Operating Income for the Insurance segment (“Insurance
AOI”).
Adjusted EBITDA
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-GAAP measurements are useful as
supplemental information, such adjusted results are not intended to
replace our GAAP financial results and should be read together with
HC2’s results reported under GAAP.
Management defines Adjusted EBITDA as net income
(loss), excluding the Insurance segment, adjusted to exclude the
impact of depreciation and amortization; amortization of equity
method fair value adjustments at acquisition; (gain) loss on sale
or disposal of assets; lease termination costs; asset impairment
expense; interest expense; net gain (loss) on contingent
consideration; loss on early extinguishment or restructuring of
debt; other (income) expense, net; foreign currency transaction
(gain) loss included in cost of revenue; income tax (benefit)
expense; (gain) loss from discontinued operations; noncontrolling
interest; bonus to be settled in equity; share-based compensation
expense; non-recurring items; and acquisition costs. A
reconciliation of Adjusted EBITDA to Net Income (Loss) is included
in the financial tables at the end of this release.
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.
As a result of the exclusions, Adjusted EBITDA
should not be considered in isolation and do not purport to be
alternatives to net income (loss) or other GAAP financial measures
or a measure of our operating performance.
Adjusted Operating Income -
Insurance
Adjusted Operating Income for the Insurance
segment (“Insurance AOI”) is a non-U.S. GAAP financial measure
frequently used throughout the insurance industry and is an
economic measure the Insurance segment uses to evaluate its
financial performance. Management believes that Insurance AOI
measures provide investors with meaningful information for gaining
an understanding of certain results and provides insight into an
organization’s operating trends and facilitates comparisons between
peer companies. However, Insurance AOI has certain
limitations and the Company 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 as a performance measure has inherent limitations as an
analytical tool as compared to income (loss) from operations or
other U.S. GAAP financial measures, as this non-U.S. GAAP measure
excludes certain items, including items that are recurring in
nature, which may be meaningful to investors. As a result of
the exclusions, Insurance AOI should not be considered in isolation
and does 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,
non-recurring items, and acquisition costs. Management
believes that Insurance AOI provides a meaningful financial metric
that helps 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, the Company
believes 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 release contains,
and certain oral statements made by our representatives from time
to time may contain, forward-looking statements. Generally,
forward-looking statements include information describing actions,
events, results, strategies and expectations and are generally
identifiable by use of the words “believes,” “expects,” “intends,”
“anticipates,” “plans,” “seeks,” “estimates,” “projects,” “may,”
“will,” “could,” “might,” or “continues” or similar expressions.
The forward-looking statements in this press release include,
without limitation, our 2018 guidance for the Construction and
Marine Services segments and statements regarding our expectation
regarding building shareholder value and future cash and invested
assets. Such statements are based on the beliefs and
assumptions of HC2's management and the management of HC2's
subsidiaries and portfolio companies. 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 HC2 has 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 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 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. 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 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 thousands, except per share
amounts) |
|
|
|
Years Ended December 31, |
|
|
2017 |
|
2016 |
|
2015 |
Revenue |
|
$ |
1,482,546 |
|
|
$ |
1,415,669 |
|
|
$ |
1,117,941 |
|
Life, accident and
health earned premiums, net |
|
80,524 |
|
|
79,406 |
|
|
1,578 |
|
Net investment
income |
|
66,070 |
|
|
58,032 |
|
|
1,031 |
|
Net realized and
unrealized gains on investments |
|
4,983 |
|
|
5,019 |
|
|
256 |
|
Net
revenue |
|
1,634,123 |
|
|
1,558,126 |
|
|
1,120,806 |
|
Operating expenses |
|
|
|
|
|
|
Cost of
revenue |
|
1,313,069 |
|
|
1,254,041 |
|
|
982,623 |
|
Policy
benefits, changes in reserves, and commissions |
|
108,695 |
|
|
123,182 |
|
|
2,245 |
|
Selling,
general and administrative |
|
182,880 |
|
|
152,890 |
|
|
108,527 |
|
Depreciation and amortization |
|
31,315 |
|
|
24,493 |
|
|
24,796 |
|
Other
operating (income) expenses |
|
(704 |
) |
|
4,941 |
|
|
1,902 |
|
Total
operating expenses |
|
1,635,255 |
|
|
1,559,547 |
|
|
1,120,093 |
|
Income (loss) from operations |
|
(1,132 |
) |
|
(1,421 |
) |
|
713 |
|
Interest expense |
|
(55,098 |
) |
|
(43,375 |
) |
|
(39,017 |
) |
Gain (loss) on
contingent consideration |
|
11,411 |
|
|
(8,929 |
) |
|
— |
|
Income (loss) from
equity investees |
|
17,840 |
|
|
10,768 |
|
|
(1,499 |
) |
Other expenses,
net |
|
(12,772 |
) |
|
(2,836 |
) |
|
(6,820 |
) |
Loss from
continuing operations before income taxes |
|
(39,751 |
) |
|
(45,793 |
) |
|
(46,623 |
) |
Income tax (expense)
benefit |
|
(10,740 |
) |
|
(51,638 |
) |
|
10,882 |
|
Loss from
continuing operations |
|
(50,491 |
) |
|
(97,431 |
) |
|
(35,741 |
) |
Loss from discontinued
operations |
|
— |
|
|
— |
|
|
(21 |
) |
Net
loss |
|
(50,491 |
) |
|
(97,431 |
) |
|
(35,762 |
) |
Less: Net loss
attributable to noncontrolling interest and redeemable
noncontrolling interest |
|
3,580 |
|
|
2,882 |
|
|
197 |
|
Net loss
attributable to HC2 Holdings, Inc. |
|
(46,911 |
) |
|
(94,549 |
) |
|
(35,565 |
) |
Less: Preferred stock
and deemed dividends from conversions |
|
2,767 |
|
|
10,849 |
|
|
4,285 |
|
Net loss
attributable to common stock and participating preferred
stockholders |
|
$ |
(49,678 |
) |
|
$ |
(105,398 |
) |
|
$ |
(39,850 |
) |
|
|
|
|
|
|
|
Basic and diluted loss
per common share |
|
|
|
|
|
|
Loss from
continuing operations |
|
$ |
(1.16 |
) |
|
$ |
(2.83 |
) |
|
$ |
(1.50 |
) |
Loss from
discontinued operations |
|
— |
|
|
— |
|
|
— |
|
Basic and
diluted loss per share |
|
$ |
(1.16 |
) |
|
$ |
(2.83 |
) |
|
$ |
(1.50 |
) |
|
|
|
|
|
|
|
Weighted average common
shares outstanding: |
|
|
|
|
|
|
Basic and
diluted |
|
42,824 |
|
|
37,260 |
|
|
26,482 |
|
|
|
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS, INC. |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(in thousands, except share
amounts) |
|
|
|
December 31, 2017 |
|
December 31, 2016 |
Assets |
|
|
|
|
Investments: |
|
|
|
|
Fixed
maturity securities, available-for-sale at fair value |
|
$ |
1,340,626 |
|
|
$ |
1,278,958 |
|
Equity
securities, available-for-sale at fair value |
|
47,500 |
|
|
51,519 |
|
Mortgage
loans |
|
52,109 |
|
|
16,831 |
|
Policy
loans |
|
17,944 |
|
|
18,247 |
|
Other
invested assets |
|
85,419 |
|
|
62,363 |
|
Total investments |
|
1,543,598 |
|
|
1,427,918 |
|
Cash and
cash equivalents |
|
97,885 |
|
|
115,371 |
|
Accounts
receivable, net |
|
322,446 |
|
|
267,598 |
|
Recoverable from reinsurers |
|
526,337 |
|
|
524,201 |
|
Deferred
tax asset |
|
1,661 |
|
|
1,108 |
|
Property,
plant and equipment, net |
|
374,660 |
|
|
286,458 |
|
Goodwill |
|
131,741 |
|
|
98,086 |
|
Intangibles, net |
|
117,105 |
|
|
39,722 |
|
Other
assets |
|
102,258 |
|
|
74,814 |
|
Total assets |
|
$ |
3,217,691 |
|
|
$ |
2,835,276 |
|
|
|
|
|
|
Liabilities,
temporary equity and stockholders’ equity |
|
|
|
|
Life,
accident and health reserves |
|
$ |
1,693,961 |
|
|
$ |
1,648,565 |
|
Annuity
reserves |
|
243,156 |
|
|
251,270 |
|
Value of
business acquired |
|
42,969 |
|
|
47,613 |
|
Accounts
payable and other current liabilities |
|
347,492 |
|
|
251,733 |
|
Deferred
tax liability |
|
10,740 |
|
|
15,304 |
|
Debt
obligations |
|
593,172 |
|
|
428,496 |
|
Other
liabilities |
|
70,174 |
|
|
92,871 |
|
Total liabilities |
|
3,001,664 |
|
|
2,735,852 |
|
Commitments and
contingencies |
|
|
|
|
Temporary equity |
|
|
|
|
Preferred
stock |
|
26,296 |
|
|
29,459 |
|
Redeemable noncontrolling interest |
|
1,609 |
|
|
2,526 |
|
Total temporary
equity |
|
27,905 |
|
|
31,985 |
|
Stockholders’
equity |
|
|
|
|
Common
stock, $.001 par value |
|
44 |
|
|
42 |
|
Shares
authorized: 80,000,000 at December 31, 2017 and December 31,
2016; |
|
|
|
|
Shares
issued: 44,570,004 and 42,070,675 at December 31, 2017 and December
31, 2016; |
|
|
|
|
Shares
outstanding: 44,190,826 and 41,811,288 at December 31, 2017 and
December 31, 2016, respectively |
|
|
|
|
Additional paid-in capital |
|
254,685 |
|
|
241,485 |
|
Treasury
stock, at cost; 379,178 and 259,387 shares at December 31,
2017 and December 31, 2016, respectively |
|
(2,057 |
) |
|
(1,387 |
) |
Accumulated deficit |
|
(221,189 |
) |
|
(174,278 |
) |
Accumulated other comprehensive income (loss) |
|
41,688 |
|
|
(21,647 |
) |
Total HC2 Holdings,
Inc. stockholders’ equity |
|
73,171 |
|
|
44,215 |
|
Noncontrolling interest |
|
114,951 |
|
|
23,224 |
|
Total stockholders’
equity |
|
188,122 |
|
|
67,439 |
|
Total liabilities,
temporary equity and stockholders’ equity |
|
$ |
3,217,691 |
|
|
$ |
2,835,276 |
|
|
HC2 HOLDINGS, INC. |
RECONCILIATION OF NET INCOME (LOSS) TO
ADJUSTED EBITDA |
(in thousands) |
|
(in thousands): |
|
Three months ended December 31, 2017 |
|
|
Core Operating Subsidiaries |
|
Early Stage and Other |
|
|
|
|
|
|
|
|
|
Construction |
|
|
Marine Services |
|
Energy |
|
Telecom |
|
Life Sciences |
|
|
Other and Eliminations |
|
|
Non-operating Corporate |
|
|
HC2 |
|
Net loss attributable
to HC2 Holdings, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(8,537 |
) |
Less: Net Income
attributable to HC2 Holdings Insurance Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,383 |
|
Net Income (loss)
attributable to HC2 Holdings, Inc., excluding Insurance
Segment |
|
$ |
9,160 |
|
|
$ |
6,230 |
|
|
$ |
1,485 |
|
|
$ |
1,253 |
|
|
$ |
(3,822 |
) |
|
$ |
(8,218 |
) |
|
$ |
(18,008 |
) |
|
(11,920 |
) |
Adjustments to
reconcile net income (loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
1,389 |
|
|
6,337 |
|
|
1,195 |
|
|
86 |
|
|
57 |
|
|
575 |
|
|
21 |
|
|
9,660 |
|
Depreciation and amortization (included in cost of revenue) |
|
1,419 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,419 |
|
Amortization of equity method fair value adjustment at
acquisition |
|
— |
|
|
(371 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(371 |
) |
(Gain)
loss on sale or disposal of assets |
|
199 |
|
|
— |
|
|
208 |
|
|
181 |
|
|
— |
|
|
— |
|
|
— |
|
|
588 |
|
Lease
termination costs |
|
— |
|
|
— |
|
|
— |
|
|
2 |
|
|
— |
|
|
— |
|
|
— |
|
|
2 |
|
Interest
expense |
|
357 |
|
|
1,029 |
|
|
629 |
|
|
4 |
|
|
— |
|
|
1,965 |
|
|
11,704 |
|
|
15,688 |
|
Net gain
on contingent consideration |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(5,410 |
) |
|
(5,410 |
) |
Other
(income) expense, net |
|
117 |
|
|
240 |
|
|
(164 |
) |
|
72 |
|
|
8 |
|
|
3,741 |
|
|
368 |
|
|
4,382 |
|
Foreign
currency gain (included in cost of revenue) |
|
— |
|
|
52 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
52 |
|
Income
tax (benefit) expense |
|
887 |
|
|
(36 |
) |
|
(4,255 |
) |
|
7 |
|
|
(820 |
) |
|
(1,129 |
) |
|
(1,073 |
) |
|
(6,419 |
) |
Noncontrolling interest |
|
751 |
|
|
(121 |
) |
|
1,321 |
|
|
— |
|
|
(728 |
) |
|
1,502 |
|
|
— |
|
|
2,725 |
|
Bonus to
be settled in equity |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,780 |
|
|
2,780 |
|
Share-based compensation expense |
|
— |
|
|
394 |
|
|
3 |
|
|
— |
|
|
80 |
|
|
213 |
|
|
547 |
|
|
1,237 |
|
Acquisition costs |
|
833 |
|
|
1,515 |
|
|
— |
|
|
— |
|
|
— |
|
|
2,648 |
|
|
339 |
|
|
5,335 |
|
Adjusted
EBITDA |
|
$ |
15,112 |
|
|
$ |
15,269 |
|
|
$ |
422 |
|
|
$ |
1,605 |
|
|
$ |
(5,225 |
) |
|
$ |
1,297 |
|
|
$ |
(8,732 |
) |
|
$ |
19,748 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Core Operating Subsidiaries |
|
$ |
32,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS, INC. |
RECONCILIATION OF NET INCOME (LOSS) TO
ADJUSTED EBITDA |
(in thousands) |
|
(in thousands): |
|
Three Months Ended December 31, 2016 |
|
|
Core Operating Subsidiaries |
|
Early Stage and Other |
|
|
|
|
|
|
|
|
|
Construction |
|
|
Marine Services |
|
Energy |
|
Telecom |
|
Life Sciences |
|
|
Other and Eliminations |
|
|
Non-operating Corporate |
|
|
HC2 |
|
Net loss attributable
to HC2 Holdings, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(61,464 |
) |
Less: Net Income
attributable to HC2 Holdings Insurance Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,050 |
) |
Net Income (loss)
attributable to HC2 Holdings, Inc., excluding Insurance
Segment |
|
$ |
7,292 |
|
|
$ |
8,667 |
|
|
$ |
(61 |
) |
|
$ |
(2,572 |
) |
|
$ |
(4,655 |
) |
|
$ |
(3,536 |
) |
|
$ |
(64,549 |
) |
|
(59,414 |
) |
Adjustments to
reconcile net income (loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
629 |
|
|
5,214 |
|
|
769 |
|
|
115 |
|
|
37 |
|
|
430 |
|
|
5 |
|
|
7,199 |
|
Depreciation and amortization (included in cost of revenue) |
|
1,322 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,322 |
|
Amortization of equity method fair value adjustment at
acquisition |
|
— |
|
|
(325 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(325 |
) |
(Gain)
loss on sale or disposal of assets |
|
2,626 |
|
|
1 |
|
|
— |
|
|
708 |
|
|
— |
|
|
— |
|
|
— |
|
|
3,335 |
|
Interest
expense |
|
322 |
|
|
1,091 |
|
|
69 |
|
|
— |
|
|
— |
|
|
1,163 |
|
|
9,116 |
|
|
11,761 |
|
Net loss
(gain) on contingent consideration |
|
— |
|
|
(2,482 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
11,411 |
|
|
8,929 |
|
Other
(income) expense, net |
|
(75 |
) |
|
(1,234 |
) |
|
391 |
|
|
487 |
|
|
10 |
|
|
99 |
|
|
(966 |
) |
|
(1,288 |
) |
Foreign
currency gain (included in cost of revenue) |
|
— |
|
|
864 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
864 |
|
Income
tax (benefit) expense |
|
6,086 |
|
|
2,150 |
|
|
(535 |
) |
|
2,803 |
|
|
1,558 |
|
|
3,250 |
|
|
32,726 |
|
|
48,038 |
|
Noncontrolling interest |
|
594 |
|
|
464 |
|
|
(253 |
) |
|
— |
|
|
(809 |
) |
|
(513 |
) |
|
— |
|
|
(517 |
) |
Bonus to
be settled in equity |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,503 |
|
|
2,503 |
|
Share-based compensation expense |
|
— |
|
|
375 |
|
|
490 |
|
|
— |
|
|
67 |
|
|
35 |
|
|
712 |
|
|
1,679 |
|
Non-recurring items |
|
1,868 |
|
|
24 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
490 |
|
|
2,382 |
|
Adjusted
EBITDA |
|
$ |
20,664 |
|
|
$ |
14,809 |
|
|
$ |
870 |
|
|
$ |
1,541 |
|
|
$ |
(3,792 |
) |
|
$ |
928 |
|
|
$ |
(8,552 |
) |
|
$ |
26,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Core Operating Subsidiaries |
|
$ |
37,884 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS, INC. |
RECONCILIATION OF NET INCOME (LOSS) TO
ADJUSTED EBITDA |
(in thousands) |
|
(in thousands): |
|
Year ended December 31, 2017 |
|
|
Core Operating Subsidiaries |
|
Early Stage and Other |
|
|
|
|
|
|
|
|
|
Construction |
|
|
Marine Services |
|
Energy |
|
Telecom |
|
Life Sciences |
|
|
Other and Eliminations |
|
|
Non-operatingCorporate |
|
|
HC2 |
|
Net loss attributable
to HC2 Holdings, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(46,911 |
) |
Less: Net Income
attributable to HC2 Holdings Insurance Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,066 |
|
Net Income (loss)
attributable to HC2 Holdings, Inc., excluding Insurance
Segment |
|
$ |
23,624 |
|
|
$ |
15,173 |
|
|
$ |
(516 |
) |
|
$ |
6,163 |
|
|
$ |
(18,098 |
) |
|
$ |
(18,005 |
) |
|
$ |
(62,318 |
) |
|
(53,977 |
) |
Adjustments to
reconcile net income (loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
5,583 |
|
|
22,898 |
|
|
5,071 |
|
|
371 |
|
|
186 |
|
|
1,508 |
|
|
71 |
|
|
35,688 |
|
Depreciation and amortization (included in cost of revenue) |
|
5,254 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
5,254 |
|
Amortization of equity method fair value adjustment at
acquisition |
|
— |
|
|
(1,594 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,594 |
) |
Asset
impairment expense |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,810 |
|
|
— |
|
|
1,810 |
|
(Gain)
loss on sale or disposal of assets |
|
292 |
|
|
(3,500 |
) |
|
247 |
|
|
181 |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,780 |
) |
Lease
termination costs |
|
— |
|
|
249 |
|
|
— |
|
|
17 |
|
|
— |
|
|
— |
|
|
— |
|
|
266 |
|
Interest
expense |
|
976 |
|
|
4,392 |
|
|
1,181 |
|
|
41 |
|
|
— |
|
|
4,373 |
|
|
44,135 |
|
|
55,098 |
|
Net gain
on contingent consideration |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(11,411 |
) |
|
(11,411 |
) |
Other
(income) expense, net |
|
(41 |
) |
|
2,683 |
|
|
1,488 |
|
|
149 |
|
|
(17 |
) |
|
6,541 |
|
|
(92 |
) |
|
10,711 |
|
Foreign
currency gain (included in cost of revenue) |
|
— |
|
|
(79 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(79 |
) |
Income
tax (benefit) expense |
|
10,679 |
|
|
203 |
|
|
(4,243 |
) |
|
7 |
|
|
(820 |
) |
|
(1,129 |
) |
|
(10,185 |
) |
|
(5,488 |
) |
Noncontrolling interest |
|
1,941 |
|
|
260 |
|
|
(681 |
) |
|
— |
|
|
(3,936 |
) |
|
(1,164 |
) |
|
— |
|
|
(3,580 |
) |
Bonus to
be settled in equity |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
4,130 |
|
|
4,130 |
|
Share-based compensation expense |
|
— |
|
|
1,527 |
|
|
364 |
|
|
— |
|
|
319 |
|
|
279 |
|
|
2,754 |
|
|
5,243 |
|
Acquisition costs |
|
3,280 |
|
|
1,815 |
|
|
— |
|
|
— |
|
|
— |
|
|
2,648 |
|
|
3,764 |
|
|
11,507 |
|
Adjusted
EBITDA |
|
$ |
51,588 |
|
|
$ |
44,027 |
|
|
$ |
2,911 |
|
|
$ |
6,929 |
|
|
$ |
(22,366 |
) |
|
$ |
(3,139 |
) |
|
$ |
(29,152 |
) |
|
$ |
50,798 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Core Operating Subsidiaries |
|
$ |
105,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS, INC. |
RECONCILIATION OF NET INCOME (LOSS) TO
ADJUSTED EBITDA |
(in thousands) |
|
(in thousands): |
|
Year Ended December 31, 2016 |
|
|
Core Operating Subsidiaries |
|
Early Stage and Other |
|
|
|
|
|
|
|
|
|
Construction |
|
|
Marine Services |
|
Energy |
|
Telecom |
|
Life Sciences |
|
|
Other and Eliminations |
|
|
Non-operating Corporate |
|
|
HC2 |
|
Net loss attributable
to HC2 Holdings, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(94,549 |
) |
Less: Net loss
attributable to HC2 Holdings Insurance Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,028 |
) |
Net Income (loss)
attributable to HC2 Holdings, Inc., excluding Insurance
Segment |
|
$ |
28,002 |
|
|
$ |
17,447 |
|
|
$ |
7 |
|
|
$ |
1,435 |
|
|
$ |
(7,646 |
) |
|
$ |
(24,800 |
) |
|
$ |
(94,966 |
) |
|
(80,521 |
) |
Adjustments to
reconcile net income (loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
1,892 |
|
|
22,007 |
|
|
2,248 |
|
|
504 |
|
|
124 |
|
|
1,480 |
|
|
9 |
|
|
28,264 |
|
Depreciation and amortization (included in cost of revenue) |
|
4,370 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
4,370 |
|
Amortization of equity method fair value adjustment at
acquisition |
|
— |
|
|
(1,371 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,371 |
) |
(Gain)
loss on sale or disposal of assets |
|
1,663 |
|
|
(9 |
) |
|
— |
|
|
708 |
|
|
— |
|
|
— |
|
|
— |
|
|
2,362 |
|
Lease
termination costs |
|
— |
|
|
— |
|
|
— |
|
|
179 |
|
|
— |
|
|
— |
|
|
— |
|
|
179 |
|
Interest
expense |
|
1,239 |
|
|
4,774 |
|
|
211 |
|
|
— |
|
|
— |
|
|
1,164 |
|
|
35,987 |
|
|
43,375 |
|
Net loss
(gain) on contingent consideration |
|
— |
|
|
(2,482 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
11,411 |
|
|
8,929 |
|
Other
(income) expense, net |
|
(163 |
) |
|
(2,424 |
) |
|
(8 |
) |
|
(87 |
) |
|
(3,213 |
) |
|
9,987 |
|
|
(1,277 |
) |
|
2,815 |
|
Foreign
currency gain (included in cost of revenue) |
|
— |
|
|
(1,106 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,106 |
) |
Income
tax (benefit) expense |
|
18,727 |
|
|
1,394 |
|
|
(535 |
) |
|
2,803 |
|
|
1,558 |
|
|
3,250 |
|
|
11,245 |
|
|
38,442 |
|
Noncontrolling interest |
|
1,834 |
|
|
974 |
|
|
(4 |
) |
|
— |
|
|
(3,111 |
) |
|
(2,575 |
) |
|
— |
|
|
(2,882 |
) |
Bonus to
be settled in equity |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,503 |
|
|
2,503 |
|
Share-based compensation expense |
|
— |
|
|
1,682 |
|
|
597 |
|
|
— |
|
|
251 |
|
|
273 |
|
|
5,545 |
|
|
8,348 |
|
Non-recurring items |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,513 |
|
|
1,513 |
|
Acquisition costs |
|
2,296 |
|
|
290 |
|
|
27 |
|
|
18 |
|
|
— |
|
|
— |
|
|
2,312 |
|
|
4,943 |
|
Adjusted
EBITDA |
|
$ |
59,860 |
|
|
$ |
41,176 |
|
|
$ |
2,543 |
|
|
$ |
5,560 |
|
|
$ |
(12,037 |
) |
|
$ |
(11,221 |
) |
|
$ |
(25,718 |
) |
|
$ |
60,163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Core Operating Subsidiaries |
|
$ |
109,139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HC2 HOLDINGS,
INC.RECONCILIATION OF NET INCOME (LOSS) TO
ADJUSTED OPERATING INCOME ("INSURANCE AOI")(in
thousands)
The table below shows the adjustments made to the reported Net
income (loss) of the Insurance segment to calculate Insurance AOI
for the three months ended December 31, 2017 and 2016
respectively:
|
|
Three months ended December 31, |
|
|
2017 |
|
2016 |
|
Increase / (Decrease) |
Net Income (loss) -
Insurance segment |
|
$ |
3,381 |
|
|
$ |
(2,050 |
) |
|
$ |
5,431 |
|
Net realized and
unrealized gains on investments |
|
(2,129 |
) |
|
(7,696 |
) |
|
5,567 |
|
Asset impairment |
|
— |
|
|
2,400 |
|
|
(2,400 |
) |
Acquisition costs |
|
1,377 |
|
|
445 |
|
|
932 |
|
Insurance
AOI |
|
$ |
2,629 |
|
|
$ |
(6,901 |
) |
|
$ |
9,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below shows the adjustments made to the reported Net
income (loss) of the Insurance segment to calculate Insurance AOI
for the years ended December 31, 2017 and 2016, respectively:
|
|
Years Ended December 31, |
|
|
2017 |
|
2016 |
|
Increase / (Decrease) |
Net Income (loss) -
Insurance segment |
|
$ |
7,066 |
|
|
$ |
(14,028 |
) |
|
$ |
21,094 |
|
Net realized and
unrealized gains on investments |
|
(4,983 |
) |
|
(5,019 |
) |
|
36 |
|
Asset impairment |
|
3,364 |
|
|
2,400 |
|
|
964 |
|
Acquisition costs |
|
2,535 |
|
|
714 |
|
|
1,821 |
|
Insurance
AOI |
|
$ |
7,982 |
|
|
$ |
(15,933 |
) |
|
$ |
23,915 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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