HC2 Holdings Reports First Quarter 2015 Results
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E-mailNEW YORK, NY -- (Marketwired) -- 05/11/15 -- HC2 Holdings, Inc. ("HC2" or the "Company") (NYSE MKT: HCHC), a diversified holding company that focuses on acquiring, investing in and operating businesses with attractive assets that it considers to be under- or fairly valued and growing its acquired businesses, today announced its consolidated results for the first quarter of fiscal 2015 ended on March 31, 2015.
"The diversification of HC2 resulted in a strong first quarter, highlighted by the over 20% year-over-year growth of Schuff's pro forma revenues," said Philip Falcone, HC2's Chairman, President and Chief Executive Officer. "The company remains committed to building long-term value by acquiring businesses that offer significant growth potential, evidenced by the recently announced acquisition establishing our insurance industry platform. Looking forward, we will continue to pursue highly attractive, cash flow positive businesses in order to create value longer-term."
First Quarter 2015 Highlights:
- HC2 recorded total net revenues of $201.8 million for the first quarter of 2015.
- Pro forma Net Revenue increased $8.4 million, or 4.3%, from $193.4 million a year ago, primarily driven by Schuff's Pro forma Net Revenue increasing $21.7 million, or 20.7%, as major commercial projects launched in late 2014, and partially offset by expected seasonality at Global Marine.
- Adjusted EBITDA for the first quarter of 2015 for our primary operating subsidiaries, Schuff and Global Marine, was a combined $14.2 million. Taking into consideration the effect of seasonality on these operating subsidiaries, year to date performance is in line with our expectations.
- Consolidated cash as of March 31, 2015 was $128.9 million.
Additional Highlights:
- On January 5, 2015, the Company issued 14,000 shares of Series A-2 Convertible Participating Preferred Stock convertible at a price of $8.25.
- On March 26, 2015, the Company issued $50.0 million in aggregate principal amount of 11% Senior Secured Notes due 2019.
- Schuff's backlog was $306.1 million as of March 31, 2015, positioning them well for the balance of the year.
- In March 2015, the Company exercised its warrants in Novatel which converted into 3,824,600 shares of common stock and also received a new warrant to purchase 1,593,583 shares of common stock at $5.50 per share. As a result, the Company's ownership increased to approximately 23% of Novatel's common stock.
- On April 13, 2015, the Company signed a definitive agreement for the acquisition of long-term care and life insurance businesses, United Teacher Associates Insurance Company and Continental General Insurance Company, which will establish HC2's insurance platform, Continental Insurance Group Ltd.
- In April 2015, the Company invested CAD$20 million (or approximately $16 million) in convertible debentures of Gaming Nation Acquisition Corporation. Gaming Nation, headquartered in Toronto, Ontario, is a leading provider of both games of skill and games of chance designed for the avid sports fan and daily fantasy sports participants.
- In April 2015, Dusenberry Martin Racing, or DMi, Inc., announced that its NASCAR® '15 racing game will launch exclusively at GameStop for the Xbox 360 and PlayStation 3 on May 22, 2015
Highlights from First Quarter 2015 Operating Results
Pro forma Net Revenue
Pro forma Net Revenue for the first quarter of 2015, giving effect to the acquisition of Schuff and Global Marine as if they occurred on January 1, 2014, was $201.8 million, an increase of 4.3% from $193.4 million in Pro forma Net Revenue during the first quarter of 2014.
Income from Operations
During the first quarter of 2015, the Company reported income from operations of $0.8 million compared to a loss of $4.1 million during the first quarter of 2014. The first quarter of 2015 included stock-based compensation expense of $2.2 million compared to $238,000 during the first quarter of 2014.
Adjusted EBITDA
During the first quarter of 2015, the company's primary operating subsidiaries, Schuff and Global Marine reported Adjusted EBITDA of $9.0 million and $5.3 million, respectively.
Non-GAAP Financial Measures and Other Information
Pro forma Net Revenue includes the as reported revenue for the comparable prior period adjusted for revenues from acquired businesses, subsequent to that periods end, made to facilitate direct comparison to the as reported revenue for the current period.
Management believes that presenting Pro forma Net Revenue is important to understanding the Company's financial performance, providing better analysis of trends in our underlying businesses as it allows for comparability to prior period results.
The calculation of Adjusted EBITDA, as defined by us, consists of Net income (loss) as adjusted for gain (loss) on sale or disposal of assets; interest expense; amortization of debt discount; interest income and other expense, net; foreign currency gain (loss); income tax (benefit) expense; loss from discontinued operations; non-controlling interests; share-based compensation expense; depreciation and amortization expense and foreign currency (gain) loss.
Management believes that Adjusted EBITDA is significant to 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, since interest, taxes, depreciation and amortization 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-US GAAP measurements are useful supplemental information, such adjusted results are not intended to replace the Company's US GAAP financial results.
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. These statements are based on the beliefs and assumptions of HC2's management and the management of HC2's subsidiaries. Factors that could cause actual results, events and developments to differ include, without limitation, capital market conditions, the ability of HC2's subsidiaries to generate sufficient net income and cash flows to make upstream cash distributions, trading characteristics of the HC2 common stock, the ability of HC2 and its subsidiaries to identify any suitable future acquisition opportunities, efficiencies/cost avoidance, cost savings, income and margins, growth, economies of scale, combined operations, future economic performance, conditions to, and the timetable for, completing the integration of financial reporting of acquired or target businesses, completing future acquisitions and dispositions, litigation, potential and contingent liabilities, management's plans, changes in regulations, taxes and the risks that may affect the performance of the operating subsidiaries of HC2 and those factors listed under the caption "Risk Factors" in HC2's most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, filed with the SEC. All forward-looking statements described herein are qualified by these cautionary statements and there can be no assurance that the actual results, events or developments referenced herein will occur or be realized. HC2 does not undertake any obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operation results.
About HC2
HC2 Holdings, Inc. is a publicly traded (NYSE MKT: HCHC), diversified holding company, which seeks to acquire and grow attractive businesses that generate sustainable free cash flow. HC2 has a diverse array of operating subsidiaries, each with its own dedicated management team, across a broad set of industries, including, but not limited to, telecom/infrastructure, large-scale U.S. construction, energy, subsea services and life sciences. HC2 seeks opportunities that generate attractive returns and significant cash flow in order to maximize value for all stakeholders. Currently, HC2's largest operating subsidiaries are Schuff, a leading structural steel fabricator in the United States, and Global Marine, a leading global offshore engineering company focused on subsea cable installation and maintenance. Founded in 1994, HC2 is headquartered in Herndon, Virginia.
HC2 HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Three Months Ended
March 31,
------------------------
2015 2014
----------- -----------
Services revenue $ 73,718 $ 43,354
Sales revenue 128,090 -
----------- -----------
Net revenue 201,808 43,354
Operating expenses:
Cost of revenue - services 61,920 41,107
Cost of revenue - sales 110,536 -
Selling, general and administrative 23,053 6,204
Depreciation and amortization 5,006 210
(Gain) loss on sale or disposal of assets 473 (80)
----------- -----------
Total operating expenses 200,988 47,441
----------- -----------
Income/(loss) from operations 820 (4,087)
Interest expense (8,608) (1)
Amortization of debt discount (92) -
Interest income and other expense, net 193 (49)
Foreign currency transaction loss (771) (34)
----------- -----------
Loss from continuing operations before income
taxes and loss from equity investees (8,458) (4,171)
Loss from equity investees (2,688) -
Income tax benefit (expense) 5,833 (9)
----------- -----------
Loss from continuing operations (5,313) (4,180)
Gain/(loss) from discontinued operations (9) 17
Loss from sale of discontinued operations - (784)
----------- -----------
Net loss (5,322) (4,947)
Less: Net loss attributable to noncontrolling
interest 261 -
----------- -----------
Net loss attributable to HC2 Holdings, Inc. (5,061) (4,947)
Less: Preferred stock dividends and accretion 1,088 -
----------- -----------
Net loss attributable to common stock and
participating preferred stockholders $ (6,149) $ (4,947)
=========== ===========
Basic loss per common share:
Loss from continuing operations attributable to
HC2 Holdings, Inc. $ (0.25) $ (0.29)
Loss from discontinued operations - -
Loss from sale of discontinued operations - (0.05)
----------- -----------
Net income (loss) attributable to HC2
Holdings, Inc. $ (0.25) $ (0.34)
=========== ===========
Diluted loss per common share:
Loss from continuing operations attributable to
HC2 Holdings, Inc. $ (0.25) $ (0.29)
Loss from discontinued operations - -
Loss from sale of discontinued operations - (0.05)
----------- -----------
Net loss attributable to HC2 Holdings, Inc. $ (0.25) $ (0.34)
=========== ===========
Weighted average common shares outstanding:
Basic 24,146 14,631
=========== ===========
Diluted 24,146 14,631
=========== ===========
Amounts attributable to common shareholders of HC2
Holdings, Inc.
Loss from continuing operations attributable to
HC2 Holdings, Inc. $ (6,140) $ (4,180)
Gain/(loss) from discontinued operations (9) 17
Loss from sale of discontinued operations - (784)
----------- -----------
Net loss attributable to HC2 Holdings, Inc. $ (6,149) $ (4,947)
----------- -----------
HC2 HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands, except per share amounts)
March 31, December 31,
2015 2014
----------- -------------
Assets
Current assets:
Cash and cash equivalents $ 128,872 $ 107,978
Short-term investments 11,768 4,867
Accounts receivable (net of allowance for
doubtful accounts receivable of $2,675 and
$2,760 at March 31, 2015 and December 31,
2014, respectively) 195,878 151,558
Costs and recognized earnings in excess of
billings on uncompleted contracts 24,656 28,098
Deferred tax asset - current 1,701 1,701
Inventories 17,062 14,975
Prepaid expenses and other current assets 29,337 22,455
Assets held for sale 11,485 3,865
----------- -------------
Total current assets 420,759 335,497
Restricted cash 7,063 6,467
Long-term investments 58,827 48,674
Property, plant and equipment, net 224,815 239,851
Goodwill 27,990 27,990
Other intangible assets, net 30,067 31,144
Deferred tax asset - long-term 15,198 15,811
Other assets 18,334 18,614
----------- -------------
Total assets $ 803,053 $ 724,048
=========== =============
Liabilities, temporary equity and stockholders'
equity
Current liabilities:
Accounts payable $ 61,888 $ 79,794
Accrued interconnection costs 19,507 9,717
Accrued payroll and employee benefits 22,883 20,023
Accrued expenses and other current liabilities 40,183 34,042
Billings in excess of costs and recognized
earnings on uncompleted contracts 31,848 41,959
Accrued income taxes - 512
Accrued interest 12,043 3,125
Current portion of long-term debt 38,811 10,444
Current portion of pension liability 5,697 5,966
----------- -------------
Total current liabilities 232,860 205,582
Long-term debt 376,549 332,927
Pension liability 28,384 31,244
Other liabilities 8,002 1,617
----------- -------------
Total liabilities 645,795 571,370
----------- -------------
Commitments and contingencies
Temporary equity
Preferred stock, $0.001 par value - 20,000,000
shares authorized; Series A - 30,000 shares
issued and outstanding at March 31, 2015 and
December 31, 2014; Series A-1 - 10,500 and
11,000 shares issued and outstanding at March
31, 2015 and December 31, 2014, respectively;
Series A-2 - 14,000 and 0 shares issued and
outstanding at March 31, 2015 and December
31, 2014, respectively 53,444 39,845
----------- -------------
Stockholders' equity:
Common stock, $0.001 par value - 80,000,000
shares authorized; 25,400,886 and 23,844,711
shares issued and 25,369,260 and 23,813,085
shares outstanding at March 31, 2015 and
December 31, 2014, respectively 25 24
Additional paid-in capital 148,762 147,081
Accumulated deficit (46,941) (41,880)
Treasury stock, at cost - 31,626 shares at
March 31, 2015 and December 31, 2014,
respectively (378) (378)
Accumulated other comprehensive loss (20,301) (15,178)
----------- -------------
Total HC2 Holdings, Inc. stockholders'
equity before noncontrolling interest 81,167 89,669
Noncontrolling interest 22,647 23,164
----------- -------------
Total stockholders' equity 103,814 112,833
----------- -------------
Total liabilities, temporary equity and
stockholders' equity $ 803,053 $ 724,048
----------- -------------
HC2 HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
------------------------
2015 2014
----------- -----------
Cash flows from operating activities:
Net income (loss) $ (5,322) $ (4,947)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Provision for doubtful accounts receivable 95 107
Share-based compensation expense 2,235 238
Depreciation and amortization 6,881 210
Amortization of deferred financing costs 329 -
(Gain) loss on sale or disposal of assets 473 704
(Gain) loss on sale of investments (164) -
Equity investment (income)/loss 2,688 -
Amortization of debt discount 92 -
Deferred income taxes (387) 1
Unrealized foreign currency transaction (gain)
loss on intercompany and foreign debt 172 (34)
Changes in assets and liabilities, net of
acquisitions:
(Increase) decrease in accounts receivable (45,764) 2,767
(Increase) decrease in costs and recognized
earnings in excess of billings on
uncompleted contracts 3,468 -
(Increase) decrease in inventories (2,355) -
(Increase) decrease in prepaid expenses and
other current assets (1,492) 6,662
(Increase) decrease in other assets (2,122) 798
Increase (decrease) in accounts payable (18,908) (1,795)
Increase (decrease) in accrued
interconnection costs 10,111 (1,181)
Increase (decrease) in accrued payroll and
employee benefits 3,723 (846)
Increase (decrease) in accrued expenses and
other current liabilities 5,995 279
Increase (decrease) in billings in excess of
costs and recognized earnings on
uncompleted contracts (10,116) -
Increase (decrease) in accrued income taxes (6,238) (4)
Increase (decrease) in accrued interest 8,918 -
Increase (decrease) in other liabilities (146) (856)
Increase (decrease) in pension liability (1,125) -
----------- -----------
Net cash provided by (used in) operating
activities (48,959) 2,103
----------- -----------
Cash flows from investing activities:
Purchase of property, plant and equipment (3,124) (89)
Sale of property and equipment and other assets 998 80
Purchase of equity investments (8,644) -
Sale of equity investments 1,026 -
Purchase of available-for-sale securities (6,664) -
Investment in debt securities (3,250) -
Purchase of noncontrolling interest (222) -
(Increase) decrease in restricted cash (893) -
----------- -----------
Net cash used in investing activities (20,773) (9)
----------- -----------
Cash flows from financing activities:
Proceeds from long-term obligations 181,303 -
Principal payments on long-term obligations (103,690) -
Payment of deferred financing costs (1,136) -
Proceeds from sale of preferred stock, net 14,032 -
Proceeds from the exercise of warrants and stock
options - 2,891
Payment of dividend equivalents - (550)
----------- -----------
Net cash provided by (used) in financing
activities 90,509 2,341
----------- -----------
Effects of exchange rate changes on cash and cash
equivalents 117 (391)
----------- -----------
Net change in cash and cash equivalents 20,894 4,044
Cash and cash equivalents, beginning of period 107,978 8,997
----------- -----------
Cash and cash equivalents, end of period $ 128,872 $ 13,041
----------- -----------
HC2 HOLDINGS, INC.
PRO FORMA NET REVENUE
(in thousands)
Quarter Ended March 31, Quarter-over-Quarter
---------------------------- ---------------------
2015 2014
------------- -------------
Net % of Net % of
(in thousands) Revenue Total Revenue Total Variance Variance %
------- ----- ------- ----- -------- -----------
Telecommunications 46,717 23.1% 43,354 22.4% 3,363 7.8%
Manufacturing 126,866 62.9% 105,142 54.4% 21,724 20.7%
Marine Services 27,001 13.4% 44,920 23.2% (17,919) -39.9%
Utilities 1,224 0.6% - 0.0% 1,224 100.0%
------- ----- ------- ----- -------- -----------
Total Net Revenue 201,808 100.0% 193,416 100.0% 8,392 4.3%
======= ===== ======= ===== ======== ===========
Quarter Ended March 31, Quarter-over-Quarter
------------------------------ ---------------------
2015 2014
------------- ---------------
Net % of Net % of
(in thousands) Revenue Total Revenue Total Variance Variance %
------- ----- -------- ----- -------- -----------
Telecommunications 46,717 23.1% 43,354 22.4% 3,363 7.8%
Manufacturing 126,866 62.9% 105,142 54.4% 21,724 20.7%
Marine Services 27,001 13.4% 44,920 23.2% (17,919) -39.9%
Utilities 1,224 0.6% - 0.0% 1,224 100.0%
------- ----- -------- ----- -------- -----------
Total Net Revenue -
pro forma 201,808 100.0% 193,416 100.0% 8,392 4.3%
Less revenue from:
Manufacturing - (105,142)
Marine Services - (44,920)
------- --------
Total Net Revenue -
GAAP 201,808 43,354
------- --------
HC2 HOLDINGS, INC.
ADJUSTED EBITDA
(in thousands)
HC2
Holdings,
Schuff GMSL ICS Other Inc.
Three Three Three Three Three
Months Months Months Months Months
Ended Ended Ended Ended Ended
March March March March March
31, 2015 31, 2015 31, 2015 31, 2015 31, 2015
--------- --------- --------- --------- ---------
Net income (loss) $ 3,188 $ 1,607 $ (524) $ (9,332) $ (5,061)
Adjustments to
reconcile net income
(loss) to Adjusted
EBIT:
(Gain) loss on sale
or disposal of
assets 423 - 50 - 473
Interest expense 344 996 - 7,268 8,608
Amortization of debt
discount - - - 92 92
Interest income and
other expense, net (17) - (5) (171) (193)
Foreign currency
(gain) loss - 448 322 1 771
Income tax (benefit)
expense 2,569 6 - (8,408) (5,833)
Loss from
discontinued
operations 9 - - - 9
Noncontrolling
interest 85 - - (346) (261)
Share-based payment
expense - - - 2,235 2,235
--------- --------- --------- --------- ---------
Adjusted EBIT 6,601 3,057 (157) (8,661) 840
Depreciation and
amortization 478 4,030 98 400 5,006
Depreciation and
amortization
(included in cost
of revenue) 1,875 - - - 1,875
Foreign currency
(gain) loss
(included in cost
of revenue) - (1,823) - - (1,823)
--------- --------- --------- --------- ---------
Adjusted EBITDA $ 8,954 $ 5,264 $ (59) $ (8,261) $ 5,898
--------- --------- --------- --------- ---------
For More Information on HC2 Holdings, Inc., Please Contact: Ashleigh Douglas [email protected] 212-339-5875
Source: HC2 Holdings, Inc.
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