FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): October 22, 2018
HC2 HOLDINGS, INC.
Delaware | 001-35210 | 54-1708481 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
450 Park Avenue, 30th Floor | ||
New York, NY 10022 | ||
(Address of principal executive offices) | ||
(212) 235-2690 | ||
(Registrant’s telephone number, including area code) | ||
Not Applicable | ||
(Former name or former address, if changed since last report.) | ||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company | ☐ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ |
Item 7.01 Regulation FD Disclosure
Notes Offering
On October 22, 2018, HC2 Holdings, Inc. (“HC2”) announced that it commenced a private offering of $535 million aggregate principal amount of senior secured notes due 2023 (the “Notes Offering”) to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to certain persons in offshore transactions in accordance with Regulation S under the Securities Act.
A copy of the press release announcing the Notes Offering is furnished with this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.
In connection with the Notes Offering, HC2 is providing prospective investors with certain financial and other information which HC2 is furnishing with this report as exhibits. This information, which has not been previously reported, is excerpted from a preliminary offering memorandum that is being disseminated in connection with the Notes Offering or from an investor presentation related thereto.
This Current Report on Form 8-K does not constitute an offer to sell or the solicitation of an offer to buy any security and shall not constitute an offer, solicitation or sale of any security in any jurisdiction in which such offering, solicitation or sale would be unlawful. The Senior Secured Notes being offered in the Notes Offering will not be and have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act.
Strategic Alternatives for Global Marine Subsidiary
On October 22, 2018, HC2 also announced that it is exploring strategic alternatives, including a potential sale, for its Global Marine Subsidiary. A copy of the press release announcing the strategic alternatives is furnished with this Current Report on Form 8-K as Exhibit 99.2 and is incorporated herein by reference.
MediBeacon
On October 22, 2018, HC2 also announced that the U.S. Food and Drug Administration has granted Breakthrough Device designation to MediBeacon Inc., a portfolio company within HC2’s Pansend Life Sciences subsidiary, for the company’s Transdermal GFR Measurement System. The device is intended to measure Glomerular Filtration Rate in patients with impaired or normal renal function. A copy of the press release is furnished with this Current Report on Form 8-K as Exhibit 99.3 and is incorporated herein by reference.
This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any of HC2’s filings under the Securities Act or the Exchange Act, whether made before or after the date hereof and regardless of any general incorporation language in such filings, except to the extent expressly set forth by specific reference in such a filing.
Forward Looking Statements
This Current Report on Form 8-K, including the Exhibits, contains forward-looking statements. Actual results, events or developments may differ materially from those anticipated or discussed in any forward-looking statement. These statements are subject to risks, uncertainties and other factors, as discussed further in the press releases attached hereto as Exhibits 99.1, 99.2 and 99.3.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit No. | |
99.1 | |
99.2 | |
99.3 | |
99.4 | |
99.5 | |
99.6 | |
99.7 | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
HC2 Holdings, Inc. | ||
Date: October 22, 2018 | By: | /s/ Michael J. Sena |
Name: Michael J. Sena | ||
Title: Chief Financial Officer | ||
Exhibit 99.1
FOR IMMEDIATE RELEASE
HC2 Holdings Announces Launch of $535 Million Senior Secured Notes Private Offering
Net Proceeds to Refinance 11% Senior Secured Notes
New York, October 22, 2018 (GlobeNewswire) - HC2 Holdings, Inc. (“HC2”) (NYSE: HCHC), a diversified holding company, announced today a private offering of $535 million aggregate principal amount of senior secured notes due 2023 (the “Notes”). The Company expects to use the proceeds from the issuance of the Notes to redeem all of its outstanding 11% senior secured notes due 2019 and to pay certain related transaction costs and expenses. The offering is subject to market conditions and other factors.
The Notes will be offered solely by means of a private placement to “qualified institutional buyers” in reliance on Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the United States to non-U.S. persons in compliance with Regulation S under the Securities Act.
The Notes have not been, and will not be registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act.
This press release does not constitute an offer to sell or the solicitation of an offer to buy any security and shall not constitute an offer, solicitation or sale of any security in any jurisdiction in which such offering solicitation or sale would be unlawful.
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 eight reportable segments, including Construction, Marine Services, Energy, Telecommunications, Life Sciences, Broadcasting, 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.
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, including statements regarding the commencement or completion of the offering. Generally, forward-looking statements include information describing the offering and other actions, events, results, strategies and expectations and are generally identifiable by use of the words “believes,” “expects,” “intends,” “anticipates,” “plans,” “seeks,” “estimates,” “projects,” “may,” “will,” “could,” “might,” or “continues” or similar expressions. The forward-looking statements in this press release include, without limitation, statements regarding our expectation regarding building shareholder value. Such statements are based on the beliefs and assumptions of HC2’s management and the management of HC2’s subsidiaries 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, the ability of our subsidiaries (including target businesses following their acquisition) to generate sufficient net income and cash flows to make upstream cash distributions, capital market conditions, our subsidiaries’ ability 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 with HC2 or the applicable subsidiary of HC2, completing future
acquisitions and dispositions, litigation, potential and contingent liabilities, management’s plans, changes in regulations and taxes. These risks and other important factors discussed under the caption “Risk Factors” in our most recent Annual Report on Form 10- K filed with the Securities and Exchange Commission (“SEC”), and our other reports filed with the SEC could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release.
You should not place undue reliance on forward-looking statements. All forward-looking statements attributable to HC2 or persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements. All such statements speak only as of the date made, and HC2 undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
For information on HC2 Holdings, Inc., please contact:
Andrew G. Backman
Managing Director
abackman@hc2.com
212-339-5836
Exhibit 99.2
FOR IMMEDIATE RELEASE
HC2 to Explore Strategic Alternatives for Global Marine Subsidiary
Deutsche Bank and ABN AMRO Engaged as Joint Advisors
NEW YORK, October 22, 2018 (GlobeNewswire) - HC2 Holdings, Inc. (“HC2”) (NYSE:HCHC), a diversified holding company, announced today that it is exploring strategic alternatives, including a potential sale, for its Global Marine subsidiary.
As part of this process, Global Marine Holdings, LLC (d/b/a Global Marine Group) (“Global Marine”), a leading provider of offshore engineering services to the telecommunications, renewables and oil & gas industries through its operating subsidiary Global Marine Systems Limited, has engaged Deutsche Bank Securities Inc. (“Deutsche Bank”) and ABN AMRO Bank N.V. (“ABN AMRO”) as joint advisors to explore strategic alternatives for the business.
“Since our acquisition four years ago, the management team at Global Marine has repositioned and strengthened itself by securing and maintaining leadership positions in various key growth markets, a testament to the strength of this business and the quality and focus of the team,” said Philip Falcone, HC2’s Chairman, Chief Executive Officer and President. “They’ve renewed the fleet of marine assets through strategic acquisitions and re-organized the business to pursue attractive growth opportunities, all while substantially reducing debt that was assumed during the acquisition. We believe exploring strategic options now will clearly position the next buyer to strategically capitalize on the next phase of growth of the Global Marine business, while allowing current investors an opportunity to realize substantial value creation since the acquisition in 2014. Reducing HC2’s debt cost of capital has been a top priority of ours, and we believe monetizing this asset will get us above and beyond that important goal.”
Mr. Falcone continued, “We’ve been delighted to be part of the Global Marine journey and having reviewed what we believe are incredible prospects for this business, we believe that now is the right time to explore strategic alternatives to support the growth trajectory of the business set by Executive Chairman, Dick Fagerstal, and long-term Chief Executive Officer, Ian Douglas.”
Since the acquisition of Global Marine by HC2, Global Marine has realized significant success across its business, including the following key initiatives and accomplishments:
• | Successfully renewed all three of its critical, long-term telecom maintenance agreements, representing approximately half of the world’s contracted telecom maintenance zones |
• | Installed numerous telecom cables for key customers, including its various joint venture partners |
• | Replaced two marine installation vessels with newer assets (Global Symphony and C.S. Recorder) |
• | Re-entered the offshore power market through the acquisition of CWind in 2016, creating a platform to address compelling growth opportunities in the global market for offshore power construction and operations, installation, repair and maintenance services |
• | Subsequently secured a number of long-term offshore power contracts with major utility and development companies |
• | Created CWind Taiwan, a joint venture with IOVTEC, to pursue significant offshore wind opportunities in the Asia Pacific region |
• | Following the acquisition of Fugro’s trenching and cable laying business in exchange for an equity stake in Global Marine by Fugro N.V in 2017, won and delivered several offshore power cable installation projects and currently building a significant pipeline of work in this growth market |
• | Recently formed a new business group, Global Offshore, to pursue installation and maintenance opportunities in the rebounding oil and gas markets |
• | Solid backlog, including backlog from Global Marine’s Huawei Marine joint venture |
“We very much welcome this decision from HC2 to explore strategic options to support the continued growth of the Global Marine Group platform,” said Ian Douglas, Chief Executive Officer of Global Marine. “Together, we have strengthened the business and grown across our target markets and we believe we have a great opportunity to accelerate our growth with our experienced and proven management team, strong balance sheet, enhanced and upgraded portfolio of marine assets and a solid pipeline of secured and potential project opportunities.”
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 eight reportable segments, including Construction, Marine Services, Energy, Telecommunications, Life Sciences, Broadcasting, 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.
About Global Marine Group
The Global Marine Group (GMG) is part of Global Marine Systems Limited, which is an operating subsidiary of HC2 Holdings Inc. (NYSE: HCHC). GMG is a market leader in offshore engineering and is recognized as a high quality, independent strategic partner across multiple sectors. GMG consists of three business units; Global Marine, providing subsea fiber optic cable solutions to the telecommunications industry, CWind, delivering power cable and asset management services topside and subsea to the offshore renewables and utilities markets, and Global Offshore, delivering the trenching and power cable laying services to the oil & gas sector.
GMG has two joint ventures in China with S.B. Submarine Systems (SBSS) and Huawei Marine Networks (HMN), demonstrating its true global reach and integrated operations. The combined experience and knowledge has led to significant embedded intellectual property and an enviable track record of quality operations.
GMG has an outstanding record in health & safety and proudly hold the RoSPA Order of Distinction, following 19 consecutive years of receiving their Gold Standard in recognition of outstanding occupational health & safety standards.
GMG is in a unique position, owning the world’s largest independent marine contracting fleet including four specialist cable installation and repair vessels, four maintenance vessels and 21 CTVs. With a workforce that has an impressive total of over 6,300 years of service, and an average service length of approximately 12 years.
GMG boasts a number of industry achievements, from installing the first subsea cable in 1850, being part of the consortium that invented the universal joint, and right through to today, finding solutions for client challenges such as blade repair for offshore wind turbines. GMG aspires to achieve its vision ‘Engineering a clean and connected future.’
For more information about the Global Marine Group, Global Marine, CWind and Global Offshore, please visit our websites at www.globalmarine.group, www.globalmarine.co.uk, www.cwind.global and www.globaloffshore.co.uk.
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 HC2’s representatives from time to time may contain, forward-looking statements. Generally, forward-looking statements include information describing actions, events, results, strategies and expectations and are generally identifiable by use of the words “believes,” “expects,” “intends,” “anticipates,” “plans,” “seeks,” “estimates,” “projects,” “may,” “will,” “could,” “might,” or “continues” or similar expressions. The forward-looking statements in this press release include, without limitation, statements regarding HC2’s 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. HC2 believes these judgments are reasonable, but you should understand that these statements are not guarantees of performance or results, and HC2’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 HC2’s financial statements; the fact that HC2 has historically identified material weaknesses in its 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; HC2’s 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 HC2’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”), and HC2’s 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.
For information on HC2 Holdings, Inc., please contact:
Andrew G. Backman
Managing Director
Investor Relations & Public Relations
abackman@hc2.com
212-339-5836
Exhibit 99.3
FOR IMMEDIATE RELEASE
HC2 Portfolio Company MediBeaconTM Granted
Breakthrough Device Status From FDA for Transdermal GFR Measurement System
MediBeacon’s Breakthrough Device is Intended to Measure GFR in
Patients with Impaired or Normal Kidney Function
NEW YORK, October 22, 2018 (GlobeNewswire) - HC2 Holdings, Inc. (“HC2”) (NYSE:HCHC), a diversified holding company, announced today that the U.S. Food and Drug Administration (“FDA”) has granted Breakthrough Device designation to MediBeacon Inc., a portfolio company within HC2’s Pansend Life Sciences subsidiary, for the company’s Transdermal GFR Measurement System (“TGFR”). The device is intended to measure Glomerular Filtration Rate (“GFR”) in patients with impaired or normal renal function.1
MediBeacon’s TGFR, which is designated by the FDA to be a combination product includes an optical skin sensor, monitor and MB-102, which is a proprietary fluorescent tracer agent that glows in the presence of light. The TGFR is designed to provide clinicians continuous real-time measurement of GFR at the point of care with no need for blood sampling or urine collection.
The ability to measure GFR is of high clinical interest especially in patients with or at risk of kidney disease. Kidney disease is a hidden epidemic, affecting more than 850 million people worldwide. This is twice the number of people who have diabetes and more than 20 times the number of people with cancer.2
Under the Breakthrough Devices program, a provision of the 21st Century Cures Act, the FDA works with companies to expedite regulatory review in order to give patients more timely access to diagnostic and therapeutic technologies. According to the FDA, a “Breakthrough Device” like the TGFR is a product that has the potential to be more effective at diagnosing a life-threatening or irreversibly debilitating disease or condition compared to the current standard of care.3
“We are extremely excited about MediBeacon’s breakthrough real-time kidney function measurement system,” said Philip Falcone, HC2’s Chairman, Chief Executive Officer and President. “HC2 is committed to continued support of this remarkable innovation which has the potential to help millions of people around the world.”
“We are delighted that the FDA has recognized the Transdermal GFR Measurement System meets the requirements for this designation,” said Steve Hanley, MediBeacon Chief Executive Officer. “We look forward to continued close collaboration with the FDA as we begin our pivotal multicenter clinical study in the United States and Europe.”
MediBeacon tracer agents and devices, including the TGFR, are not approved or cleared for human use by any regulatory agency.
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 eight reportable segments, including Construction, Marine Services, Energy, Telecommunications, Life Sciences, Broadcasting, 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.
About MediBeacon Inc.
MediBeacon’s mission is to commercialize biocompatible optical diagnostic agents for physiological monitoring, surgical guidance, and imaging of pathological disease in the human population. Several product concepts in these arenas are contained in the MediBeacon Intellectual Property estate. MediBeacon’s portfolio includes a renal function system that uses an optical skin sensor combined with a proprietary fluorescent tracer agent that glows in the presence of light. This system, currently in human trials, is designed to enable clinically practical point of care measurement of a patient’s kidney function. Learn more about MediBeacon at www.medibeacon.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 HC2’s representatives from time to time may contain, forward-looking statements. Generally, forward-looking statements include information describing actions, events, results, strategies and expectations and are generally identifiable by use of the words “believes,” “expects,” “intends,” “anticipates,” “plans,” “seeks,” “estimates,” “projects,” “may,” “will,” “could,” “might,” or “continues” or similar expressions. The forward-looking statements in this press release include, without limitation, statements regarding HC2’s 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. HC2 believes these judgments are reasonable, but you should understand that these statements are not guarantees of performance or results, and HC2’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 HC2’s financial statements; the fact that HC2 has historically identified material weaknesses in its 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; HC2’sability 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 HC2’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”), and HC2’s 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.
For information on HC2 Holdings, Inc., please contact:
Andrew G. Backman
Managing Director
Investor Relations & Public Relations
abackman@hc2.com
212-339-5836
1 Data on file. MediBeacon Inc., St. Louis, MO.
2 Joint Press Release, June 27, 2018 “The hidden epidemic: Worldwide, over 850 million people suffer from kidney diseases”, American Society of Nephrology - ASN (https://www.asn-online.org ), ERA-EDTA (http://web.era-edta.org ) and ISN (https://www.theisn.org).
3 U.S. Food and Drug Administration. https://www.fda.gov/downloads/MedicalDevices/DeviceRegulationandGuidance/GuidanceDocuments/UCM581664.pdf
Exhibit 99.4
NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA is a “non-GAAP financial measure” as defined under the rules of the SEC.
Adjusted EBITDA represents EBITDA net income (loss) attributable to HC2 Holdings, Inc., adjusted for depreciation and amortization, interest expense and income tax (benefit) expense), adjusted to exclude our Insurance segment and add back or deduct certain items that management believes are non-recurring in nature or not comparable from period to period. See below for the definition of Adjusted EBITDA employed by HC2.
Our management uses Adjusted EBITDA as a supplemental financial measure to assess:
l | the financial performance of our assets without regard to our Insurance segment, financing methods, capital structure, taxes, historical cost basis or non-recurring expenses; |
l | our liquidity and operating performance over time in relation to other companies that own similar assets and calculate Adjusted EBITDA in a similar manner; and |
l | the ability of our assets to generate cash sufficient to pay potential interest cost. |
We use Adjusted EBITDA as presented in this offering memorandum as a supplemental measure of our performance. Adjusted EBITDA is not defined under generally accepted accounting principles in the United States (“GAAP” or “US GAAP”) and is not a measure of operating income, operating performance or liquidity presented in accordance with GAAP.
Adjusted EBITDA has limitations as an analytical tool and when assessing our operating performance or liquidity, investors and others should not consider this data in isolation or as a substitute for net income (loss) attributable to HC2 Holdings, Inc., cash flow from operating activities or other cash flow data calculated in accordance with GAAP.
Further, the results presented by Adjusted EBITDA cannot be achieved without incurring the costs that the measure excludes: interest, taxes, depreciation and amortization. Please see the audited and unaudited financial statements and the notes thereto of HC2 incorporated by reference into this offering memorandum.
Adjusted EBITDA Reconciliations
The calculation of Adjusted EBITDA, as defined by us, consists of net income (loss) attributable to HC2, excluding our Insurance segment, as adjusted for 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.
Adjusted EBITDA is not a measurement recognized under U.S. GAAP. In addition, other companies may define Adjusted EBITDA differently than we do, which could limit its usefulness. Management believes that Adjusted EBITDA provides investors with meaningful information for gaining an understanding of our results as it is frequently used by the financial community to provide insight into an organization's operating trends and facilitates comparisons between peer companies, since interest, taxes, depreciation, amortization and the other items listed in the definition of Adjusted EBITDA below can differ greatly between organizations as a result of differing capital structures and tax strategies. Adjusted EBITDA can also be a useful measure of a company's ability to service debt. While management believes that non-U.S. GAAP measurements are useful supplemental information, such adjusted results are not intended to replace our U.S. GAAP financial results. Using Adjusted EBITDA as a performance measure has inherent limitations as an analytical tool as compared to net income (loss) or other U.S. GAAP financial measures, as this non-GAAP measure excludes certain items, including items that are recurring in nature, which may be meaningful to investors. As a result of the exclusions, Adjusted EBITDA should not be considered in isolation and does not purport to be an alternative to net income (loss) or other U.S. GAAP financial measures as a measure of our operating performance. Adjusted EBITDA excludes the results of operations of our Insurance segment.
The following table provides the reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable GAAP measure:
(in thousands): | For the year ended December 31, 2017 | |||||||||||||||||||||||||||||||
Core Operating Subsidiaries | Early Stage and Other | HC2 | ||||||||||||||||||||||||||||||
Construction | Marine Services | Energy | Telecom | Life Sciences | Other and Eliminations | Non-operating Corporate | ||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||
Non-recurring items | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||
(in thousands): | For the year ended December 31, 2016 | |||||||||||||||||||||||||||||||
Core Operating Subsidiaries | Early Stage and Other | HC2 | ||||||||||||||||||||||||||||||
Construction | Marine Services | Energy | Telecom | Life Sciences | Other and Eliminations | Non-operating Corporate | ||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||
(in thousands): | For the year ended December 31, 2015 | |||||||||||||||||||||||||||||||
Construction | Marine Services | Energy | Telecom | Life Sciences | Other and Eliminations | Non-operating Corporate | HC2 | |||||||||||||||||||||||||
Net Income (loss) attributable to HC2 Holdings, Inc. | $ | (35,565 | ) | |||||||||||||||||||||||||||||
Less: Net Income (loss) attributable to HC2 Holdings Insurance Segment | 1,327 | |||||||||||||||||||||||||||||||
Net Income (loss) attributable to HC2 Holdings, Inc., excluding Insurance Segment | $ | 24,451 | $ | 20,855 | $ | (274 | ) | $ | 2,779 | $ | (4,575 | ) | $ | (18,276 | ) | $ | (61,852 | ) | $ | (36,892 | ) | |||||||||||
Adjustments to reconcile net income (loss) to Adjusted EBITDA: | ||||||||||||||||||||||||||||||||
Depreciation and amortization | 2,016 | 18,772 | 1,635 | 417 | 20 | 1,934 | — | 24,794 | ||||||||||||||||||||||||
Depreciation and amortization (included in cost of revenue) | 7,659 | — | — | — | — | — | — | 7,659 | ||||||||||||||||||||||||
Amortization of equity method fair value adjustments at acquisition | — | (1,516 | ) | — | — | — | — | — | (1,516 | ) | ||||||||||||||||||||||
(Gain) loss on sale or disposal of assets | 257 | (138 | ) | — | 50 | — | 1 | — | 170 | |||||||||||||||||||||||
Lease termination costs | — | — | — | 1,184 | — | 1 | — | 1,185 | ||||||||||||||||||||||||
Asset impairment expense | — | 547 | — | — | — | — | — | 547 | ||||||||||||||||||||||||
Interest expense | 1,379 | 3,803 | 42 | — | — | — | 33,793 | 39,017 | ||||||||||||||||||||||||
Other (income) expense, net | (443 | ) | (1,340 | ) | (42 | ) | (2,304 | ) | (1 | ) | 5,764 | 5,242 | 6,876 | |||||||||||||||||||
Foreign currency (gain) loss (included in cost of revenue) | — | (2,039 | ) | — | — | — | — | — | (2,039 | ) | ||||||||||||||||||||||
Income tax (benefit) expense | 15,572 | 400 | (347 | ) | (237 | ) | (1,037 | ) | (7,733 | ) | (16,052 | ) | (9,434 | ) | ||||||||||||||||||
Loss from discontinued operations | 20 | — | — | — | — | 1 | — | 21 | ||||||||||||||||||||||||
Noncontrolling interest | 1,136 | 616 | (267 | ) | — | (1,681 | ) | (1 | ) | — | (197 | ) | ||||||||||||||||||||
Share-based payment expense | — | — | 49 | — | 71 | — | 10,982 | 11,102 | ||||||||||||||||||||||||
Acquisition and nonrecurring items | — | 2,181 | 70 | 121 | 23 | — | 8,362 | 10,757 | ||||||||||||||||||||||||
Adjusted EBITDA | $ | 52,047 | $ | 42,141 | $ | 866 | $ | 2,010 | $ | (7,180 | ) | $ | (18,309 | ) | $ | (19,525 | ) | $ | 52,050 | |||||||||||||
Total Core Operating Subsidiaries | $ | 97,064 | ||||||||||||||||||||||||||||||
Exhibit 99.5
RECENT DEVELOPMENTS
Preliminary Financial Results for the Third Quarter ending September 30, 2018
On October 22, 2018, we announced our preliminary summary financial information as of and for the three and nine months ended September 30, 2018. We are currently in the process of finalizing our unaudited consolidated financial results as of and for the three and nine months ended September 30, 2018.
Certain of these operating results and other financial data for the third fiscal quarter ended September 30, 2018, are set forth below.
Preliminary Third Quarter 2018 Financial Highlights:
▪ | Net Revenue: We expect to record net revenue for the third quarter of 2018 consistent with our previously reported net revenue for the second quarter of 2018. Our net revenue attributable to our Core Operating Subsidiaries for the third quarter of 2018 totaled approximately $433 million for the three months ended September 30, 2018, comprised as follows: Construction of approximately $195 million, Marine Services of approximately $45 million, Energy of approximately $5 million, and Telecommunications of approximately $188 million. |
▪ | Cash and Cash Equivalents: As of September 30, 2018, we had consolidated cash and cash equivalents of approximately $832 million of which approximately $44 million was held at HC2 and approximately $749 million in the Insurance Segment. |
▪ | Debt: As of September 30, 2018, consolidated debt was approximately $707 million, which included $510 million of our 11.0% Senior Secured bonds and approximately $197 million of subsidiary debt. As of September 30, 2018, our collateral coverage ratio was 2.52x. |
▪ | Adjusted EBITDA - Core Operating Subsidiaries: We recorded total Adjusted EBITDA for our core operating segments, which include Construction, Marine Services, Energy and Telecommunications between $24 to $29 million for the three months ended September 30, 2018, comprised as follows: Construction of approximately $15 to $17 million, Marine Services of approximately $7 to $9 million, Energy of approximately $1 million, and Telecommunications of approximately $1 to $2 million. |
Three months ended September 30, 2018 | |||||||||||||||||||||||||||||||||||||||||
Low | High | ||||||||||||||||||||||||||||||||||||||||
(in millions) | Construction | Marine | Energy | Telecom | Total | Construction | Marine | Energy | Telecom | Total | |||||||||||||||||||||||||||||||
Estimated Net Income | $ | 7 | $ | (1 | ) | $ | (1 | ) | $ | 1 | $ | 6 | $ | 9 | $ | 1 | $ | (1 | ) | $ | 2 | $ | 11 | ||||||||||||||||||
Reconciliation: | |||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 2 | 7 | 1 | — | 10 | 2 | 7 | 1 | — | 10 | |||||||||||||||||||||||||||||||
Depreciation and amortization (included in cost of revenue) | 2 | — | — | — | 2 | 2 | — | — | — | 2 | |||||||||||||||||||||||||||||||
(Gain) loss on sale or disposal of assets | (1 | ) | — | — | — | (1 | ) | (1 | ) | — | — | — | (1 | ) | |||||||||||||||||||||||||||
Interest expense | 1 | 1 | 1 | — | 3 | 1 | 1 | 1 | — | 3 | |||||||||||||||||||||||||||||||
Other (income) expense, net | (2 | ) | — | — | — | (2 | ) | (2 | ) | — | — | — | (2 | ) | |||||||||||||||||||||||||||
Income tax (benefit) expense | 4 | — | — | — | 4 | 4 | — | — | — | 4 | |||||||||||||||||||||||||||||||
Noncontrolling interest | 1 | — | — | — | 1 | 1 | — | — | — | 1 | |||||||||||||||||||||||||||||||
Acquisition and disposition costs | 1 | — | — | — | 1 | 1 | — | — | — | 1 | |||||||||||||||||||||||||||||||
Total Core Operating Subsidiaries | $ | 15 | $ | 7 | $ | 1 | $ | 1 | $ | 24 | $ | 17 | $ | 9 | $ | 1 | $ | 2 | $ | 29 | |||||||||||||||||||||
Our estimates of such preliminary financial results are based solely on information available to us as of the date of this offering memorandum and are subject to change, and we undertake no obligation to update this information. Accordingly, you should not place undue reliance on such preliminary financial results. Actual results remain subject to the completion of management's final review, as well as the review by our independent registered accounting firm, and our other financial closing procedures. During the course of the preparation of our final consolidated financial statements and related notes, additional items that would require adjustments, which may be material, to the preliminary operating results and other financial data presented below may be identified. The preliminary financial results as of and for the three months ended September 30, 2018 and the comparative period for 2017 are not comprehensive statements of our financial and operational results, and should not be viewed as a substitute for full financial
statements prepared in accordance with GAAP. In addition, the preliminary financial results as of and for the three months ended September 30, 2018 are not necessarily indicative of the results to be achieved in any future period.
Other Third Quarter 2018 Activity
▪
• | On August 4, 2018, HC2 Chairman and Chief Executive Officer Philip Falcone informed Inseego Corp’s (‘‘INSG’’) Board of Directors (the ‘‘Board’’) of his resignation from his position as a Director and Chairman of the Board effective upon consummation of a private placement at INSG. The INSG private placement consisted of an issuance of an aggregate of 12.0 million shares of its common stock to two investors for a purchase price of $1.63 per share, resulting in aggregate gross proceeds to INSG of approximately $19.7 million. Concurrently, INSG amended HC2's Investors’ Rights Agreement where HC2 agreed to eliminate its board observation and nomination rights. As a result, HC2 lost its ability to exercise significant influence. HC2's equity investment in INSG security no longer qualifies to be accounted for under the equity method. Beginning in the third quarter, the investment will be recorded at fair value. The investment basis in INSG under the equity method had been reduced to zero as a result of operating losses incurred for the duration of the investment. The change in the accounting method resulted in an initial gain of $44 million during the third quarter of 2018. |
• | On August 14, 2018, 704Games issued a 53.5% equity interest to Motorsport Games for a total consideration of up to $11.0 million. As a result, HC2’s ownership percentage in 704Games was diluted to 26.2% resulting in the loss of control in 704Games and the deconsolidation of the entity. HC2 elected to utilize the fair value option to mark to market the investment in 704Games based on the most recent valuation reports issued. As a result of the change, HC2 recognized a gain of approximately $3 million. |
• | On August 9, 2018, Continental General Insurance Company (‘‘CGI’’), an indirect subsidiary of HC2, consummated the previously announced transactions contemplated by a Stock Purchase Agreement (the ‘‘SPA’’) with Humana, Inc. (‘‘Humana’’). Pursuant to the SPA, CGI acquired all of the outstanding shares of KMG America Corporation (‘‘KMG’’), the parent company of Kanawha Insurance Company (‘‘KIC’’), Humana’s long-term care insurance subsidiary (the ‘‘KMG Acquisition’’). CGI acquired approximately $2.4 billion of cash and cash equivalents and invested assets, and recognized in excess of $75 million bargain purchase gain. Following the consummation of the KMG Acquisition, CGI has approximately $4.1 billion of cash and cash equivalents and invested assets. |
• | CGI recaptured one of KIC’s reinsurance treaties covering Long Term Care business immediately following the closing of the KMG Acquisition with Humana. As a result of the recapture, CGI received approximately $159 million cash and reduced its ceded reinsurance by approximately $141 million, recognizing a onetime gain of approximately $18 million during the three months ended September 30, 2018. |
GrayWolf Industries Acquisition
On October 11, 2018, we announced that DBM Global entered into an Agreement and Plan of Merger, dated October 10, 2018 (the ‘‘GrayWolf Merger Agreement’’), with DBM Merger Sub, Inc., a wholly owned subsidiary of DBM Global, CB-Horn Holdings, Inc. (the ‘‘Target’’ or ‘‘GrayWolf Industrial’’), and Charlesbank Equity Fund VI, Limited Partnership, solely in its capacity as representative for the Target’s securityholders, pursuant to which Merger Sub will merge with, and into, the Target with the Target surviving the merger as an indirect subsidiary of DBM Global (the ‘‘GrayWolf Merger’’).
Pursuant to the terms of the GrayWolf Merger Agreement, DBM Global will acquire GrayWolf Industrial, a premier specialty maintenance, repair and installation services provider, for an enterprise value of approximately $135 million, including the assumption of certain existing indebtedness, subject to customary adjustments for cash, debt, transaction expenses and normalized working capital. For the year ended December 31, 2017, GrayWolf Industrial recorded $196.8 million, $19.7 million and $1.3 million of revenue, Adjusted EBITDA and capital expenditures, respectively. Based on HC2’s review of financial information available to them from management of GrayWolf as of the date of this offering memorandum, HC2 believes that revenue, Adjusted EBITDA and capital expenditures of GrayWolf for the twelve month period ended June 30, 2018 are consistent with such results for the year ended December 31, 2017; however such information is based on GrayWolf management’s internal reporting and you should not place undue reliance on these expectations. In addition, these expectations are not necessarily indicative of results of operations for the current fiscal year or any future period. In particular, GrayWolf's Adjusted EBITDA represents a normalized EBITDA view, which excludes certain expenses management believes will not continue post-acquisition, in order to better reflect ongoing earnings capacity.
Pursuant to the GrayWolf Merger Agreement, DBM Global has agreed to customary covenants to obtain debt financing, and GrayWolf Industrial has agreed to provide reasonable cooperation with DBM Global in DBM Global’s efforts to obtain such financing. In connection with the GrayWolf Merger, we anticipate that we and certain of our subsidiaries will use existing cash to make investments in DBM Global, which may consist of common or preferred stock issued by DBM Global, debt issued by DBM Global, or a combination thereof, in an aggregate amount of at least $40.0 million and that DBM Global will make an equity investment in GrayWolf of $15.0 million through borrowings under DBM Global’s existing credit facility. In addition, DBM Global has agreed to assume approximately $80.0 million of Target’s outstanding indebtedness. Upon the consummation of the GrayWolf Merger, we expect the consolidated indebtedness of DBM Global to increase by approximately $95.0 million. DBM Global has entered into committed financing arrangements to re-finance this indebtedness. There is no financing condition to the consummation of the GrayWolf Merger.
The GrayWolf Merger Agreement contains customary representations, warranties and closing conditions. The transaction, which is expected to be accretive to DBM Global’s Adjusted EBITDA, is expected to close in the fourth quarter of 2018. If these conditions are not satisfied or waived, DBM Global will not complete the GrayWolf Acquisition. This offering is not conditioned on the closing of the GrayWolf Acquisition. We cannot assure you that the GrayWolf Acquisition will close on our expected timeframe, or at all, or close without adjustment of material terms.
Redemption of Existing Notes
On October 22, 2018, we issued a conditional notice to holders of the Existing Notes to redeem all the outstanding aggregate principal amount of the Existing Notes on December 1, 2018 at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest to the redemption date (the “Redemption”). We estimate that the aggregate redemption payment in connection with the Redemption will be approximately $538.1 million. Consummation of the Redemption is conditioned upon, among other things, consummation of this offering. Substantially concurrently with the closing of this offering, we intend to irrevocably deposit with the trustee for the Existing Notes cash in an amount sufficient to redeem all outstanding Existing Notes pursuant to the Redemption (including accrued and unpaid interest to the redemption date). Upon the trustee’s confirmation of receipt of such funds, we expect in accordance with the terms of the indenture governing the Existing Notes, the trustee will acknowledge satisfaction and discharge of the obligations with respect to the Existing Notes. Upon such satisfaction and discharge, the indenture governing the Existing Notes will generally cease to be in effect.
Nothing contained in this offering memorandum should be construed as an offer to purchase or a solicitation of an offer to buy any Existing Notes or a notice of redemption or satisfaction and discharge with respect to the Existing Notes and the indenture governing the Existing Notes. Any such notice will be given in accordance with the terms of the indenture governing the Existing Notes.
GMSL Strategic Alternatives
On October 22, 2018, we announced our intention to explore strategic alternatives for GMSL, including a potential sale, the net proceeds of which we would expect to use to pay down HC2’s senior secured debt. We believe this will allow current GMSL investors to capitalize on the substantial value creation since the acquisition in 2014 and open up opportunities to further support the continued growth in the marine services platform. However, we cannot assure you that any such strategic alternative, including a potential sale, will be consummated, or if such an alternative is consummated, that it will be on terms that are favorable to current investors of holders of the Notes or that the net proceeds of any such sale will be used to pay down HC2’s senior secured debt despite our current intentions.
In addition, during the third quarter of 2018, a long-term dividend policy was implemented by the shareholders of GMSL’s Huawei Marine Joint venture, Huawei Marine Networks, after several years of meaningful shareholder value creation. For more information on GMSL, including certain financial results of GMSL on a segment basis as compared to to our HC2 consolidated financial results, see Item 2 of our Quarterly Report on Form 10-Q, filed with the SEC on August 8, 2018, and Items 1 and 7 of our Annual Report on Form 10-K (as amended), filed with the SEC on March 14, 2018, each incorporated by reference herein.
MediBeacon Granted Breakthrough Device Designation
On October 22, 2018, we announced that MediBeacon, Inc., a portfolio company within Pansend, was granted Breakthrough Device designation by the U.S. Food and Drug Administration for a device intended to measure Golmerular Filtration Rate in patients with impaired or normal renal function.
HC2 Broadcasting Holdings Update
During the three months ended September 30, 2018, Broadcasting closed on a series of transactions for a total consideration of $33.3 million.
Exhibit 99.6
RISK FACTORS
The notes are structurally subordinated to all liabilities of our subsidiaries that are not guarantors and may be diluted by liens granted to secure future indebtedness.
The notes are our senior secured obligations, secured on a first-lien basis by a pledge of substantially all of our assets (subject to the priority of any First-Out Obligations), including our equity interests in certain of our material, wholly-owned domestic subsidiaries and all cash and U.S. investment securities owned by HC2. The notes are guaranteed by certain of our current wholly-owned domestic subsidiaries but will not be guaranteed by our subsidiaries that are not wholly-owned or that are foreign entities. As a result of our holding company structure, claims of creditors of our subsidiaries that are not guarantors will generally have priority as to the assets of such subsidiaries over our claims and over claims of the holders of our indebtedness, including the notes. As of June 30, 2018, on a pro forma basis for this offering and the use of proceeds therefrom, the notes would be structurally subordinated to approximately $162.8 million in total indebtedness and vessel financing of our Non-Guarantor Subsidiaries. Additionally, as of June 30, 2018, on a pro forma basis for this offering and the use of proceeds therefrom and the consummation of the GrayWolf Acquisition, the notes would be structurally subordinated to approximately $257.8 million in total indebtedness and vessel financing of our Non-Guarantor Subsidiaries.
As a result, upon any distribution to the creditors of any subsidiary that is not a guarantor in bankruptcy, liquidation, reorganization or similar proceedings, or following acceleration of our indebtedness or an event of default under such indebtedness, the lenders or noteholders, as the case may be, of the indebtedness of our subsidiaries that are not guarantors will be entitled to be repaid in full from the proceeds of the assets of such subsidiaries, before any payment may be made to holders of the notes from such proceeds. The indenture does not prohibit the ability of our subsidiaries to incur additional indebtedness or grant liens secured by assets of our subsidiaries, but will permit such indebtedness in a limited manner. Further, we may incur future indebtedness, some of which may be secured by liens on the collateral securing the notes (including First-Out Obligations), to the extent permitted by the indenture. In any of the foregoing events, we cannot assure you that there will be sufficient assets to pay amounts due on the notes. Holders of the notes will participate ratably with all holders of our senior secured indebtedness secured by the collateral, to the extent of the value of the collateral and potentially with all of our general creditors.
There can be no assurance that the GrayWolf Merger or a strategic alternative for GMSL will be completed.
We have previously announced the GrayWolf acquisition and our intention to explore strategic alternatives for GMSL. The GrayWolf Merger Agreement contains customary representations, warranties and closing conditions and is expected to close in the fourth quarter of 2018. If these conditions are not satisfied or waived, DBM Global will not complete the GrayWolf Merger. This offering is not conditioned on the closing of the GrayWolf Merger. We cannot assure you that the GrayWolf Merger will close on our expected timeframe, or at all, or close without adjustment of material terms. There can be no assurance that the conditions to closing of the GrayWolf Merger will be satisfied or waived or that other events will not intervene to delay or result in the failure to close the GrayWolf Merger. Any delay in closing or a failure to close could have a negative impact on our business and the trading price of our common stock.
We are in the early stages of exploring a strategic alternative for GMSL, including a potential sale. However, we cannot assure you that any such strategic alternative, including a potential sale, will be consummated, or if such an alternative is consummated, that it will be on terms that are favorable to current investors of holders of the Notes or that the net proceeds of any such sale will be used to pay down our senior secured debt despite our current intentions.
The liens securing the obligations under the notes will be subject to the priority of First-Out Obligations and other limitations set forth in the Collateral Trust Agreement.
On the Issue Date, we will enter into a Collateral Trust Agreement with the guarantors, the Collateral Trustee and the trustee under the indenture governing the notes offered hereby. The Collateral Trust Agreement shall govern the relative rights and priorities any First-Out Obligations, the Notes and any other pari passu indebtedness secured by liens on the collateral. The Collateral Trust Agreement, among other limitations, will provide that if we incur First-Out Obligations in accordance with the terms of the indenture, holders of notes will receive proceeds of a collateral foreclosure only after the payment in full of any First-Out Obligations. Furthermore, the Collateral Trust Agreement will provide that not less than a majority in principal amount of First-Out Obligations and other pari passu obligations (including the notes and subject to certain other exclusions) shall have the ability to direct the trustee to enforce its liens. Thus, holders of the notes will not have sole control of decisions regarding the collateral.
The Collateral Trust Agreement will further provide that, in the event of a bankruptcy, insolvency, or similar event the holders of the notes may be subject to certain restrictions with respect to their ability to seek certain remedies, including (in the case of U.S. bankruptcy proceedings) adequate protection, or object to a number of important matters or to take other actions following the filing of a bankruptcy petition. See “Description of Notes-Collateral Trust Agreement.”
We depend upon our information technology systems, which are subject to interruption and failure.
Information technology security threats from user error to cybersecurity attacks designed to gain unauthorized access to our systems, networks and data are increasing in frequency and sophistication. Cybersecurity attacks may range from random attempts to coordinated and targeted attacks, including sophisticated computer crime and advanced persistent threats. We treat such cybersecurity risks seriously given these threats pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. Cybersecurity attacks could also include attacks targeting sensitive data or the security, integrity and/or reliability of the hardware and software installed in products we use. We devote resources to maintain and regularly update our systems and processes that are designed to protect the security of our computer systems, software, networks and other technology assets against attempts by unauthorized parties to obtain access to confidential information, destroy data, disrupt or degrade service, sabotage systems or cause other damage. Nevertheless, we have experienced cybersecurity attacks that have resulted in unauthorized parties gaining access to our information technology systems and networks, and we could in the future experience similar attacks. As a result, we have implemented certain review and approval procedures internally and with our banks; and have implemented system changes. However, to date, no cybersecurity attack has had a material impact on our financial condition, results of operations or liquidity.
HC2 HOLDINGS, INC. Investor Presentation © HC2 Holdings, Inc. 2018 October 2018
Company Overview
HC2 Holdings, Inc. (NYSE: HCHC) W h o W e A r e P u b l i c l y t r a d e d d i v e r s i f i e d h o l d i n g c o m p a n y w i t h p o r t f o l i o o f u n c o r r e l a t e d a s s e t s a n d i n v e s t m e n t s P e r m a n e n t c a p i t a l S t r a t e g i c a n d f i n a n c i a l p a r t n e r T e a m o f v i s i o n a r i e s W h a t W e Do B u y a n d b u i l d c o m p a n i e s P a r t n e r w i t h o p e r a t i n g m a n a g e me n t t e a m s t o e x e c u te b u s i ne s s p l a n s D e l i v e r s u s ta i na b l e v a l u e f o r s h a r e ho l der s © 2 0 1 8 H C 2 H O L D I N G S , I NC. 10
Why Invest in the HC2 Approach? Diverse portfolio of uncorrelated assets and investments across multiple industries Unique combination of operating entities accessible through one investment – Controlling stakes in leading, stable, cash flow generating businesses Active management methodology to creating shareholder value by driving asset and capital appreciation of subsidiary and investment holdings – Long-term strategy allows management teams the ability to execute business plans Continue to drive organic and inorganic growth; Increasing “Core Operating Subsidiary” Revenue and Adjusted EBITDA Well-positioned with financial flexibility to opportunistically capitalize and build platform in both public and private markets – Rigorous commitment to realize synergies and optimize resources – Approach focused on control / implied control of acquisitions & investments Continued focus on both cash flow and growth opportunities provides stakeholders with a unique balance of stability Look to not only create, but ultimately extract and monetize value where appropriate * © 2 0 1 8 H C 2 H O L D I N G S , I NC. 11
How HC2 Builds Value Clear focus on delivering sustainable value for all stakeholders Value operator with long-term outlook Acquire controlling equity interests in diverse industries creating value through growth in operating subsidiaries Strong capital base allows funding of subsidiary growth Speed of execution, while maintaining rigorous diligence, provides HC2 a competitive advantage over traditional private equity firms E n v i s i o n – Seek to build value over the long-term – Leadership team’s expansive network results in unique deal flow – Target a barbell investment strategy E n v i s i o n • Stable cash flow generation • Early-stage companies with option value E m p o w e r M a n a g e m e n t E x e c u t e – Partner with experienced management – Focus on speed of execution teams – Capitalize on opportunities to – Establish specific operating objectives create, extract and monetize value and clear growth plans – Realize synergies and optimize – Provide financial expertise E m p o w e r E x e c u t e resources – Help execute strategy – Deliver sustainable value © 2 0 1 8 H C 2 H O L D I N G S , I NC. 12
HC2’s Diversified Portfolio Core Financial Core Operating Subsidiaries Services Subsidiaries Construction: Marine Services: Energy: Telecommunications: Insurance: DBM GLOBAL (SCHUFF) GMSL ANG PTGI ICS CIG One of the largest steel Leading provider of subsea Premier distributor of natural International wholesale Platform to invest in long-term care fabrication and erection cable installation, gas motor fuel throughout the telecom service company (LTC) portfolio of assets companies in the U.S. maintenance and protection U.S. Global sales presence Initially acquired American Offers full suite of integrated steel in telecom, offshore power Financial Group’s LTC assets Currently own or operate Internal and scalable construction and professional and oil & gas Ring Fenced Liabilities – No Parent ~40 natural gas fueling offshore back office services Guarantees JV’s with Huawei Marine stations throughout United operations 100% ownership Pending acquisition of GrayWolf Networks & S.B. Submarine States Industrial, entry into heavy Systems (China Telecom) 100% ownership ~$68.7m of statutory surplus 67.7% ownership maintenance and repair industry LTM 6/30/18 Revenue: $742.4 ~$85.4m total adjusted capital 72.5% ownership LTM 6/30/18 Revenue: $19.6 92.5% ownership million ~$1.5b cash & invested assets LTM 6/30/18 Revenue: $194.0 million LTM 6/30/18 Revenue: $663.2 LTM 6/30/18 Adjusted EBITDA: Recently closed acquisition of million LTM 6/30/18 Adjusted EBITDA: Humana’s $2.4b LTC assets: million $5.5 million LTM 6/30/18 Adjusted EBITDA: $4.3 million ~$155 - $175 million pro-forma LTM 6/30/18 Adjusted EBITDA: $42.0 million statutory surplus; ~$185-$205 million $57.4 million pro-forma total adjusted capital Early Stage and Other Holdings Life Sciences: PANSEND Broadcasting: Other: BeneVir: Oncolytic viral immunotherapy for treatment of solid cancer tumors; Sold to Janssen 704Games Biotech (Johnson & Johnson) for up to $1.04 billion 2Q18 HC2 Broadcasting Holdings Capitalizing on Over-the-Air (Formerly DMR) MediBeacon: Unique non-invasive real-time monitoring of kidney function; MediBeacon recently broadcast opportunities Owns worldwide granted Breakthrough Device designation from the FDA; MediBeacon’s device is intended to exclusive licensing ® measure GFR in patients with impaired or normal kidney function rights to NASCAR simulation style racing R2 Dermatology: Medical device to brighten skin based on Mass. General Hospital technology titles Genovel: Novel, Patented, “Mini Knee” and “Anatomical Knee” replacements Triple Ring Technologies: R&D engineering company specializing in medical devices, homeland security, imaging, sensors, optics, fluidics, robotics & mobile healthcare All data as of equity ownership percentages and CIG metrics are as of June 30, 2018; Humana acquisition closed on 8/9/18 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 13
Significant Value Creation Since inception in 2014, HC2: – Increased market capitalization from ~$46 million to ~$240 million and increased revenues from ~$230 million to ~$1.6 billion – Received ~$200 million in total dividends, distributions, tax share and asset management fees from subsidiaries and investments Since HC2’s acquisition of DBM Global in 2014, DBM: – Increased Adjusted EBITDA by ~93% and increased backlog from ~$400 million to ~$656 million (6/30/18) with a record high of ~$723 million (4Q’17) – DBM’s projects/customers have included the Inglewood NFL Stadium (LA Rams / LA Chargers), Apple, Google, Facebook, Tesla, etc. Since HC2’s acquisition of Global Marine in 2014, Global Marine: – Successfully renewed all three of its critical, long-term telecom maintenance agreements, representing approximately half of the world’s contracted telecom maintenance zones – Renewed its fleet of marine assets through strategic acquisitions and substantially reduced debt and pension liabilities by ~31% – Huawei Marine joint venture profit, of which Global Marine owns 49%, increased from ~$2 million in 2014 to ~$40 million in FY17; Increased cash/equivalents/securities from ~$16 million to ~$73 million in the same period – Huawei Marine joint venture recently implemented a long-term annual dividend policy Since HC2’s initial investment in American Natural Gas in 2014, ANG: – Increased its Compressed Natural Gas (“CNG”) fueling station footprint to ~40 stations across the United States from two stations at the time of HC2’s initial investment – Increased annual gasoline-gallon equivalents to ~12 million and increased the flow of Renewable Natural Gas (“RNG”) through the ANG stations Since HC2’s acquisition of PTGi-ICS in 2014, PTGi-ICS: – Increased Adjusted EBITDA from a loss generating business at the time of HC2’s acquisition to ~$5.5 million in the LTM period ended 6/30/18 Since HC2’s initial acquisition of the long-term care assets from American Financial Group in 2015, our insurance subsidiary: – Has grown platform assets to approximately $4.1 billion in cash, cash equivalents and invested assets and has more than doubled its total adjusted capital base, through its recently completed acquisition of Humana’s long-term care insurance business – Built a powerful insurance platform, including a team over 100 insurance professionals based in Austin, Texas, which has served as a competitive advantage in acquiring books of business – Provides a valuable fee stream through various asset management fees, providing a source of upstream liquidity to HC2 Since HC2’s initial investment in the Life Sciences Platform in 2014: – BeneVir Biopharm was acquired by Janssen Biotech, Inc., (Johnson & Johnson) for up to $1.04 billion; $140 million upfront cash payment and ~$900 million of pre-determined milestones (Pansend owned ~76% of BeneVir); HC2’s total investment in BeneVir was ~$8 million – MediBeacon recently granted Breakthrough Device designation from the FDA; MediBeacon’s device is intended to measure GFR in patients with impaired or normal kidney function – R2 Dermatology received two U.S. Food and Drug Administration (“FDA”) approvals Since HC2’s initial broadcast acquisitions in 2017: – HC2 has acquired spectrum and licenses to cover a significant part of the U.S. – Currently have over 160 operational stations, including 13 full-power stations, 49 Class A stations and 102 low power stations* – Currently have an additional ~400 silent licenses and construction permits in over 130 U.S. Markets including nine of the top 10 markets nationwide *Includes closed and pending transactions © 2 0 1 8 H C 2 H O L D I N G S , I NC. 14
Recent Developments Overview: DBM Global DBM Global recently announced the pending acquisition of GrayWolf Industrial for a purchase price of $135.0 million at ~6.9x EBITDA multiple. Benefits of the acquisition include: Strategic entry into the heavy maintenance and repair industry, providing critical diversification and expansion of DBM Global’s product and service offerings Immediately accretive to EBITDA, minimal capital expenditure requirements and strong free cash flow generation Identified acquisition cost synergies and broader value proposition to combined customer base Offsets cyclicality of commercial and industrial construction markets Global Marine Group Global Marine recently began a process to explore strategic alternatives, including a possible sale, that will capitalize on the substantial value creation since acquisition in 2014 Net proceeds from potential sale would be used by HC2 to pay down senior secured debt In the third quarter, shareholders of Global Marine’s HMN joint venture, implemented a long-term annual dividend policy. As a result of this new policy: Global Marine received a $9.8 million cash dividend in the third quarter and will receive an additional $4.9M in 4Q18 and $4.9M in 2Q19 Going forward, annual dividends to be distributed at a minimum of 30% of cumulative distributable net profits providing a more stable source of incremental liquidity to Global Marine Continental General Insurance Company (“CGIC”) CGIC recently closed the previously announced acquisition of the long-term care insurance business, KMG America Corporation (“KMG”) from Humana, Inc. The acquisition more than doubled CGIC’s total adjusted capital base and the combined investment portfolio allows for increased asset management fees, providing an important source of upstream liquidity to HC2 Going forward, estimated $15 to $17 million management fee annually, post KMG Acquisition Life Sciences On October 22, 2018, HC2 announced that MediBeacon, Inc., a portfolio company within Pansend, was granted Breakthrough Device designation by the U.S. Food and Drug Administration for a device intended to measure Golmerular Filtration Rate in patients with impaired or normal renal function © 2 0 1 8 H C 2 H O L D I N G S , I NC. 15
Preliminary Third Quarter 2018 Financial Highlights* Overview: Net Revenue We expect to record net revenue for the third quarter of 2018 consistent with our previously reported net revenue for the second quarter of 2018 Our net revenue attributable to our Core Operating Subsidiaries for the third quarter of 2018 is expected to total approximately $433 million for the three months ended September 30, 2018, comprised as follows: Construction of approximately $195 million, Marine Services of approximately $45 million, Energy of approximately $5 million and Telecommunications of approximately $188 million Cash and Cash Equivalents As of September 30, 2018, HC2 had consolidated cash, cash equivalents of approximately $832 million, of which approximately $44 million was held at HC2 and approximately $749 million in the Insurance Segment Debt As of September 30, 2018, consolidated debt was approximately $707 million, which included $510 million in aggregate principal amount of Existing Notes and approximately $197 million of subsidiary debt Adjusted EBITDA – Core Operating Subsidiaries HC2 expects to record total Adjusted EBITDA for HC2’s core operating segments, which consist of Construction, Marine Services, Energy and Telecommunications, of between $24 to $29 million for the three month period ended September 30, 2018, comprised as follows: Construction of approximately $15 to $17 million, Marine Services of approximately $7 to $9 million, Energy of approximately $1 million and Telecommunications of approximately $1 to $2 million *HC2 estimates of such preliminary financial data are based solely on information available to HC2 as of the date hereof and are subject to change. Accordingly, you should not place undue reliance on such preliminary data. Actual results remain subject to the completion of management's final review, as well as the review by HC2’s independent registered accounting firm, and HC2’s other financial closing procedures © 2 0 1 8 H C 2 H O L D I N G S , I NC. 16
Segment Detail
DBM Global Inc. Business Description: DBM Global Inc. is focused on delivering world class, sustainable value to its clients through a highly collaborative portfolio of companies which provide better designs, more efficient construction and superior asset management solutions The Company offers integrated steel construction services from a single source and L.A. Rams professional services which include design-assist, design-build, engineering, BIM participation, 3D steel modeling/detailing, fabrication, advanced field erection, project management and state-of-the-art steel management systems Major market segments include commercial, healthcare, convention centers, stadiums, gaming and hospitality, mixed use and retail, industrial, public works, bridges, transportation and international projects Select Management: Rustin Roach – President and CEO Michael Hill – CFO and Treasurer Scott Sherman – VP, General Counsel Apple Shane Metzger - COO DC United Select Customers: Sacramento Kings © 2 0 1 8 H C 2 H O L D I N G S , I NC. 19
DBM Global Inc. Core Activities Products & Service Offerings Industries Served The largest structural steel fabricator and Structural Steel fabrication Commercial Industrial & Mining erector in the U.S. Steel erection services Conv. & Event Centers Infrastructure In-house structural & design engineering Structural engineering & design services Energy Leisure expertise Preconstruction engineering services Government Retail BIM (Building Information Modeling) Healthcare Transportation Project Mgmt (proprietary SIMS platform) Provides specialty maintenance, repair & Extensive track record delivering complex Petrochemical installation services in the US. service and maintenance type projects for the Power power, petrochemical, pulp & paper, and GrayWolf Organized in four business segments – Titan Pulp & paper Contracting, Inco Services, Milco National, & refinery end markets Industrial Oil refineries Titan Fabricators 60% of revenue is service contracts Assets of Mountain States Steel became part Extensive track record delivering structural steel Bridge of Schuff Steel (4Q17) for iconic projects throughout the Western Infrastructure Mountain States Steel has a modern United States: San Francisco-Oakland Bay Leisure fabrication facility located on approximately Bridge, Alameda Corridor Transportation 32 acres in Lindon, Utah. Authority Bridge, Mile High Stadium, Paris Hotel & Casino in Las Vegas, etc. Provides structural steel fabrication & erection Structural Steel fabrication (subcontracted) Commercial Leisure services for smaller projects leveraging Steel erection services (subcontracted) Government Retail subcontractors and in-house project managers Project Mgmt (proprietary SIMS platform) Healthcare Transportation Manufactures equipment for use in the Design engineering Petrochemical petrochemical oil & gas industries, such as: Fabrication services Oil & gas infrastructure pollution control scrubbers, tunnel liners, Pipelines pressure vessels, strainers, filters & separators A highly experienced global Detailing and 3D Steel Detailing Commercial Industrial & Mining BIM Modelling company 3D BIM Modelling Conv. & Event Ctrs Infrastructure BIM Management Energy Leisure Integrated Project Delivery (IPD) Government Retail 3D Animation and Visualization Healthcare Transportation A global Building Information Modelling (BIM), Steel Detailing Commercial Industrial & Mining Steel Detailing and Rebar Detailing firm Rebar Detailing Conv. & Event Ctrs Infrastructure 3D BIM Modelling Energy Leisure Connection Design Government Retail Forensic Modelling & Animation Healthcare Transportation The premiere Bridge and Complex Structures Bridge Detailing Bridge Energy Detailing and Building Information Modelling Steel Detailing Commercial Government (BIM) firm in N.A. 3D BIM Modelling Conv. & Event Ctrs Infrastructure Connection Design © 2 0 1 8 H C 2 H O L D I N G S , I NC. 20
DBM Global Historical Financial Summary ($USD millions) Revenue Adjusted EBITDA $700.0 $663.2 $70.0 20.0% $59.9 18.0% $600.0 $579.0 $60.0 $57.4 16.0% $502.7 $51.6 $500.0 $50.0 14.0% 11.9% 12.0% $400.0 $40.0 8.9% 8.7% 10.0% $300.0 $30.0 8.0% $200.0 $20.0 6.0% 4.0% $100.0 $10.0 2.0% $0.0 $0.0 0.0% 2016 2017 LTM 6/30/18 2016 2017 LTM 6/30/18 Adj. EBITDA Adj. EBITDA Margin Free Cash Flow(1) Backlog $70.0 $800.0 $675.4 $60.0 $55.7 $55.2 $49.2 $600.0 $50.0 $40.0 $400.0 $723.4 $30.0 $656.4 $503.5 $20.0 $200.0 $10.0 $4.0 $9.3 $6.4 $0.0 $4.2 $2.4 $2.2 $0.0 2016 2017 LTM 6/30/18 2016 2017 6/30/2018 Total Backlog is $675.4 million inclusive of Maintenance CapEx Growth CapEx FCF contracts awarded, but not yet signed 1. Free Cash Flow defined as Adjusted EBITDA less Maintenance Capital Expenditures. © 2 0 1 8 H C 2 H O L D I N G S , I NC. 21
GrayWolf Industrial Inc. (“GrayWolf”) Business Description Blue Chip Customer Base GrayWolf, which DBM Global is under contract to acquire, is a leader in industrial services focusing on highly complex, labor-intensive specialty maintenance, repair and installation services to diverse end markets across a national footprint The Company has built a reputation for high quality service over its nearly 40 year operating history, through a leading safety record, superior service quality, national scale, local relationships and access to skilled labor Specialty mechanical contracting Specialty construction solutions to Turnarounds, tank construction, Custom steel fabrication for heavy Business services the pulp and paper and other and piping, among a broad industrial markets Overview processing markets service offering Plant maintenance Plant maintenance Plant maintenance Engineering Specialty welding Process piping Specialty welding Design Equipment setting / rigging Equipment, tanks, and vessels Equipment setting / rigging Modularization fabrication and erection Services Mechanical construction Piping systems Custom mechanical services Overview Modularization Engineering, procurement, and Tanks and vessels Pipe fabrication Piping construction Fabrication Tanks and vessels Tanks and vessels Civil, mechanical, and electrical General mechanical construction Machining construction Power Pulp & paper Power Heavy industrial Petrochemical Petrochemical Refining Primary End Refining Industrial Petrochemical Markets Industrial Metals, mining & minerals Water treatment Water treatment Industrial © 2 0 1 8 H C 2 H O L D I N G S , I NC. 22
GrayWolf Industrial Inc. (“GrayWolf”) Strategic Rationale: GrayWolf Industrial provides DBM Global with an entry into the heavy maintenance and repair industry, diversifying its revenue stream from large commercial construction projects while capitalizing on strong customer relationships with prime contracts and a culture focused on ROI when bidding and pricing work GrayWolf substantially increases DBM’s exposure to recurring maintenance work, providing increased revenue stability and visibility The acquisition increases the combined business’ exposure to industrial build, diversifying away from more cyclical commercial construction market GrayWolf’s asset light business model requires minimal capital expenditure spend which translates to higher free cash flow conversion DBM management believes the GrayWolf acquisition will allow for the combined company to cross sell its products amongst its current customer base and provide meaningful synergies related to accounting and consolidated back office expenses Transaction Overview: The purchase price for the acquisition is $135.0 million or ~6.9x 2017 Adjusted EBITDA(1) of $19.7 million which represents a compelling multiple given comparable transactions in the sector The acquisition is expected to be financed by an $80.0 million Term Loan financing at DBM Global, $40.0 million of common or preferred stock issued by DBM Global, debt issued by DBM Global, or a combination thereof and $15.0 million of cash from DBM Additionally, DBM Global’s ABL Revolver is expected to be upsized to $90.0 million with this transaction 1. GrayWolf Adjusted EBITDA represents normalized EBITDA view, which excludes certain expenses management believes will not be continuing post-acquisition in order to © 2 0 1 8 H C 2 H O L D I N G S , I NC. 23 better reflect ongoing earnings capacity
Global Marine Group - Business Description: “Engineering a Clean and Connected Future” Leading provider of offshore marine engineering delivered via three business units Founded in 1850 - Headquartered in UK with major regional hub in Singapore Select Management: Dick Fagerstal – Executive Chairman Ian Douglas – Chief Executive Officer Global Marine Highlights: CWind Highlights: Global Offshore Highlights: Fiber optic cable solutions to the Power cable and asset management services Trenching and power cable lay services to telecommunications and oil & gas markets to the offshore renewables & utilities the oil & gas industry Installed roughly 21% of the world's subsea Through it’s Complete Cable Care package To date, the Global Offshore team has been fiber optic cable, amounting to 300,000km recognised for speedy mobilisation in power involved in the installation of more than 470 cable repair solutions In maintenance, Global Marine benefits power cables CWind delivers a broad spectrum of topside from long-term contracts with high renewal Market-leading Q1400 trenching system and subsea services to developers and has rates; Responsible for 385,000km of the total experience at almost 50 wind farms to date effective in the harshest of seas and most 1,200,000 km of global in-service cable challenging of seabed conditions CWind is recognized for having the most fuel Significant opportunities in Telecom through efficient Crew Transport Vessel (CTV) fleet in the Completed work on six UK and two 49% owned strategic joint ventures with market European wind farms to date Huawei Technologies (HMN) and China CWind Taiwan joint venture launched in Q1 Multiple operations in oil & gas for major oil Telecom (SBSS) 2018 to support the growing Taiwan offshore companies such as Shell and BP renewables market Select Customers: © 2 0 1 8 H C 2 H O L D I N G S , I NC. 24
Maintenance Wind Farm Trenching Provision of vessels on standby to repair fiber optic Offshore wind planning, construction and Trenching of cables, rigid & flexible pipelines telecom cables in defined geographic zones operations & maintenance support services and umbilicals Location of fault, cable recovery, jointing and Fleet of Crew Transfer Vessels (CTVs) which have Precision installation in challenging seabed re-deployment of cables a historically high utilisation and are positioned 4th environments utilizing the market-leading Operation of depots storing cable and spare parts in the overall CTV market Q1400 which able to perform jet trenching in across the globe Over 250 certified & experienced personnel soils of up to 100KPA Management of customer data through the life of the including technicians, riggers, slingers, lifting Providing maximum, long-term protection of cable system supervisors & foremen assets Offshore training facility Engineering support & project management Fiber Optic Cable Installation Power Cable Installation & Repair Power Cable Installation Provision of turnkey repeated telecom systems via Installation for inter-array power cables for Planning, installation, burial, storage, testing, Huawei Marine (“HMN”) joint-venture offshore wind market locating, recovering and maintaining subsea CoreActivities Installation contracts for telecom customers Maintenance provision, including cable storage, cables and other subsea assets Services include route planning, route survey, cable power joint development and vessel availability Modern assets including the Global mapping, route engineering, laying, trenching and Offshore wind planning, Interconnector Symphony and the Q1400 trenching system burial at all depths installation Approximately 400 m² of available space aft Fiber optic communications infrastructure to offshore Services include route planning, route survey, of the cable lay spread, allowing space for platforms cable mapping, route engineering, laying, up to ten 20 foot containers of cable trenching and burial at all depths protection system 470 power cables installed to date Cable Retriever C.S. Sovereign 18 owned & 3 Crew Transfer Vessels on long-term Global Symphony Wave Sentinel CS Recorder charter ASV Pioneer Cable Innovator Networker C.S. Sovereign Global Symphony CS Recorder Vessels Global Symphony ASV Pioneer Sino British Submarine Systems in Asia (SBSS); Joint CWind Training(100%) venture (49%) with China Telecom Sino British Submarine Systems in Asia (SBSS); Joint Huawei Marine; Joint venture (49%) with Huawei venture (49%) with China Telecom Technologies CWind Taiwan; joint venture (51%) with Ventures International Cableship Pte Ltd (“ICPL”) International Ocean Vessel Technical Consultant Joint venture (30%) with SingTel and ASEAN Cableship (IOVTEC) Joint SCDPL; Joint venture (40%) with SingTel © 2 0 1 8 H C 2 H O L D I N G S , I NC. 25
Historical Financial Summary ($USD millions) Revenue Adjusted EBITDA $194.0 $200.0 $60.0 60.0% $169.5 $161.9 $59.8 $50.0 50.0% $44.0 $150.0 $42.0 $37.0 $51.1 $41.2 $40.0 40.0% $42.4 $38.4 $27.2 $100.0 $30.0 25.4% 26.0% 30.0% 21.6% $20.0 20.0% $50.0 $86.5 $91.2 $91.8 $10.0 10.0% $0.0 $0.0 0.0% 2016 2017 LTM 6/30/18 2016 2017 LTM 6/30/18 Maintenance Telecom Install O&G / Power Install Adj. EBITDA Adj. EBITDA Margin Capital Expenditures Free Cash Flow(1) $60.0 $60.0 $50.0 $50.0 $40.7 $40.0 $40.0 $35.5 $30.0 $30.0 $30.0 $19.9 $20.0 $20.0 $12.2 $10.5 $7.9 $10.0 $6.5 $10.0 $7.2 $12.0 $5.7 $0.0 $3.3 $0.0 2016 2017 LTM 6/30/18 2016 2017 LTM 6/30/18 Maintenance CapEx Growth CapEx 1. Free Cash Flow defined as Adjusted EBITDA less Maintenance Capital Expenditures. © 2 0 1 8 H C 2 H O L D I N G S , I NC. 26
American Natural Gas Business Description: Designs, builds, owns, operates and maintains compressed natural gas commercial fueling stations for transportation Building a premier nationwide network of publically accessible heavy duty CNG fueling stations throughout the United States designed and located to serve fleet customers – Completed the integration & upgrade of 18 fueling stations acquired in 2016; ~40 stations currently owned or operated nationwide – Expect to expand station footprint via organic and select M&A opportunities Founded in 2011, with headquarters in Saratoga Springs, New York Select Management: Drew West – Founder and Chief Executive Officer “Fueling the Future” Why CNG?: Currently ~40 stations owned or operated in 14 states across the United States* American transportation sector is rapidly converting from foreign-dependent diesel fuel to clean burning natural gas: – Substantially reduces emissions – Extends truck life – Significantly reduces fuel cost Given the cost effectiveness of CNG, its environmental friendliness and the abundance of natural gas reserves in the United States, CNG is a leading candidate for alternatives to gasoline and diesel for the motor vehicle market © 2 0 1 8 H C 2 H O L D I N G S , I NC. 27
PTGi International Carrier Services (“PTGi ICS”) Business Description: International wholesale telecom service company providing voice and data call termination to the telecom industry worldwide Provides transit and termination of telephone calls through its own global network of next-generation IP soft switches and media gateways, connecting the networks of incumbent telephone companies, mobile operators and OTT companies worldwide Restructured in 2014, PTGi ICS now delivers industry leading technology via best of breed sales and operational support teams – 2Q18: Thirteenth consecutive quarter of positive Adjusted EBITDA In business since 1997, recognized as a trusted business partner globally Headquartered in Herndon, Virginia with representation across North America, South America, the Middle East, CIS, Asia, Romania and the UK Select Management: Craig Denson – Chief Executive Officer © 2 0 1 8 H C 2 H O L D I N G S , I NC. 28
Continental Insurance Group Business Description: The formation of Continental Insurance Group (“CIG”) in April 2015 to invest in the insurance sector is consistent with HC2’s overall strategy of taking advantage of dislocated and undervalued operating businesses Through CIG, HC2 intends to build an attractive platform of insurance businesses “Ring Fenced” Liabilities – No Parent Guarantees In December 2015, Continental LTC Inc. (“CLI”), a wholly owned subsidiary of CIG, completed the acquisition of American Financial Group’s long-term care and life insurance businesses, United Teacher Associates Insurance Company (“UTAIC”) and Continental General Insurance Company (“CGIC”) In 2016, HC2 merged UTAIC into CGIC to form a single Texas-domiciled life insurance company, CGIC, and unlock cost and capital efficiencies Key measures as of June 30, 2018: – Statutory Surplus ~$68.7million - Total Adjusted Capital ~$85.4 million – GAAP Assets of ~$2.1 billion / Cash and Invested Assets ~$1.5 billion Completed Acquisition of Humana’s Long-Term Care Insurance Business* Total Adjusted Capital ~$150 million; ~$2.4 billion of cash, cash equivalents and invested assets as of June 30, 2018 Immediately accretive to Continental’s Risk Based Capital ratio and Statutory Surplus Inclusive of the acquired Humana assets, Continental has approximately ~$4.1 billion in cash, cash equivalents and invested assets ~$155 - $175 million pro-forma statutory surplus ~$185 - $205 million pro-forma total adjusted capital Select Management: James P. Corcoran – Executive Chair – James has extensive experience in the insurance industry on both the corporate and regulatory side as the former Superintendent of Insurance of the State of New York All data as of June 30, 2018 unless otherwise noted *Humana acquisition closed on 8/9/18 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 29
Pansend HC2’s Pansend Life Sciences Segment Is Focused on the Development of Innovative Healthcare Technologies and Products Recently completed sale to Janssen Biotech, Inc. (Johnson & Johnson) for up to $1.04 billion (2Q18); $8m total investment 76% equity ownership of company focused on immunotherapy; Oncolytic virotherapy for treatment of solid cancer tumors Founded by Dr. Matthew Mulvey & Dr. Ian Mohr (who co-developed T-Vec); Biovex (owner of T-Vec) acquired by Amgen for ~$1billion Benevir’s T-Stealth is a second generation oncolytic virus with new features and new intellectual property BeneVir holds exclusive worldwide license to develop BV-2711 (T-Stealth) Granted new patent entitled “Oncolytic Herpes Simplex Virus and Therapeutic Uses Thereof”, covering the composition of matter for Stealth-1H, BeneVir’s lead oncolytic immunotherapy, as well as other platform assets (2Q17) 74% equity ownership of dermatology company focused on lightening and brightening skin Founded by Pansend in partnership with Mass. General Hospital and inventors Dr. Rox Anderson, Dieter Manstein and Dr. Henry Chan Over $20 billion global market Received Food and Drug Administration approval for the R2 Dermal Cooling System (4Q16) Received Food and Drug Administration approval for second generation R2 Dermal Cooling System (2Q17) 80% equity ownership in company with unique knee replacements based on technology from Dr. Peter Walker, NYU Dept. of Orthopedic Surgery and one of the pioneers of the original Total Knee. “Mini-Knee” for early osteoarthritis of the knee; “Anatomical Knee” – A Novel Total Knee Replacement Strong patent portfolio 50% equity ownership in company with unique technology and device for monitoring of real-time kidney function Current standard diagnostic tests measure kidney function are often inaccurate and not real-time MediBeacon’s Optical Renal Function Monitor will be first and only, non-invasive system to enable real-time, direct monitoring of renal function at point-of-care $3.5 billion potential market Successfully completed a key clinical study of its unique, real-time kidney monitoring system on subjects with impaired kidney function at Washington University in St. Louis. (1Q17) Recently granted Breakthrough Device designation from the FDA Profitable technology and product development company Areas of expertise include medical devices, homeland security, imaging systems, sensors, optics, fluidics, robotics and mobile healthcare Located in Silicon Valley and Boston area with over 90,000 square feet of working laboratory and incubator space Contract R&D market growing rapidly Customers include Fortune 500 companies and start-ups All data as of June 30, 2018 unless otherwise noted Note: Equity ownership percentages do not reflect fully diluted amounts, © 2 0 1 8 H C 2 H O L D I N G S , I NC. except BeneVir, which reflects fully diluted ownership at the time of disposition. 30
HC2 Broadcasting Holdings Inc. Business Description* Broadcast Television Stations: Key Metrics** HC2 Broadcasting Holdings Inc., a subsidiary of HC2 Holdings, has Operational Stations: 164 strategically acquired broadcast assets across the United States – Full-Power Stations: 13 HC2’s broadcast vision is to capitalize on the opportunities to bring – Class A Stations: 49 valuable content to more viewers over-the-air and position the company – LPTV Stations: 102 for a changing media landscape Silent Licenses & Construction Permits: ~400 U.S. Markets: >130 Total Footprint Covers Approximately 60% of the U.S. Population Select Management: Kurt Hanson – Chief Technology Officer, HC2 Broadcasting Holdings Louis Libin – Managing Director, Strategy, HC2 Broadcasting Holdings Les Levi – Chief Operating Officer, HC2 Broadcasting Holdings Rebecca Hanson – General Counsel, HC2 Broadcasting Holdings Manuel Abud – President and CEO, Azteca America * Map based on 2010 population data; footprint includes pending FCC assignment applications as of August 7, 2018 ** Metrics include pending transactions as of August 7, 2018. © 2 0 1 8 H C 2 H O L D I N G S , I NC. 31
Financial Overview
Segment Financial Summary ($m) Q2 2018 Q1 2018 FY 2017 Q4 2017 Q3 2017 Q2 2017 Q1 2017 FY 2016 Core Operating Subsidiaries Construction $15.5 $10.0 $51.6 $15.1 $16.8 $11.1 $8.6 $59.9 Marine Services 20.4 (2.4) 44.0 15.3 8.8 3.6 16.3 41.2 Energy 3.0 0.7 2.9 0.4 0.3 1.0 1.2 2.5 Telecom 1.3 1.1 6.9 1.6 1.5 2.2 1.7 5.6 Total Core Operating $40.2 $9.3 $105.5 $32.4 $27.3 $17.9 $27.8 $109.1 Adjusted Early Stage and Other Holdings EBITDA Life Sciences ($4.9) ($4.4) ($22.4) ($5.2) ($8.2) ($4.9) ($4.1) ($12.0) Broadcasting (6.2) (5.1) (0.8) (0.8) 0.0 0.0 0.0 0.0 Other (1.0) (0.2) (2.3) 2.1 (1.1) (2.2) (1.2) (11.2) Total Early Stage and Other ($12.1) ($9.6) ($25.5) ($3.9) ($9.3) ($7.1) ($5.2) ($23.2) Non-Operating Corporate ($5.4) ($6.7) ($29.2) ($8.7) ($8.3) ($6.3) ($5.9) ($25.7) Total HC2 (excluding $22.7 ($6.9) $50.8 $19.7 $9.8 $4.6 $16.7 $60.2 Insurance) Pre-Tax Core Financial Services Insurance AOI Insurance $0.5 $2.2 $24.2 $3.6 $17.0 $4.1 ($0.5) ($2.7) Note: Reconciliations of Adjusted EBITDA and Pre-Tax Insurance AOI to U.S. GAAP Net Income in appendix. Table may not foot due to rounding. Pre-Tax Insurance Adjusted Operating Income for Q1 2016 was adjusted to exclude certain intercompany eliminations to better reflect the results of the Insurance segment, and remain consistent with internally reported metrics. Additional details in appendix. All data as of June 30, 2018 unless otherwise noted © 2 0 1 8 H C 2 H O L D I N G S , I NC. 33
Historical Consolidated Revenue and Adjusted EBITDA ($USD millions) Core Operating Revenue Core Operating Adjusted EBITDA(1) $1,700 $1,619.2 $120 $19.6 $109.1 $109.2 $1,466.8 $105.5 $1,500 $194.0 $2.5 $4.3 $1,406.0 $16.4 $2.9 $6.4 $100 $169.5 $1,300 $161.9 $41.2 $42.0 $80 $44.0 $1,100 $663.2 $502.7 $579.0 $900 $60 $700 $40 $500 $59.9 $51.6 $57.4 $735.0 $701.9 $742.4 $300 $20 $100 $6.9 $0 $5.6 $5.5 $(100) 2016 2017 6/30/2018 2016 2017 6/30/2018 PTGI ICS DBM Global Global Marine ANG PTGI ICS DBM Global Global Marine ANG Non-Core Operating Revenue Non-Core Operating Adjusted EBITDA(1) 2016 2017 LTM 6/30/18 2016 2017 LTM 6/30/18 CIG $142.5 $151.6 $161.2 Pansend ($12.0) ($22.4) ($22.6) Pansend - - - Broadcasting - (0.8) (12.1) Broadcasting - 4.8 26.5 Other (11.2) (2.3) (0.1) Other 9.7 11.0 8.4 Non-Op. Corp. - - - Non-Op. Corp. (25.7) (29.2) (29.0) Total Core + $1,558.1 $1,634.1 $1,815.4 Total Core + $60.2 $50.8 $45.3 Non-Core Non-Core 1. Adjusted EBITDA does not include results of HC2’s Insurance segment. © 2 0 1 8 H C 2 H O L D I N G S , I NC. 34
Appendix:
Free Cash Flow Generation ($USD millions) LTM 6/30/18 Core Operating Adj. EBITDA $ 109.2 Less: Non-Operating Corporate Adj. EBITDA 29.0 Less: DBM Global Maintenance Capex 2.2 Less: GMSL Maintenance Capex 12.0 Less: ANG Maintenance Capex 1.5 Less: Broadcasting Maintenance Capex 0.1 Less: HC2 Capex 0.1 Free Cash Flow(1) $ 64.3 Less: DBM Global Growth Capex 6.4 Less: GMSL Growth Capex 7.9 Less: ANG Growth Capex 3.8 Less: Pansend Growth Capex 0.3 Less: PTGi ICS Growth Capex 0.1 Less: Broadcasting Growth Capex 0.2 Free Cash Flow after Growth Capex $ 45.6 1. Free Cash Flow defined as Adjusted EBITDA less Maintenance Capital Expenditures. © 2 0 1 8 H C 2 H O L D I N G S , I NC. 36
Reconciliation of Net Revenue Last Twelve Months Ended June 30, 2018 (in thousands) Net revenue Twelve Months Ended Six Months Ended Latest Twelve Months December 31, June 30, June 30, June 30, 2017 2017 2018 2018 Construction $ 578,989 $ 251,628 $ 335,851 $ 663,212 Marine Services 169,453 80,565 105,098 193,986 Energy 16,415 8,382 11,580 19,613 Telecommunications 701,898 352,333 392,832 742,397 Core Operating $ 1,466,755 $ 692,908 $ 845,361 $ 1,619,208 Insurance 151,577 74,295 83,950 161,232 Broadcasting 4,765 - 21,745 26,510 Life Sciences - - - - Other 11,026 2,017 3,409 12,418 Non-operating Corporate - - - - Consolidating Elimination - - (3,996) (3,996) Total net revenue $ 1,634,123 $ 769,220 $ 950,469 $ 1,815,372 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 37
Reconciliation of Adjusted EBITDA Last Twelve Months Ended June 30, 2018 (in thousands) Adjusted EBITDA Twelve Months Ended Six Months Ended Latest Twelve Months December 31, June 30, June 30, September 30, 2017 2017 2018 2017 Construction $ 51,588 $ 19,688 $ 25,502 $ 57,402 Marine Services 44,027 19,995 17,956 41,988 Energy 2,911 2,201 3,624 4,334 Telecommunications 6,929 3,841 2,383 5,471 Core Operating $ 105,455 $ 45,725 $ 49,465 $ 109,195 Broadcasting (849) - (11,268) (12,117) Life Sciences (22,366) (8,986) (9,205) (22,585) Other (2,290) (3,321) (1,174) (143) Non-operating Corporate (29,152) (12,164) (12,056) (29,044) Total $ 50,798 $ 21,254 $ 15,762 $ 45,306 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 38
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA Three Months Ended June 30, 2018 (in thousands) Three Months Ended June 30, 2018 Core Operating Subsidiaries Early Stage & Other Non- Life Other & operating Total HC2 Construction Marine Energy Telecom Sciences Broadcasting Elimination Corporate Net Income attributable to HC2 Holdings, Inc. $ 55,366 Less: Net Incom e attributable to HC2 Holdings Insurance Segm ent 565 Less: Consolidating elim inations attributable to HC2 Holdings Insurance (2,009) segm ent Net Income (loss) attributable to HC2 Holdings, Inc., excluding Insurance $ 7,397 $ 10,864 $ 679 $ 1,040 $ 74,124 $ (11,816) $ (552) $ (24,926) $ 56,810 Segment Adjustments to reconcile net income (loss) to Adjusted EBITDA: Depreciation and amortization 1,665 6,429 1,359 87 53 743 21 20 10,377 Depreciation and amortization (included in cost of revenue) 1,686 - - - - - - - 1,686 Amortization of equity method fair value adjustment at acquisition - (370) - - - - - - (370) Asset impairment expense - - 277 - - 104 - - 381 (Gain) loss on sale or disposal of assets 13 (25) (192) - - 8 - - (196) Interest expense 458 1,328 426 - - 1,523 - 13,446 17,181 Loss on early extinguishment or restructuring of debt - - - - - 2,537 - - 2,537 Gain on sale of subsidiary - - - - (102,141) - - - (102,141) Other (income) expense, net (66) (1,981) 66 99 56 93 121 226 (1,386) Foreign currency (gain) loss (included in cost of revenue) - (420) - - - - - - (420) Income tax (benefit) expense 3,318 68 13 - 1 14 (272) 2,759 5,901 Noncontrolling interest 601 4,030 324 - 20,679 (700) (536) - 24,398 Bonus to be settled in equity - - - - - - - 175 175 Share-based compensation expense - 476 2 - 18 349 200 2,660 3,705 Acquisition and disposition costs 456 - - 49 2,355 928 - 240 4,028 Adjusted EBITDA $ 15,528 $ 20,399 $ 2,954 $ 1,275 $ (4,855) $ (6,217) $ (1,018) $ (5,400) $ 22,666 Total Core Operating Subsidiaries $ 40,156 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 39
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA Three Months Ended March 31, 2018 (in thousands) Three Months Ended March 31, 2018 Core Operating Subsidiaries Early Stage & Other Non- Life Other & operating Total HC2 Construction Marine Energy Telecom Sciences Broadcasting Elimination Corporate Net (loss) attributable to HC2 Holdings, Inc. $ (34,996) Less: Net Incom e attributable to HC2 Holdings Insurance Segm ent 1,245 Less: Consolidating elim inations attributable to HC2 Holdings Insurance (1,987) segm ent Net Income (loss) attributable to HC2 Holdings, Inc., excluding Insurance $ 3,467 $ (6,253) $ (698) $ 1,053 $ (3,936) $ (12,736) $ (156) $ (14,995) $ (34,254) Segment Adjustments to reconcile net income (loss) to Adjusted EBITDA: - Depreciation and amortization 1,527 6,828 1,344 86 58 705 21 21 10,590 Depreciation and amortization (included in cost of revenue) 1,593 - - - - - - - 1,593 Amortization of equity method fair value adjustment at acquisition - (371) - - - - - - (371) (Gain) loss on sale or disposal of assets 415 (2,636) (31) - - - - - (2,252) Interest expense 410 1,163 320 - - 5,706 2 11,724 19,325 Other (income) expense, net 89 948 66 (59) 28 (75) 52 (722) 327 Foreign currency (gain) loss (included in cost of revenue) - (102) - - - - - - (102) Income tax (benefit) expense 1,832 (66) - - - - - (3,315) (1,549) Noncontrolling interest 282 (2,364) (333) - (747) (610) (86) - (3,858) Bonus to be settled in equity - - - - - - - 175 175 Share-based compensation expense - 410 2 - 74 313 11 278 1,088 Non-recurring items - - - - - - - - - Acquisition and disposition costs 359 - - 28 173 1,646 - 178 2,384 Adjusted EBITDA $ 9,974 $ (2,443) $ 670 $ 1,108 $ (4,350) $ (5,051) $ (156) $ (6,656) $ (6,904) Total Core Operating Subsidiaries $ 9,309 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 40
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA Six Months Ended June 30, 2018 (in thousands) Six Months Ended June 30, 2018 Core Operating Subsidiaries Early Stage & Other Non- Life Other & operating Total HC2 Construction Marine Energy Telecom Sciences Broadcasting Elimination Corporate Net Income attributable to HC2 Holdings, Inc. $ 20,370 Less: Net Incom e attributable to HC2 Holdings Insurance Segm ent 1,810 Less: Consolidating elim inations attributable to HC2 Holdings Insurance (3,996) segm ent Net Income (loss) attributable to HC2 Holdings, Inc., excluding Insurance $ 10,864 $ 4,611 $ (19) $ 2,093 $ 70,188 $ (24,552) $ (708) $ (39,921) $ 22,556 Segment Adjustments to reconcile net income (loss) to Adjusted EBITDA: - Depreciation and amortization 3,192 13,257 2,703 173 111 1,448 42 41 20,967 Depreciation and amortization (included in cost of revenue) 3,279 - - - - - - - 3,279 Amortization of equity method fair value adjustment at acquisition - (741) - - - - - - (741) Asset impairment expense - - 277 - - 104 - - 381 (Gain) loss on sale or disposal of assets 428 (2,661) (223) - - 8 - - (2,448) Interest expense 868 2,491 746 - - 7,229 2 25,170 36,506 Loss on early extinguishment of debt - - - - - 2,537 - - 2,537 Gain on sale of subsidiary - - - - (102,141) - - - (102,141) Other (income) expense, net 23 (1,033) 132 40 84 18 173 (496) (1,059) Foreign currency (gain) loss (included in cost of revenue) - (522) - - - - - - (522) Income tax (benefit) expense 5,150 2 13 - 1 14 (272) (556) 4,352 Noncontrolling interest 883 1,666 (9) - 19,932 (1,310) (622) - 20,540 Bonus to be settled in equity - - - - - - - 350 350 Share-based compensation expense - 886 4 - 92 662 211 2,938 4,793 Acquisition and disposition costs 815 - - 77 2,528 2,574 - 418 6,412 Adjusted EBITDA $ 25,502 $ 17,956 $ 3,624 $ 2,383 $ (9,205) $ (11,268) $ (1,174) $ (12,056) $ 15,762 Total Core Operating Subsidiaries $ 49,465 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 41
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA Six Months Ended June 30, 2017 (in thousands) Six Months Ended June 30, 2017 Core Operating Subsidiaries Early Stage & Other Non- Life Other & operating Total HC2 Construction Marine Energy Telecom Sciences Broadcasting Elimination Corporate Net (loss) attributable to HC2 Holdings, Inc. $ (32,407) Less: Net Income (loss) attributable to HC2 Holdings Insurance Segment (597) Net Incom e (loss) attributable to HC2 Holdings, Inc., excluding Insurance $ 7,382 $ 8,099 $ (1,062) $ 3,562 $ (7,516) $ - $ (9,187) $ (33,088) $ (31,810) Segm ent Adjustments to reconcile net income (loss) to Adjusted EBITDA: Depreciation and amortization 2,880 10,340 2,629 191 79 - 661 33 16,813 Depreciation and amortization (included in cost of revenue) 2,542 - - - - - - - 2,542 Amortization of equity method fair value adjustment at acquisition - (650) - - - - - - (650) Asset impairment expense - - - - - - 1,810 - 1,810 (Gain) loss on sale or disposal of assets (393) (3,500) 14 - - - - - (3,879) Lease termination costs - 249 - - - - - - 249 Interest expense 381 2,342 290 23 - - 2,407 20,745 26,188 Net loss (gain) on contingent consideration - - - - - - - 319 319 Other (income) expense, net 7 1,555 1,375 65 (15) - 2,918 258 6,163 Foreign currency (gain) loss (included in cost of revenue) - 107 - - - - - - 107 Income tax (benefit) expense 5,311 376 12 - (0) - 0 (4,366) 1,333 Noncontrolling interest 632 338 (1,239) - (1,702) - (1,977) - (3,948) Bonus to be settled in equity - - - - - - - 585 585 Share-based compensation expense - 739 182 - 168 - 47 1,489 2,625 Acquisition and disposition costs 946 - - - - - - 1,861 2,807 Adjusted EBITDA $ 19,688 $ 19,995 $ 2,201 $ 3,841 $ (8,986) $ - $ (3,321) $ (12,164) $ 21,254 Total Core Operating Subsidiaries $ 45,725 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 42
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA Full Year Ended December 31, 2017 (in thousands) Year Ended December 31, 2017 Core Operating Subsidiaries Early Stage & Other Non- operating Total HC2 Life Other & Corporate Construction Marine Energy Telecom Sciences Broadcasting Elimination Net loss attributable to HC2 Holdings, Inc. $ (46,911) Less: Net Incom e attributable to HC2 Holdings Insurance segm ent 7,066 Net Income (loss) attributable to HC2 Holdings, Inc., excluding $ 23,624 $ 15,173 $ (516) $ 6,163 $ (18,098) $ (4,941) $ (13,064) $ (62,318) $ (53,977) Insurance Segment Adjustments to reconcile net income (loss) to Adjusted EBITDA: Depreciation and amortization 5,583 22,898 5,071 371 186 302 1,206 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 - 1,963 2,410 44,135 55,098 Net loss (gain) on contingent consideration - - - - - - - (11,411) (11,411) Other (income) expense, net (41) 2,683 1,488 149 (17) 41 6,500 (92) 10,711 Foreign currency (gain) loss (included in cost of revenue) - (79) - - - - - - (79) Income tax (benefit) expense 10,679 203 (4,243) 7 (820) (1,811) 682 (10,185) (5,488) Noncontrolling interest 1,941 260 (681) - (3,936) 755 (1,919) - (3,580) Bonus to be settled in equity - - - - - - - 4,130 4,130 Share-based compensation expense - 1,527 364 - 319 194 85 2,754 5,243 Non-recurring items - - - - - - - - - Acquisition costs 3,280 1,815 - - - 2,648 - 3,764 11,507 Adjusted EBITDA $ 51,588 $ 44,027 $ 2,911 $ 6,929 $ (22,366) $ (849) $ (2,290) $ (29,152) $ 50,798 Total Core Operating Subsidiaries $ 105,455 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 43
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA Three Months Ended December 31, 2017 (in thousands) Three Months Ended December 31, 2017 Core Operating Subsidiaries Early Stage & Other Non- operating Total HC2 Life Other & Corporate Construction Marine Energy Telecom Sciences Broadcasting Elimination Net loss attributable to HC2 Holdings, Inc. $ (8,537) Less: Net Incom e attributable to HC2 Holdings Insurance segm ent 3,383 Net Income (loss) attributable to HC2 Holdings, Inc., excluding $ 9,160 $ 6,230 $ 1,485 $ 1,253 $ (3,822) $ (4,941) $ (3,277) $ (18,008) $ (11,920) Insurance Segment Adjustments to reconcile net income (loss) to Adjusted EBITDA: Depreciation and amortization 1,389 6,337 1,195 86 57 302 273 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) Asset impairment expense - - - - - - - - - (Gain) loss on sale or disposal of assets 199 - 208 181 - - - - 588 Lease termination costs - - - 2 - - - - 2 Interest expense 357 1,029 629 4 - 1,963 2 11,704 15,688 Net loss (gain) on contingent consideration - - - - - - - (5,410) (5,410) Other (income) expense, net 117 240 (164) 72 8 41 3,700 368 4,382 Foreign currency (gain) loss (included in cost of revenue) - 52 - - - - - - 52 Income tax (benefit) expense 887 (36) (4,255) 7 (820) (1,811) 682 (1,073) (6,419) Noncontrolling interest 751 (121) 1,321 - (728) 755 747 - 2,725 Bonus to be settled in equity - - - - - - - 2,780 2,780 Share-based compensation expense - 394 3 - 80 194 19 547 1,237 Non-recurring items - - - - - - - - - Acquisition costs 833 1,515 - - - 2,648 - 339 5,335 Adjusted EBITDA $ 15,112 $ 15,269 $ 422 $ 1,605 $ (5,225) $ (849) $ 2,146 $ (8,732) $ 19,748 Total Core Operating Subsidiaries $ 32,408 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 44
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA Three Months Ended September 30, 2017 (in thousands) Three Months Ended September 30, 2017 Core Operating Subsidiaries Early Stage & Other Non- operating Total HC2 Life Other & Corporate Construction Marine Energy Telecom Sciences Broadcasting Elimination Net loss attributable to HC2 Holdings, Inc. $ (5,967) Less: Net Incom e attributable to HC2 Holdings Insurance segm ent 4,280 Net Income (loss) attributable to HC2 Holdings, Inc., excluding $ 7,082 $ 844 $ (939) $ 1,348 $ (6,760) $ - $ (600) $ (11,222) $ (10,247) Insurance Segment Adjustments to reconcile net income (loss) to Adjusted EBITDA: Depreciation and amortization 1,314 6,221 1,247 94 50 - 272 17 9,215 Depreciation and amortization (included in cost of revenue) 1,293 - - - - - - - 1,293 Amortization of equity method fair value adjustment at acquisition - (573) - - - - - - (573) Asset impairment expense - - - - - - - - - (Gain) loss on sale or disposal of assets 486 - 25 - - - - - 511 Lease termination costs - - - 15 - - - - 15 Interest expense 238 1,021 262 14 - - 1 11,686 13,222 Net loss (gain) on contingent consideration - - - - - - - (6,320) (6,320) Other (income) expense, net (165) 888 277 12 (10) - (118) (718) 166 Foreign currency (gain) loss (included in cost of revenue) - (238) - - - - - - (238) Income tax (benefit) expense 4,481 (137) - - - - - (4,746) (402) Noncontrolling interest 558 43 (763) - (1,506) - (689) - (2,357) Bonus to be settled in equity - - - - - - - 765 765 Share-based compensation expense - 394 179 - 71 - 19 718 1,381 Non-recurring items - - - - - - - - - Acquisition costs 1,501 300 - - - - - 1,564 3,365 Adjusted EBITDA $ 16,788 $ 8,763 $ 288 $ 1,483 $ (8,155) $ - $ (1,115) $ (8,256) $ 9,796 Total Core Operating Subsidiaries $ 27,322 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 45
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA Three Months Ended June 30, 2017 (in thousands) Three Months Ended June 30, 2017 Core Operating Subsidiaries Early Stage & Other Non- operating Total HC2 Life Other & Corporate Construction Marine Energy Telecom Sciences Broadcasting Elimination Net loss attributable to HC2 Holdings, Inc. $ (17,911) Less: Net Incom e attributable to HC2 Holdings Insurance segm ent 164 Net Income (loss) attributable to HC2 Holdings, Inc., excluding $ 4,179 $ (3,053) $ (365) $ 2,060 $ (4,106) $ - $ (3,757) $ (13,033) $ (18,075) Insurance Segment Adjustments to reconcile net income (loss) to Adjusted EBITDA: Depreciation and amortization 1,240 5,255 1,381 94 41 - 331 16 8,358 Depreciation and amortization (included in cost of revenue) 1,302 - - - - - - - 1,302 Amortization of equity method fair value adjustment at acquisition - (325) - - - - - - (325) Asset impairment expense - - - - - - 1,810 - 1,810 (Gain) loss on sale or disposal of assets (145) - 18 - - - - - (127) Lease termination costs - 55 - - - - - - 55 Interest expense 174 1,040 154 14 - - 16 10,675 12,073 Net loss (gain) on contingent consideration - - - - - - - 88 88 Other (income) expense, net 28 490 255 (9) (11) - 803 214 1,770 Foreign currency (gain) loss (included in cost of revenue) - 83 - - - - - - 83 Income tax (benefit) expense 3,232 (134) (1) - - - - (6,543) (3,446) Noncontrolling interest 369 (156) (492) - (911) - (1,372) - (2,562) Bonus to be settled in equity - - - - - - - 585 585 Share-based compensation expense - 394 91 - 76 - 18 527 1,106 Non-recurring items - - - - - - - - - Acquisition costs 701 - - - - - - 1,168 1,869 Adjusted EBITDA $ 11,080 $ 3,649 $ 1,041 $ 2,159 $ (4,911) $ - $ (2,151) $ (6,303) $ 4,564 Total Core Operating Subsidiaries $ 17,929 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 46
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA Three Months Ended March 31, 2017 (in thousands) Three Months Ended March 31, 2017 Core Operating Subsidiaries Early Stage & Other Non- operating Total HC2 Life Other & Corporate Construction Marine Energy Telecom Sciences Broadcasting Elimination Net loss attributable to HC2 Holdings, Inc. $ (14,496) Less: Net loss attributable to HC2 Holdings Insurance segm ent (761) Net Income (loss) attributable to HC2 Holdings, Inc., excluding $ 3,203 $ 11,152 $ (697) $ 1,502 $ (3,410) $ - $ (5,430) $ (20,055) $ (13,735) Insurance Segment Adjustments to reconcile net income (loss) to Adjusted EBITDA: Depreciation and amortization 1,640 5,085 1,248 97 38 - 330 16 8,454 Depreciation and amortization (included in cost of revenue) 1,240 - - - - - - - 1,240 Amortization of equity method fair value adjustment at acquisition - (325) - - - - - - (325) Asset impairment expense - - - - - - - - - (Gain) loss on sale or disposal of assets (248) (3,500) (4) - - - - - (3,752) Lease termination costs - 194 - - - - - - 194 Interest expense 207 1,302 136 9 - - 2,391 10,070 14,115 Net loss (gain) on contingent consideration - - - - - - - 231 231 Other (income) expense, net (21) 1,065 1,120 74 (4) - 2,115 44 4,393 Foreign currency (gain) loss (included in cost of revenue) - 24 - - - - - - 24 Income tax (benefit) expense 2,079 510 13 - - - - 2,177 4,779 Noncontrolling interest 263 494 (747) - (791) - (605) - (1,386) Bonus to be settled in equity - - - - - - - - - Share-based compensation expense - 345 91 - 92 - 29 962 1,519 Non-recurring items - - - - - - - - - Acquisition costs 245 - - - - - - 693 938 Adjusted EBITDA $ 8,608 $ 16,346 $ 1,160 $ 1,682 $ (4,075) $ - $ (1,170) $ (5,862) $ 16,689 Total Core Operating Subsidiaries $ 27,796 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 47
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA Full Year Ended December 31, 2016 (in thousands) Year Ended December 31, 2016 Core Operating Subsidiaries Early Stage & Other Non- Life Other & operating Total HC2 Construction Marine Energy Telecom Sciences Elimination Corporate Net loss attributable to HC2 Holdings, Inc. $ (94,549) Less: Net loss attributable to HC2 Holdings Insurance segm ent (14,028) Net Income (loss) attributable to HC2 Holdings, Inc., excluding $ 28,002 $ 17,447 $ 7 $ 1,435 $ (7,646) $ (24,800) $ (94,966) $ (80,521) Insurance Segment 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) loss (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 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 48
Reconciliation of U.S. GAAP Net Income (Loss) to Insurance Adjusted Operating Income (in thousands) Adjusted Operating Income - Insurance ("Insurance AOI") YTD 2018 Q2 2018 Q1 2018 FY 2017 Q4 2017 Q3 2017 Q2 2017 Q1 2017 FY 2016 Q4 2016 Net Income (loss) - Insurance segment $ 1,810 $ 565 $ 1,245 $ 7,066 $ 3,381 $ 4,282 $ 164 $ (761) $ (14,028) $ (2,050) Net realized and unrealized gains on inv estments (6,939) (4,429) (2,510) (4,983) (2,129) (978) (1,095) (781) (5,019) (7,696) Asset impairment - - - 3,364 - - 2,842 522 2,400 2,400 Acquisition costs 1,062 759 303 2,535 1,377 422 736 - 714 445 Insurance AOI $ (4,067) $ (3,105) $ (962) $ 7,982 $ 2,629 $ 3,726 $ 2,647 $ (1,020) $ (15,933) $ (6,901) Addback: Tax expense (benefit) 6,741 3,560 3,181 16,228 992 13,263 1,461 512 13,196 7,248 Pre-tax Insurance AOI $ 2,674 $ 455 $ 2,219 $ 24,210 $ 3,621 $ 16,989 $ 4,108 $ (508) $ (2,737) $ 347 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 49
Reconciliation of Net Income (Loss) to Normalized Adjusted EBITDA Full Year Ended December 31, 2017 – GrayWolf (in thousands) GrayWolf Normalized Adjusted EBITDA for the Year Ended December 31, 2017 GrayWolf (1) Net Income $8,570 Adjustments to reconcile net income (loss) to Adjusted EBITDA: Depreciation $2,734 Interest 6,407 Tax Benefit (2,607) Gain / Loss on Assets (28) Acquisition Costs 1,641 Non Recurring 2,955 Adjusted EBITDA $19,672 1. GrayWolf Adjusted EBITDA represents normalized EBITDA view, which excludes certain expenses management believes will not be continuing post-acquisition in order to © 2 0 1 8 H C 2 H O L D I N G S , I NC. 50 better reflect ongoing earnings capacity
HC2 HOLDINGS, INC. A n d r e w G . B a c k m a n • i r @ h c 2 . c o m • 2 1 2 . 2 3 5 . 2 6 9 1 • 4 5 0 P a r k A v e n u e , 3 0 th F l o o r , N e w Y o r k , N Y 1 0 0 2 2 © HC2 Holdings, Inc. 2018 October 2018