HC2 Holdings Reports Third Quarter 2015 Results

Net Revenue of $277.5 Million for the Third Quarter 2015 and $760.3 Million for the 9 Months Ended September 30, 2015

Adjusted EBITDA of $24.7 Million From Our Primary Operating Subsidiaries

NEW YORK, Nov. 02, 2015 (GLOBE NEWSWIRE) — HC2 Holdings, Inc. (“HC2”) (NYSE MKT:HCHC), a diversified holding company that focuses on acquiring, investing in and operating businesses that it considers to be under or fairly valued and growing its acquired businesses, today announced its consolidated results for the third quarter of fiscal 2015, which ended on September 30, 2015.

“We are very pleased with our third quarter execution, especially the continued strength of Schuff and Global Marine, two of HC2’s key operating companies,” said Philip Falcone, HC2’s Chairman, President and Chief Executive Officer. “We are encouraged by the 16% increase in Schuff’s backlog of projects during the quarter and the company’s ongoing execution of building a solid revenue pipeline. In Marine Services, our outlook remains positive as Global Marine, a company that has been in business for more than 120 years, continues to perform as expected as their maintenance sector remains robust and continues to underpin results. We are also very excited about the progress at our Telecommunications segment which is now Adjusted EBITDA positive as a result of the past year’s restructuring of the PTGi ICS business. Looking forward, we will continue to pursue highly attractive, cash flow positive businesses and will remain committed to building long-term value in these businesses, which we believe will offer a significant value added proposition to our shareholders.”

Third Quarter 2015 Financial Highlights:

Net revenue: HC2 recorded consolidated total net revenues of $277.5 million for the third quarter of 2015, an increase of $98.0 million, or 54.6%, as compared to the third quarter of 2014 as reported and up $53.5 million, or 23.9%, from the third quarter of 2014 on a pro-forma basis. Net revenue for the third quarter of 2015 decreased $3.5 million, or 1%, when compared to the seasonally high second quarter of $281.0 million, primarily driven by decreases in our Manufacturing segment due to a reduction in industrial projects in the Gulf Coast region and our Marine Services segment due to lower installation projects during the quarter. The decrease was largely offset by continued improvement in our Telecom segment due to continued expansion into emerging markets.

HC2 recorded consolidated total net revenue of $760.3 million for the nine months ended September 30, 2015, an increase of $440.9 million, or 138%, as compared to the same period last year as reported and an increase of $130.2 million, or 20.7%, for the same period of 2014 on a pro-forma basis.

Operating Income: Income from operations for the third quarter was $2.4 million compared to $3.3 million during the second quarter of 2015. The decrease in operating profit was largely the result of an increase in acquisition costs as we look to close the insurance transaction in the fourth quarter along with lease termination costs in our Telecom segment as they continue to consolidate operations to low cost countries offset in part by cost savings in our Pacific region and favorable mix in higher margin projects in our Manufacturing segment.

Adjusted EBITDA: HC2 reported total Adjusted EBITDA of $14.1 million and $39.4 million for the three and nine month period ended September 30, 2015, respectively, up from $8.4 million and $9.0 million from the three and nine month periods ended September 30, 2014, respectively, as reported.

Adjusted EBITDA for HC2’s primary operating subsidiaries, Schuff and Global Marine, was a combined $24.7 million for the third quarter of 2015 and $69.8 million for the first nine months of the year. Schuff continued to grow its Adjusted EBITDA during the quarter to $14.4 million as the company continued to profit from improved margins in the Pacific division. In the Telecommunications segment, PTGi ICS enjoyed positive Adjusted EBITDA for the second consecutive quarter.

Adjusted EBITDA growth during the first nine months of the year was largely the result of our ability to subcontract work at lower costs in our Manufacturing segment along with an increased level of installation work in our Marine Services segment. This was offset, in part by, early stage investments and increases in deal related diligence expenses in Corporate and Other segments.

Balance sheet: As of September 30, 2015, HC2 had consolidated cash, cash equivalents and short-term investments of $84.7 million.

Additional Third Quarter Highlights and Recent Developments:

  • HC2 has received $16.2 million in total dividends year-to-date from its primary subsidiaries, including $8.2 million from Schuff and $8.0 million from Global Marine.
  • Schuff’s backlog was $381.6 million as of September 30, 2015, compared to $329.3 million as of June 30, 2015. We expect to continue to add backlog during the fourth quarter. Notable ongoing projects include the Wilshire Grand Center in Los Angeles, the Sacramento Kings Arena, and the new Apple headquarters in Cupertino, CA.
  • Global Marine completed a major fiber optic project in the Gulf of Guinea and had its first installation of the R2 repeater following successful sea trials. In addition, Huawei Marine, a Global Marine joint venture company, announced it will construct the Cameroon-Brazil Cable System, connecting Africa to Latin America.
  • HC2’s acquisition of long-term care and life insurance businesses, United Teacher Associates Insurance Company and Continental General Insurance Company, is expected to close during the fourth quarter of 2015, subject to receipt of required governmental approvals.
  • American Natural Gas (“ANG”) completed a new compressed natural gas (“CNG”) facility at the Tops Friendly Markets distribution center in Lancaster, New York. ANG is also building CNG stations near Rochester, New York and in Georgetown, Kentucky where Bestway Express, a truckload carrier, will be the anchor tenant.
  • Pansend Life Sciences, LLC has entered into an agreement to provide $22.4 million in staged financing with MediBeacon, Inc., maker of a proprietary noninvasive real-time monitoring system for kidney function.
  • On October 9, 2015, HC2 announced that one of its shareholders, HGI Funding, LLC (“HGI”), a subsidiary of HRG Group, Inc., entered into a definitive stock purchase agreement for the sale of 4,678,395 shares of common stock at $7.50 per share. HC2 did not receive any of the proceeds from the sale. The purchasers included Philip Falcone, HC2’s Chairman, President and Chief Executive Officer, who purchased 540,000 shares and Paul Voigt, HC2’s Senior Managing Director, who purchased 100,000 shares.

Non-GAAP Financial Measures and Other Information

Pro forma net revenue gives effect to revenues from our 2014 acquisitions of Schuff and Global Marine as if they had occurred on January 1, 2014.

Management believes that presenting pro forma net revenue is important to understanding HC2’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; lease termination costs; interest expense; amortization of debt discount; other income (expense), net; foreign currency transaction gain (loss); income tax (benefit) expense; loss from discontinued operations; noncontrolling interest; share-based compensation expense; acquisition related costs, other costs and depreciation and amortization expense.

Management believes that Adjusted EBITDA is significant to gaining an understanding of HC2’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, amortization and other adjustments 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 HC2’s US GAAP financial results.

Conference Call

HC2 Holdings, Inc. will host a live conference call to discuss its results on Monday, November 2, 2015 at 10:00 a.m. Eastern Time. To join the event, participants may call 1.866.395.3893 (U.S. callers) or 1.678.509.7540 (international callers), using conference ID number 53945900. 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.

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. 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 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. 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, our ability to realize efficiencies, cost savings, income and margin improvements, growth, economies of scale and other anticipated benefits of strategic transactions, integrating financial reporting of acquired or target businesses, completing pending and future acquisitions, including our pending acquisition of United Teacher Associates Insurance Company and Continental General Insurance Company, and dispositions, litigation and other contingent liabilities, changes in regulations, taxes and risks that may affect the performance of the operating subsidiaries of HC2. Additional information concerning these and other factors can be found in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

You should not place undue reliance on forward-looking statements. All forward-looking statements attributable to HC2 or persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements. All such statements speak only as of the date made, and HC2 undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

About HC2

HC2 Holdings, Inc. is a publicly traded (NYSE MKT: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 six reportable segments, including Manufacturing, Marine Services, Utilities, Telecommunications, Life Sciences and Other. Currently, HC2’s largest operating subsidiaries are Schuff International, Inc., a leading structural steel fabricator and erector in the United States, and Global Marine Systems Limited, a leading provider of engineering and underwater services on submarine cables. 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
September 30,
Nine Months Ended
September 30,
  2015 2014 2015 2014
Services revenue $ 151,933   $ 41,267   $ 373,492   $ 126,731  
Sales revenue   125,534     138,166     386,765     192,642  
Net revenue   277,467     179,433     760,257     319,373  
Operating expenses:                        
Cost of revenue – services   138,099     39,464     334,608     120,101  
Cost of revenue – sales   103,375     119,175     324,820     162,505  
Selling, general and administrative   27,830     20,246     77,359     40,482  
Depreciation and amortization   6,593     921     16,835     1,475  
Gain on sale or disposal of assets   (1,957 )   (448 )   (986 )   (81 )
Lease termination costs   1,124         1,124      
Total operating expenses   275,064     179,358     753,760     324,482  
Income (loss) from operations   2,403     75     6,497     (5,109 )
Interest expense   (10,343 )   (2,103 )   (28,992 )   (3,116 )
Amortization of debt discount   (40 )   (805 )   (216 )   (1,381 )
Loss on early extinguishment or restructuring of debt       (6,947 )       (6,947 )
Other income (expense), net   1,216     (1,092 )   (3,528 )   524  
Foreign currency transaction gain   1,099     170     2,150     573  
Loss from continuing operations before income (loss) from equity investees and income tax benefit (expense)   (5,665 )   (10,702 )   (24,089 )   (15,456 )
Income (loss) from equity investees   535     (288 )   (724 )   (288 )
Income tax benefit (expense)   649     (4,515 )   4,018     (6,470 )
Loss from continuing operations   (4,481 )   (15,505 )   (20,795 )   (22,214 )
Loss from discontinued operations   (24 )   (106 )   (44 )   (62 )
Gain (loss) from sale of discontinued operations       663         (121 )
Net loss   (4,505 )   (14,948 )   (20,839 )   (22,397 )
Less: Net income attributable to noncontrolling interest   (65 )   (931 )   (8 )   (1,990 )
Net loss attributable to HC2 Holdings, Inc.   (4,570 )   (15,879 )   (20,847 )   (24,387 )
Less: Preferred stock dividends and accretion   1,035     1,004     3,212     1,204  
Net loss attributable to common stock and participating preferred stockholders $ (5,605 ) $ (16,883 ) $ (24,059 ) $ (25,591 )
Basic loss per common share:                        
Loss from continuing operations attributable to HC2 Holdings, Inc. $ (0.22 ) $ (0.75 ) $ (0.96 ) $ (1.38 )
Gain (loss) from sale of discontinued operations       0.03         (0.01 )
Net loss attributable to HC2 Holdings, Inc. $ (0.22 ) $ (0.72 ) $ (0.96 ) $ (1.39 )
Diluted loss per common share:                        
Loss from continuing operations attributable to HC2 Holdings, Inc. $ (0.22 ) $ (0.75 ) $ (0.96 ) $ (1.38 )
Gain (loss) from sale of discontinued operations       0.03         (0.01 )
Net loss attributable to HC2 Holdings, Inc. $ (0.22 ) $ (0.72 ) $ (0.96 ) $ (1.39 )
Weighted average common shares outstanding:                        
Basic   25,592     23,372     25,093     18,348  
Diluted   25,592     23,372     25,093     18,348  

HC2 HOLDINGS, INC.
 
CONDENSED CONSOLIDATED BALANCE SHEET
 
(in thousands, except share and per share amounts)
 
  September 30,
2015
December 31,
2014
Assets            
Current assets:            
Cash and cash equivalents $ 81,066   $ 107,978  
Short-term investments   3,625     4,867  
Accounts receivable (net of allowance for doubtful accounts receivable of $1,576 and $2,760 at September 30, 2015 and December 31, 2014, respectively)   187,474     151,558  
Costs and recognized earnings in excess of billings on uncompleted contracts   37,266     28,098  
Deferred tax asset – current   1,701     1,701  
Inventories   14,408     14,975  
Prepaid expenses and other current assets   27,835     22,455  
Assets held for sale   6,349     3,865  
Total current assets   359,724     335,497  
Restricted cash   7,196     6,467  
Long-term investments   77,154     48,674  
Property, plant and equipment, net   221,842     239,851  
Goodwill   30,665     27,990  
Other intangible assets, net   26,674     31,144  
Deferred tax asset – long-term   23,571     15,811  
Other assets   18,201     18,614  
Total assets $ 765,027   $ 724,048  
Liabilities, temporary equity and stockholders’ equity            
Current liabilities:            
Accounts payable $ 65,573   $ 79,794  
Accrued interconnection costs   36,689     9,717  
Accrued payroll and employee benefits   22,127     20,023  
Accrued expenses and other current liabilities   48,338     34,042  
Billings in excess of costs and recognized earnings on uncompleted contracts   20,045     41,959  
Accrued income taxes   1,470     512  
Accrued interest   11,567     3,125  
Current portion of long-term debt   13,454     10,444  
Current portion of pension liability       5,966  
Total current liabilities   219,263     205,582  
Long-term debt   374,404     332,927  
Pension liability   27,664     31,244  
Other liabilities   8,151     1,617  
Total liabilities   629,482     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 September 30, 2015 and December 31, 2014; Series A-1 – 10,000 and 11,000 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively; Series A-2 – 14,000 and 0 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively   53,403     39,845  
Stockholders’ equity:            
Common stock, $0.001 par value – 80,000,000 shares authorized; 25,623,982 and 23,844,711 shares issued and 25,592,356 and 23,813,085 shares outstanding at September 30, 2015 and December 31, 2014, respectively   26     24  
Additional paid-in capital   151,662     147,081  
Accumulated deficit   (62,727 )   (41,880 )
Treasury stock, at cost – 31,626 shares at September 30, 2015 and December 31, 2014, respectively   (378 )   (378 )
Accumulated other comprehensive loss   (28,273 )   (15,178 )
Total HC2 Holdings, Inc. stockholders’ equity before noncontrolling interest   60,310     89,669  
Noncontrolling interest   21,832     23,164  
Total stockholders’ equity   82,142     112,833  
Total liabilities, temporary equity and stockholders’ equity $ 765,027   $ 724,048  

HC2 HOLDINGS, INC.
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(in thousands)
 
  Nine Months Ended September 30,
    2015     2014  
Cash flows from operating activities:    
Net loss $   (20,839 ) $   (22,397 )
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:    
Provision for doubtful accounts receivable     325       (114 )
Share-based compensation expense     6,943       1,725  
Depreciation and amortization     22,570       4,071  
Amortization of deferred financing costs     1,030       288  
Lease termination costs     1,124      
(Gain) loss on sale or disposal of assets     (986 )     635  
(Gain) loss on sale of investments     (399 )     (437 )
Equity investment (income)/loss     724       288  
Amortization of debt discount     216       1,381  
Unrealized (gain) loss on investments     (32 )    
Loss on early extinguishment of debt         6,947  
Deferred income taxes     (8,143 )     1  
Other, net     225      —  
Unrealized foreign currency transaction (gain) loss on intercompany and foreign debt     90       57  
Changes in assets and liabilities, net of acquisitions:    
(Increase) decrease in accounts receivable     (36,099 )     6,037  
(Increase) decrease in costs and recognized earnings in excess of billings on uncompleted contracts     (9,253 )     522  
(Increase) decrease in inventories     455       (1,984 )
(Increase) decrease in prepaid expenses and other current assets     (4,799 )     25,539  
(Increase) decrease in other assets     1,483       1,558  
Increase (decrease) in accounts payable     (15,675 )     1,751  
Increase (decrease) in accrued interconnection costs     26,915       (2,618 )
Increase (decrease) in accrued payroll and employee benefits     2,936       3,055  
Increase (decrease) in accrued expenses and other current liabilities     18,406       (3,785 )
Increase (decrease) in billings in excess of costs and recognized earnings on uncompleted contracts     (21,933 )     (7,695 )
Increase (decrease) in accrued income taxes     2,060       (2,198 )
Increase (decrease) in accrued interest     8,442       502  
Increase (decrease) in other liabilities     (720 )     (1,371 )
Increase (decrease) in pension liability     (8,665 )    
Net cash (used in) provided by operating activities     (33,599 )     11,758  
Cash flows from investing activities:    
Purchase of property, plant and equipment     (16,751 )     (4,064 )
Sale of property and equipment and other assets     4,994       3,696  
Purchase of equity investments     (11,506 )     (15,363 )
Sale of equity investments     1,026      
Sale of assets held for sale     1,479      —  
Purchase of available-for-sale securities     (10,857 )     (3,277 )
Sale of available-for-sale securities     5,850       24  
Investment in debt securities     (19,347 )     (250 )
Sale of investments         1,111  
Cash paid for business acquisitions, net of cash acquired     (568 )     (163,510 )
Purchase of noncontrolling interest     (239 )     (6,978 )
Contribution by noncontrolling interest         15,500  
Receipt of dividends from equity investees     2,448      —  
(Increase) decrease in restricted cash     (727 )    
Net cash used in investing activities     (44,198 )     (173,111 )
Cash flows from financing activities:    
Proceeds from long-term obligations     425,527       492,068  
Principal payments on long-term obligations     (379,037 )     (294,237 )
Payment of fees on restructuring of debt         (837 )
Payment of deferred financing costs     (1,137 )    
Proceeds from sale of common stock, net         6,000  
Proceeds from sale of preferred stock, net     14,033       39,765  
Proceeds from the exercise of warrants and stock options    —       24,344  
Payment of dividends     (3,855 )     (750 )
Taxes paid in lieu of shares issued for share-based compensation         (41 )
Net cash provided by financing activities     55,531       266,312  
Effects of exchange rate changes on cash and cash equivalents     (4,646 )     (2,217 )
Net change in cash and cash equivalents     (26,912 )     102,742  
Cash and cash equivalents, beginning of period     107,978       8,997  
Cash and cash equivalents, end of period $   81,066   $   111,739  

HC2 HOLDINGS, INC.
 
PRO FORMA NET REVENUE
 
(in thousands)
 
Three Months Ended September 30,
  2015 2014 Actual 2014 Pro Forma 2015 Compared to 2014
Pro Forma
(in thousands) Net
Revenue
% of
Total
Net
Revenue
% of
Total
Net
Revenue
% of
Total
Variance Variance %
Telecommunications $ 116,872     42.1 % $ 41,267     23.0 % $ 41,267     18.4 % $ 75,605     183.2 %
Manufacturing   122,932     44.3 %   137,706     76.7 %   137,706     61.5 %   (14,774 )   (10.7 )%
Marine Services   35,062     12.6 %       %   44,393     19.8 %   (9,331 )   (21.0 )%
Utilities   1,841     0.7 %   460     0.3 %   561     0.3 %   1,280     228.2 %
Other   760     0.3 %       %       %   760     100.0 %
Total Net Revenue $ 277,467     100.0 % $ 179,433     100.0 % $ 223,927     100.0 % $ 53,540     23.9 %
Less net revenue from:                                                
Marine Services                           (44,393 )                  
Utilities                           (101 )                  
Total Net Revenue – Actual                         $ 179,433                    

Nine Months Ended September 30,
  2015 2014 Actual 2014 Pro Forma 2015 Compared to 2014
Pro Forma
(in thousands) Net
Revenue
% of
Total
Net
Revenue
% of
Total
Net
Revenue
% of
Total
Variance Variance %
Telecommunications $ 267,554     35.2 % $ 126,731     39.7 % $ 126,731     20.1 % $ 140,823     111.1 %
Manufacturing   380,783     50.1 %   192,182     60.2 %   369,923     58.7 %   10,860     2.9 %
Marine Services   105,939     13.9 %       %   132,215     21.0 %   (26,276 )   (19.9 )%
Utilities   4,432     0.6 %   460     0.1 %   1,166     0.2 %   3,266     280.1 %
Other   1,549     0.2 %       %       %   1,549     100.0 %
Total Net Revenue $ 760,257     100.0 % $ 319,373     100.0 % $ 630,035     100.0 % $ 130,222     20.7 %
Less net revenue from:                                                
Manufacturing                           (177,741 )                  
Marine Services                           (132,215 )                  
Utilities                           (706 )                  
Total Net Revenue – Actual                         $ 319,373                    

HC2 HOLDINGS, INC.
 
ADJUSTED EBITDA
 
(in thousands)
 
  Three Months Ended September 30, 2015
  Manufacturing Marine
Services
Manufacturing
and Marine
Services
Telecommunications Corporate Other (1) HC2
Net income (loss) $ 7,116   $ 8,016   $ 15,132   $ (362 ) $ (12,549 ) $ (6,791 ) $ (4,570 )
Adjustments to reconcile net income (loss) to Adjusted EBIT:                                          
(Gain) loss on sale or disposal of assets   (990 )   (968 )   (1,958 )           1     (1,957 )
Lease termination costs               1,124             1,124  
Interest expense   354     929     1,283         9,050     10     10,343  
Amortization of debt discount                   40         40  
Other (income) expense, net   (141 )   (214 )   (355 )   1     (873 )   11     (1,216 )
Foreign currency transaction (gain) loss       (937 )   (937 )   (163 )   1         (1,099 )
Income tax (benefit) expense   5,284     130     5,414         (6,063 )       (649 )
Loss from discontinued operations                       24     24  
Noncontrolling interest   383         383             (318 )   65  
Share-based payment expense                   2,322     22     2,344  
Acquisition related costs                   2,732         2,732  
Other costs               109             109  
Adjusted EBIT   12,006     6,956     18,962     709     (5,340 )   (7,041 )   7,290  
Depreciation and amortization   513     5,085     5,598     98         897     6,593  
Depreciation and amortization (included in cost of revenue)   1,928         1,928                 1,928  
Foreign currency (gain) loss (included in cost of revenue)       (1,739 )   (1,739 )               (1,739 )
Adjusted EBITDA $ 14,447   $ 10,302   $ 24,749   $ 807   $ (5,340 ) $ (6,144 ) $ 14,072  
 
(1) Other includes Utilities, Life Sciences and income (loss) from equity investees not included in our Marine Services segment.

  Nine Months Ended September 30, 2015
  Manufacturing Marine
Services
Manufacturing and
Marine Services
Telecommunications Corporate Other (1) HC2
Net income (loss) $ 16,182   $ 19,983   $ 36,165   $ (299 ) $ (39,083 ) $ (17,630 ) $ (20,847 )
Adjustments to reconcile net income (loss) to Adjusted EBIT:                                          
(Gain) loss on sale or disposal of assets   (69 )   (968 )   (1,037 )   50         1     (986 )
Lease termination costs               1,124             1,124  
Interest expense   1,064     2,888     3,952         25,007     33     28,992  
Amortization of debt discount                   216         216  
Other (income) expense, net   (164 )   (251 )   (415 )   (5 )   3,941     7     3,528  
Foreign currency transaction (gain) loss       (1,842 )   (1,842 )   (309 )   1         (2,150 )
Income tax (benefit) expense   12,188     142     12,330         (16,348 )       (4,018 )
Loss from discontinued operations   20         20             24     44  
Noncontrolling interest   967         967             (959 )   8  
Share-based payment expense                   6,921     22     6,943  
Acquisition related costs                   4,701         4,701  
Other costs               109             109  
Adjusted EBIT   30,188     19,952     50,140     670     (14,644 )   (18,502 )   17,664  
Depreciation and amortization   1,490     13,196     14,686     294         1,855     16,835  
Depreciation and amortization (included in cost of revenue)   5,735         5,735                 5,735  
Foreign currency (gain) loss (included in cost of revenue)       (804 )   (804 )               (804 )
Adjusted EBITDA $ 37,413   $ 32,344   $ 69,757   $ 964   $ (14,644 ) $ (16,647 ) $ 39,430  
 
(1) Other includes Utilities, Life Sciences and income (loss) from equity investees not included in our Marine Services segment.

  Three Months Ended Nine Months Ended
  September 30, 2014
Net income (loss) $ (15,879 ) $ (24,387 )
Adjustments to reconcile net income (loss) to Adjusted EBIT:            
(Gain) loss on sale or disposal of assets   (448 )   (81 )
Lease termination costs        
Interest expense   2,103     3,116  
Amortization of debt discount   805     1,381  
Loss on early extinguishment or restructuring of debt   6,947     6,947  
Other (income) expense, net   1,092     (524 )
Foreign currency transaction (gain) loss   (170 )   (573 )
Income tax (benefit) expense   4,515     6,470  
Loss from discontinued operations   106     62  
(Gain) loss from sale of discontinued operations   (663 )   121  
Noncontrolling interest   931     1,990  
Share-based payment expense   719     1,725  
Acquisition related costs   5,345     8,663  
Other costs        
Adjusted EBIT   5,403     4,910  
Depreciation and amortization   921     1,475  
Depreciation and amortization (included in cost of revenue)   2,107     2,589  
Foreign currency (gain) loss (included in cost of revenue)        
Adjusted EBITDA $ 8,431   $ 8,974  

CONTACT: For More Information on HC2 Holdings, Inc., Please Contact:

Ashleigh Douglas
ir@HC2.com
212-339-5875