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HC2 Holdings Reports Fourth Quarter and Fiscal Year 2015 Results

Net revenue of $360.6 million for the fourth quarter 2015 and $1.1 billion for fiscal 2015

Adjusted EBITDA of $26.7 million and $96.9 million in Q4 and FY15, respectively, from our Core Operating Subsidiaries

NEW YORK, March 15, 2016 (GLOBE NEWSWIRE) -- HC2 Holdings, Inc. (“HC2”) (NYSE MKT:HCHC), a diversified holding company that focuses on acquiring and operating businesses that it considers to be under or fairly valued and growing its acquired businesses, today announced its consolidated results for the fourth quarter and fiscal year 2015, which ended on December 31, 2015. 

“2015 was an exciting year for HC2 highlighted by the diversification of our business through the establishment of our insurance industry platform as well as the solid performance from our other Core Operating Subsidiaries,” said Philip Falcone, HC2’s Chairman, President and Chief Executive Officer. “Longer-term, we believe that HC2 is well positioned to build significant shareholder value given its diverse array of operating subsidiaries and commitment to pursue highly attractive, cash flow positive businesses.”

Fourth Quarter and Fiscal Year 2015 Financial Highlights:

  • Net revenue: HC2 recorded consolidated total net revenues of $360.6 million for the fourth quarter of 2015, an increase of $136.6 million, or 61%, as compared to the fourth quarter of 2014, primarily driven by the expansion in scale and number of customer relationships in our Telecommunications segment.

    HC2 recorded consolidated total net revenue of $1,120.8 million for the fiscal year ended December 31, 2015, an increase of $573.4 million, or 105%, as compared to fiscal 2014 as reported due to the full year impact of acquisitions made in 2014 and expansion in scale and customer relationships in our Telecommunications segment. 

  • Operating Profit/(Loss): HC2 reported a loss of $3.2 million from operations for the fourth quarter compared to a loss of $6.8 million during the fourth quarter of 2014, primarily driven by a reduction in corporate share-based payment expense due to equity awards granted in the fourth quarter of 2014.    

    Operating profit for fiscal year 2015 was $2.2 million compared to a loss of $13.6 million during fiscal year 2014.  The increase in operating profit was largely the result of the full year impact of the acquisitions made in 2014 and improved profitability in our Manufacturing and Telecommunications segments.  The increase was offset in part by an increase in acquisition and overhead costs in our Non-operating Corporate segment and decreases in our Life Sciences and Other segments (“Early-Stage and Other”).

  • Adjusted EBITDA: Adjusted EBITDA for our Manufacturing, Marine Services, Telecommunications, Utilities, and Insurance segments (our “Core Operating Subsidiaries”), was a combined $26.7 million for the fourth quarter of 2015 and $96.9 million for fiscal year 2015. This compares to a combined Adjusted EBITDA of $94.3 million during fiscal year 2014.

    Adjusted EBITDA for our Core Operating Subsidiaries benefitted from strong growth in our Manufacturing segment due largely to margin expansion, growth in scale and customer relationships in the Telecommunications segment, and an increase in the number of natural gas fueling stations in our Utilities segment.  This was offset by the impact of fewer installation projects in the Marine Services segment when compared to 2014 on a pro-forma basis.

    HC2 recorded total Adjusted EBITDA of $12.5 million during the fourth quarter of 2015 and $51.9 million for fiscal year 2015 after considering results from Early-Stage and Other (including a $5.0 million and $12.0 million Novatel Wireless non-cash charge in the fourth quarter and fiscal year 2015, respectively) and our Non-Operating Corporate segment.

  • Balance sheet: As of December 31, 2015, HC2 had consolidated cash, cash equivalents and investments of $1.5 billion, which includes the addition of our Insurance segment during the fourth quarter.  At the corporate level, HC2 had $41.2 million in cash, cash equivalents and short-term investments at the end of the year.

Additional Fourth Quarter Highlights and Recent Developments:

  • On December 24, 2015, HC2 completed the acquisition of long-term care and life insurance businesses, United Teacher Associates Insurance Company (“UTAIC”) and Continental General Insurance Company (“CGIC”). UTAIC and CGIC had approximately $80.0 million of statutory surplus and $1.9 billion in total GAAP assets as of December 31, 2015.  

  • Schuff’s backlog was $380.8 million as of December 31, 2015 consistent with the third quarter 2015 backlog.  Notable ongoing projects include the Wilshire Grand Center in Los Angeles, the new Apple headquarters in Cupertino, CA, the new Volvo facility in South Carolina, the Anaheim Convention Center, and the Loma Linda Hospital in Los Angeles.

  • Global Marine announced the acquisition of a majority interest in CWind Limited, a leading offshore renewables specialist, highlighting the continued commitment to the offshore renewable sector.  Global Marine also completed operations and installed a fiber optic cable between the Japanese island of Okinawa and an existing branching unit (BU) in the Asia Submarine-cable Express (ASE) system.  In addition, Global Marine secured a sub-contract to install an optic cable between the Indonesian islands of Bali and Lombok and a contract win from Ocean Networks Canada, to upgrade the fibre optic cables serving the NEPTUNE observatory off the west coast of Canada.

    Global Marine recently announced the award of  the extension of the North America Maintenance Zone (NAZ) submarine cable maintenance contract up to December 31, 2024.  This long-term extension demonstrates Global Marine’s capability to deliver highly responsive and well-executed maintenance provisions to its customers.

    Huawei Marine Networks, one of Global Marine’s Joint Venture partners, secured a contract to build the Cameroon-Brazil Cable System (CBCS), connecting Africa to Latin America.

  • On November 4, 2015, HC2 announced the pricing of an underwritten public offering of 8,452,500 newly issued shares of HC2’s common stock. The net proceeds to HC2 from the offering, after deducting underwriting discounts and commissions and offering expenses, were approximately $54.7 million.

Non-GAAP Financial Measures and Other Information

The pro forma basis gives effect to the impact from our 2014 acquisitions of Schuff and Global Marine as if they had occurred on January 1, 2014.

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-US GAAP measurements are useful supplemental information, such adjusted results are not intended to replace our US GAAP financial results.

In 2015, we adjusted our definition of Adjusted EBITDA to exclude the adjustment for income (loss) from equity investees. We believe that the income generated by the equity investees of our Marine Services segment is an integral part of the segment's operating results. For consistency purposes we applied the same treatment to the equity investees within our Other segment. For the year ended December 31, 2014, this change resulted in an increase in Adjusted EBITDA of $4.7 million and $6.3 million on an as reported and pro forma basis, respectively.

The calculation of Adjusted EBITDA, as defined by us, consists of Net income (loss) as adjusted for depreciation and amortization; asset impairment expense; gain (loss) on sale or disposal of assets; lease termination costs; interest expense; loss on early extinguishment or restructuring of debt; other income (expense), net; foreign currency transaction gain (loss); income tax (benefit) expense; gain (loss) from discontinued operations; noncontrolling interest; share-based compensation expense; acquisition related costs; and other costs. See below for a reconciliation of Adjusted EBITDA to net income.

Conference Call

HC2 Holdings, Inc. will host a live conference call to discuss its results on Wednesday, March 16, 2016 at 8:30 a.m. Eastern Daylight Time. To join the event, participants may call 1.866.395.3893 (U.S. callers) or 1.678.509.7540 (international callers), using conference ID number 67881436. Alternatively, a live webcast of the conference call can be accessed by interested parties through the Investor Relations section of the HC2 Website, www.HC2.com

A telephonic replay of the call will be available through midnight March 22, 2016 by dialing 1.855.859.2056 (domestic) or 1.404.537.3406 (international) and entering passcode 67881436.

Cautionary Statement Regarding Forward-Looking Statements

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: This release contains, and certain oral statements made by our representatives from time to time may contain, forward-looking statements. Generally, forward-looking statements include information describing actions, events, results, strategies and expectations and are generally identifiable by use of the words “believes,” “expects,” “intends,” “anticipates,” “plans,” “seeks,” “estimates,” “projects,” “may,” “will,” “could,” “might,” or “continues” or similar expressions. The forward-looking statements in this press release include without limitation 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. 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, unanticipated issues related to the restatement of our financial statements; the fact that we have identified material weaknesses in our internal control over financial reporting, and any inability to remediate future material weaknesses; capital market conditions; the ability of HC2's subsidiaries 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 to identify any suitable future acquisition opportunities; our ability to realize efficiencies, cost savings, income and margin improvements, growth, economies of scale and other anticipated benefits of strategic transactions; difficulties related to the integration of financial reporting of acquired or target businesses; difficulties completing pending and future acquisitions and dispositions; effects of litigation, indemnification claims, and other contingent liabilities; changes in regulations and tax laws; and risks that may affect the performance of the operating subsidiaries of HC2. 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.

About HC2

HC2 Holdings, Inc. is a publicly traded (NYSE MKT:HCHC) diversified holding company, which seeks opportunities to acquire and grow businesses that can generate long-term sustainable free cash flow and attractive returns in order to maximize value for all stakeholders. HC2 has a diverse array of operating subsidiaries across seven reportable segments, including Manufacturing, Marine Services, Utilities, Telecommunications, Life Sciences, Insurance and Other. HC2’s largest operating subsidiaries include Schuff International, Inc., a leading structural steel fabricator and erector in the United States, and Global Marine Systems Limited, a leading provider of engineering and underwater services on submarine cables. Founded in 1994, HC2 is headquartered in Herndon, Virginia.

HC2 HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(in thousands, except share and per share amounts)

  December 31,  
    2015       2014    
Assets        
Investments:        
Fixed maturities, available-for-sale at fair value $  1,231,841     $   250    
Equity securities, available-for-sale at fair value     49,682         4,867    
Mortgage loans     1,252         -     
Policy loans     18,476         -     
Other invested assets     53,119         50,566    
Total investments    1,354,370         55,683    
Cash and cash equivalents     158,624        107,978    
Restricted cash     538         6,467    
Accounts receivable, net     210,853        152,279    
Costs and recognized earnings in excess of billings on uncompleted contracts     39,310         28,098    
Inventory     12,120         14,975    
Recoverable from reinsurers     522,562         -     
Accrued investment income     15,300         -     
Deferred tax asset     52,511         15,720    
Property, plant and equipment, net     214,466        233,022    
Goodwill     61,178         30,540    
Intangibles     29,409         31,158    
Other assets     65,206         32,378    
Assets held for sale     6,065         3,865    
Total assets $  2,742,512     $  712,163    
Liabilities, temporary equity and stockholders’ equity        
Life, accident and health reserves $  1,593,330     $   -     
Annuity reserves     259,460         -     
Value of business acquired     50,761         -     
Accounts payable and other current liabilities     225,389        147,602    
Billings in excess of costs and recognized earnings on uncompleted contracts     21,201         41,959    
Deferred tax liability     4,281         -     
Long-term obligations     371,876        335,531    
Pension liability     25,156         37,210    
Other liabilities     17,793         1,617    
Total liabilities    2,569,247        563,919    
Commitments and contingencies        
Temporary equity:        
Preferred stock, $.001 par value - 20,000,000 shares authorized; Series A - 29,172 and 30,000 shares issued and outstanding at December 31, 2015 and 2014; Series A-1 - 10,000 and 11,000 shares issued and outstanding at December 31, 2015 and 2014, respectively; Series A-2 - 14,000 and 0 shares issued and outstanding at December 31, 2015 and 2014, respectively   52,619       39,845    
Redeemable noncontrolling interest     3,122         4,004    
Total temporary equity     55,741         43,849    
Stockholders’ equity:        
Common stock, $.001 par value - 80,000,000 shares authorized; 35,281,375 and 23,844,711 shares issued and 35,249,749 and 23,813,085 shares outstanding at December 31, 2015 and 2014, respectively     35         24    
Additional paid-in capital     209,477        141,948    
Accumulated deficit     (79,729 )       (44,164 )  
Treasury stock, at cost     (378 )       (378 )  
Accumulated other comprehensive loss     (35,375 )       (18,243 )  
Total HC2 Holdings, Inc. stockholders’ equity before noncontrolling interest     94,030         79,187    
Noncontrolling interest     23,494         25,208    
Total stockholders’ equity     117,524        104,395    
Total liabilities, temporary equity and stockholders’ equity $  2,742,512     $  712,163    
           

HC2 HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

  Years Ended December 31,  
    2015       2014       2013    
Services revenue $   595,280     $   197,280     $   230,686    
Sales revenue     522,661         350,158         -     
Life, accident and health earned premiums, net     1,578         -          -     
Net investment income     1,031         -          -     
Realized gains (losses) on investments     256         -          -     
Net revenue     1,120,806         547,438         230,686    
Operating expenses            
Cost of revenue—services     544,655         177,812         220,315    
Cost of revenue—sales     437,968         296,530         -     
Insurance benefits and acquisition expenses     2,245         -          -     
Selling, general and administrative     108,527         80,239         34,692    
Depreciation and amortization     23,280         6,334         12,032    
(Gain) loss on sale or disposal of assets     170         (162 )       (8 )  
Lease termination costs     1,185         -          -     
Asset impairment expense     547         291         2,791    
Total operating expenses     1,118,577         561,044         269,822    
Income (loss) from operations     2,229         (13,606 )       (39,136 )  
Interest expense     (39,017 )       (12,347 )       (8 )  
Loss on early extinguishment or restructuring of debt     -          (11,969 )       -     
Gain from contingent value rights valuation     -          -          14,904    
Other income (expense), net     (6,820 )       702         (814 )  
Income (loss) from equity investees     (3,015 )       2,665         -     
Loss from continuing operations before income taxes     (46,623 )       (34,555 )       (25,054 )  
Income tax benefit      10,882         22,869         7,442    
Loss from continuing operations     (35,741 )       (11,686 )       (17,612 )  
Gain (loss) from discontinued operations     (21 )       (146 )       129,218    
Net income (loss)     (35,762 )       (11,832 )       111,606    
Less: Net (income) loss attributable to noncontrolling interest     197         (2,559 )       -     
Net income (loss) attributable to HC2 Holdings, Inc.     (35,565 )       (14,391 )       111,606    
Less: Preferred stock dividends and accretion     4,285         2,049         -     
Net income (loss) attributable to common stock and participating preferred stockholders $   (39,850 )   $   (16,440 )   $   111,606    
Basic income (loss) per common share:            
Loss from continuing operations attributable to HC2 Holdings, Inc. $   (1.50 )   $   (0.82 )   $   (1.25 )  
Gain (loss) from discontinued operations     -          (0.01 )       9.20    
Net income (loss) attributable to HC2 Holdings, Inc. $   (1.50 )   $   (0.83 )   $   7.95    
Diluted income (loss) per common share:            
Loss from continuing operations attributable to HC2 Holdings, Inc. $   (1.50 )   $   (0.82 )   $   (1.25 )  
Gain (loss) from discontinued operations     -          (0.01 )       9.20    
Net income (loss) attributable to HC2 Holdings, Inc. $   (1.50 )   $   (0.83 )   $   7.95    
Weighted average common shares outstanding:            
Basic     26,482         19,729         14,047    
Diluted     26,482         19,729         14,047    
Dividends declared per basic weighted average common shares outstanding $   -      $   -      $   8.58    
                         

HC2 HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

     
  Years Ended December 31,  
    2015       2014       2013    
Cash flows from operating activities:            
Net income (loss) $   (35,762 )   $   (11,832 )   $   111,606    
Adjustments to reconcile net income (loss) to operating cash flows:            
Provision for doubtful accounts receivable     99         403         1,507    
Share-based compensation expense     11,102         11,028         2,286    
Depreciation and amortization     30,939         10,684         23,964    
Amortization of deferred financing costs     1,420         240          
Lease termination costs     1,185                
(Gain) loss on sale or disposal of assets     170         816         (148,848 )  
(Gain) loss on sale of investments           (434 )        
Equity investment (income)/loss     3,015         (2,665 )        
Asset impairment expense     547         291         3,123    
Amortization of debt discount     301         1,593         86    
Loss on early extinguishment or restructuring of debt           11,969         21,124    
(Gain) on bargain purchase           (1,417 )        
Unrealized loss on equity securities     2,878                
Realized (gains) losses on investments     3,175         1,608          
Change in fair value of Contingent Value Rights                 (14,904 )  
Deferred income taxes     (13,102 )       (30,223 )       (522 )  
Unrealized foreign currency transaction (gain) loss on intercompany and foreign debt     182         1,352         (764 )  
Other     5,269                
Changes in assets and liabilities, net of acquisitions:            
(Increase) decrease in accounts receivable     (60,720 )       18,349         (2,892 )  
(Increase) decrease in costs and recognized earnings in excess of billings on uncompleted contracts     (11,579 )       (1,139 )        
(Increase) decrease in inventory     2,610         6,616         644    
(Increase) decrease in other assets     17,032         764         (2,125 )  
Increase (decrease) in life, accident and health reserves     608                
Increase (decrease) in accounts payable and other current liabilities     36,216         18,968         (12,859 )  
Increase (decrease) in billings in excess of costs and recognized earnings on uncompleted contracts       (20,767 )       (23,793 )        
Increase (decrease) in other liabilities     3,259         (1,951 )       (1,741 )  
Increase (decrease) in pension liability     (10,638 )       (7,564 )        
Net change in cash due to operating activities     (32,561 )       3,663         (20,315 )  
Cash flows from investing activities:            
Purchases of property, plant and equipment     (21,324 )       (5,819 )       (12,577 )  
Sale of property and equipment and other assets     5,034         3,706         9    
Purchases of investments     (54,598 )       (33,034 )        
Sale of investments     12,248         2,411          
Cash from disposition of business, net of cash disposed           31,645         270,634    
Cash paid for business acquisitions, net of cash acquired     39,726         (146,026 )       (397 )  
Purchase of noncontrolling interest     (475 )       (38,403 )        
Receipt of dividends from equity investees     4,647         2,081          
(Increase) decrease in restricted cash           (1,785 )       475    
Net change in cash due to investing activities     (14,742 )       (185,224 )       258,144    
Cash flows from financing activities:            
Annuity receipts     78                
Proceeds from long-term obligations     564,857         915,896          
Principal payments on long-term obligations     (528,679 )       (689,745 )       (128,036 )  
Payment of fees on restructuring of debt  —        (12,333 )       (1,201 )  
Proceeds from sale of common stock, net     53,975         6,000         1,158    
Proceeds from sale of preferred stock, net     14,033         40,050          
Proceeds from the exercise of warrants and stock options           24,348          
(Increase) decrease in restricted cash     6,014                
Payment of deferred financing costs     (1,423 )              
Payment of dividend equivalents                 (1,235 )  
Payment of dividends     (5,687 )       (1,626 )       (119,788 )  
Taxes paid in lieu of shares issued for share-based compensation           (47 )       (1,000 )  
Net change in cash due to financing activities     103,168         282,543         (250,102 )  
Effects of exchange rate changes on cash and cash equivalents     (5,219 )       (2,001 )       (1,927 )  
Net change in cash and cash equivalents     50,646         98,981         (14,200 )  
Cash and cash equivalents, beginning of period     107,978         8,997         23,197    
Cash and cash equivalents, end of period $   158,624     $   107,978     $   8,997    
Supplemental cash flow information:            
Cash paid for interest $   39,451     $   7,527     $   10,372    
Cash paid for taxes $   1,134     $   8,792     $   616    
Preferred stock accreting dividends and accretion $   206     $   487        $—    
Non-cash investing and financing activities:            
Capital lease additions    $—        $—     $   148    
Purchases of property, plant and equipment under financing arrangements $   1,808     $   4,400        $—    
Property, plant and equipment included in accounts payable $   911     $   2,544        $—    
Non-cash investing activity on the reacquisition of shares from a noncontrolling interest    $—     $   1,700        $—    
Conversion of preferred stock to common stock $   1,839        $—        $—    
Business acquisition through the issuance of common stock, long-term debt and warrants $   11,591        $—        $—    
Non-cash financing activity on issuance of long-term debt $   5,000        $—        $—    
                         

HC2 HOLDINGS, INC.

ADJUSTED EBITDA

(in thousands)

                         
  Twelve Months Ended December 31, 2015  
  Core Operating Early Stage and Other  Non-operating Corporate   HC2
Holdings,
Inc. 
 
   Manufacturing   Marine Services   Insurance   Telecommunications  Utilities Total Life
Sciences
 Other   Total   
Net income (loss)     24,451       20,855       1,327       2,779       (274 )     49,139       (4,575 )     (18,276 )     (22,851 )     (61,852 )     (35,565 )  
Adjustments to reconcile net income (loss) to Adjusted EBITDA:                       -         
Depreciation and amortization   2,016     17,256     2       417     1,635       21,325       20       1,934       1,954       -        23,280    
Depreciation and amortization
(included in cost of revenue)
    7,659       -        -        -        -        7,659       -        -        -        -        7,659    
Asset impairment expense     -        547       -        -        -        547       -        -        -        -        547    
(Gain) loss on sale or disposal of assets     257       (138 )     -        50       -        170       -        1       1       -        170    
Lease termination costs     -        -        -        1,184       -        1,184       -        1       1       -        1,185    
Interest expense     1,379       3,803       -        -        42       5,224       -        -        -        33,793       39,017    
Other (income) expense, net     (443 )     (1,340 )     (56 )     (2,304 )     (42 )     (4,185 )     (1 )     5,764       5,763       5,242       6,820    
Foreign currency (gain) loss (included in cost of revenue)     -        (2,039 )     -        -        -        (2,039 )     -        -        -        -        (2,039 )  
Income tax (benefit) expense     15,572       400       (1,448 )     (237 )     (347 )     13,941       (1,037 )     (7,733 )     (8,770 )     (16,052 )     (10,882 )  
Loss from discontinued operations     20       -        -        -        -        20       -        1       1       -        21    
Noncontrolling interest     1,136       616       -        -        (267 )     1,485       (1,681 )     (1 )     (1,682 )     -        (197 )  
Share-based payment expense     -        -        -        -        49       49       71       -        71       10,982       11,102    
Acquisition related costs     -        -        -        -        70       70       23       -        23       8,362       8,455    
Other costs     -        2,181       -        121       -        2,302       -        -        -        -        2,302    
Adjusted EBITDA $    52,047   $    42,141   $    (175 ) $    2,010   $    866   $    96,889   $    (7,180 ) $    (18,309 ) $    (25,489 ) $    (19,525 ) $    51,875    
                         


                       
  Three Months Ended December 31, 2015
  Core Operating Early Stage and Other Non-
operating Corporate
 HC2
Holdings,
Inc.
  Manufacturing Marine Services Insurance Telecommunications Utilities Total Life
Sciences
 Other  Total
Net income (loss)     8,269       2,891       1,618       3,078       55       15,911       (545 )     (24,044 )     (24,589 )      (2,762 )     (11,440 )
Adjustments to reconcile net income (loss) to Adjusted EBITDA:                      
Depreciation and amortization   526     4,279     2     123     429       5,358       12       1,292        1,305       -        6,663  
Depreciation and amortization
(included in cost of revenue)
    1,924       -        -        -        -        1,924       -        -        -        -        1,924  
Asset impairment expense     -        547       -        -        -        547       -        (0 )      (0 )     -        547  
(Gain) loss on sale or disposal of assets     326       (21 )     -        -        -        305       -        1       1       -        305  
Lease termination costs      -        -        -        60       -        60       -        1       1        -        61  
Interest expense     315       914       -        -        10       1,239       -        (0 )     (0 )     8,570       9,809  
Other (income) expense, net   (279 )   (1,090 )   (56 )   (2,299 )   (10 )   (3,733 )     (0 )     6,774       6,774       251       3,292  
Foreign currency (gain) loss  (included in cost of revenue)       608         309         916         (1 )   (1 )       915  
Income tax (benefit) expense   3,384     222     (1,448 )   (237 )   (347 )   1,575     (1,037 )     8,616       7,579       (18,203 )     (9,048 )
Loss from discontinued operations     0       -        -        -        -        0       -        (23 )     (23 )     -        (23 )
Noncontrolling interest     169       52       -        -        43       265       (468 )     (1 )     (469 )     -        (205 )
Share-based payment expense     -        -        0       -        26       26       71       (0 )     71       3,602       3,700  
Acquisition related costs     -        -        -        -        70       70       23       0       23       3,660       3,754  
Other costs     -        2,181       -        12       -        2,193       -        -        -        -        2,193  
Adjusted EBITDA $ 14,634   $ 10,585   $ 116   $ 1,046   $ 274   $ 26,655   $ (1,944 ) $ (7,383 ) $ (9,327 ) $ (4,882 ) $  12,446  
                       


  As Reported Pro Forma
  Twelve Months Ended December 31, 2014
  HC2 Holdings, Inc. Core Operating Early Stage and Other Non-operating Corporate  HC2
Holdings,
Inc.
  Manufacturing Marine Services Insurance Telecommunications Utilities Total Life
Sciences
 Other  Total
Net income (loss)   (14,391 )   19,278     17,718      -      (1,068 )    236     36,164     (3,759 )   29,219     25,460     (51,410 )    10,214  
Adjustments to reconcile net income (loss) to Adjusted EBITDA:                        
Depreciation and amortization     6,334       4,139       14,776       -        528       484     19,927     1      -      1      -      19,928  
Depreciation and amortization
(included in cost of revenue)
    4,350       4,350       -        -        -         -      4,350      -       -       -       -      4,350  
Asset impairment expense     291       -        -        -        291       -        291       -        -        -        -        291  
(Gain) loss on sale or disposal of assets     (162 )     (2 )     104       -         (160 )     -        (58 )     -        -        -        -        (58 )
Lease termination costs     -        -        -        -        -        -         -        -        -        -        -        -   
Interest expense   12,347     1,627     4,708          1      20     6,356      -        -        -       10,700     17,056  
Loss on early extinguishment of debt   11,969       -        -          -        -         -        -        -        11,969     11,969  
Other (income) expense, net     (702 )     (476 )     (2,410 )     -        (831 )   (1,431 )   (5,148 )     -      1,610     1,610     217     (3,321 )
Foreign currency (gain) loss (included in cost of revenue)     -        -        -        -        -        -         -        -        -        -        -        -   
Income tax (benefit) expense   (22,869 )   13,318     1,069       -      58      103     14,548       -       (31,828 )   (31,828 )   (963 )   (18,243 )
Loss from discontinued operations     146       35       3,007       -        -        -        3,042       -        157       157         3,199  
Noncontrolling interest     2,559       3,569       3,059       -        -        229       6,857     (1,038 )   1     (1,037 )     -      5,820  
Share-based payment expense    11,028       -        -        -        -        -        -        -        -        -      11,028      11,028  
Acquisition related costs   13,044       -      7,966       -        -        -      7,966       -        -        -      5,078      13,044  
Other costs     -        -        -         -        -        -        -        -        -        -        -        -   
Adjusted EBITDA   23,944   $ 45,838   $ 49,997   $   $ (1,181 ) $ (359 ) $ 94,295   $ (4,796 ) $ (841 ) $ (5,637 ) $ (13,381 ) $ 75,277  
                                                                         
For More Information on HC2 Holdings, Inc., Please Contact:
Ashleigh Douglas
ir@HC2.com
212-339-5875

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HC2 Holdings, Inc.