INNOVATE Corp 8-K, filed Jan 19, 2021
INNOVATE Corp. (VATE)
8-K
2021-01-19
For: 2021-01-15
View Original
Added on
April 06, 2026
About this 8-K
INNOVATE Corp filed this 8-K on January 19, 2021, reporting on events of January 15, 2021.
Items reported
- Item 2.01: Completed an acquisition or sale of assets
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 15, 2021
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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).
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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. o | ||
Item 2.01 - Completion of Acquisition or Disposition of Assets
On January 15, 2021, HC2 Holdings, Inc., a Delaware corporation (“HC2”), closed on the previously announced sale of its majority-owned subsidiary Beyond6, Inc. (“Beyond6”) to an affiliate of Mercuria Investments US, Inc., pursuant to an Agreement and Plan of Merger, dated as of December 30, 2020, among Beyond6, Greenfill, Inc., a Delaware corporation (“Parent”), Greenfill Merger, Inc., a newly-formed Delaware corporation and wholly-owned subsidiary of Parent, and an affiliate of HC2 as the Stockholder Representative for the Beyond6 stockholders, as amended by the First Amendment to Agreement and Plan of Merger dated as of January 15, 2021 (as amended, the “Merger Agreement”). The purchase price of the transaction payable to selling holders at closing of Beyond6’s equity, net of Beyond6’s debt and transaction expenses, customary purchase price adjustments and escrow arrangements as set forth in the Merger Agreement, was approximately $106.5 million. Net proceeds received by HC2 at closing was approximately $70.0 million in cash, which HC2 intends to use to reduce debt.
The foregoing information is a summary of the transactions described above and, as such, is not complete, and is qualified in its entirety by reference to the full text of the Merger Agreement, which was filed as Exhibit 2.1 to the Current Report on Form 8-K filed by HC2 on December 30, 2020, and the First Amendment to the Merger Agreement, which is filed as Exhibit 2.2 to this report, and are incorporated herein by reference.
Item 7.01 - Regulation FD Disclosure
On January 19, 2021, HC2 issued a press release announcing the closing of the transactions contemplated under the Merger Agreement, a copy of which is filed as Exhibit 99.1 hereto and is incorporated herein by reference.
The information set forth in (and incorporated by reference into) this Item 7.01, including Exhibit 99.1, 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. The information in this Item 7.01, including Exhibit 99.1, shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item Item 9.01 - Financial Statements and Exhibits
(b) Pro forma financial information
Unaudited pro forma condensed consolidated financial information of HC2 Holdings, Inc. to give effect to the transactions contemplated by the Merger Agreement is included in Exhibit 99.2 filed herewith and incorporated by reference into this Item 9.01(b).
(d) Exhibits
Exhibit No. | Description | ||||
| 2.1* | |||||
| 2.2 | |||||
| 99.1 | |||||
| 99.2 | |||||
| 104 | Cover Page Interactive Data File (the cover page XBRL tags are embedded within the inline XBRL document). | ||||
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.
Date: January 19, 2021
HC2 Holdings, Inc. (Registrant) | |||||||||||||||||
| By: | /s/ Michael J. Sena | ||||||||||||||||
| Name: Michael J. Sena | |||||||||||||||||
| Title: Chief Financial Officer | |||||||||||||||||
EXHIBIT 2.2
Execution Version
FIRST AMENDMENT
TO
AGREEMENT AND PLAN OF MERGER
This FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this “Amendment”), dated as of January 15, 2021, is made by and among BEYOND6, INC., a Delaware corporation (“Beyond6”); Greenfill, Inc., a Delaware corporation and wholly-owned subsidiary of TopCo (“Parent”); Greenfill Merger, Inc., a Delaware corporation (“Sub”); and HC2 HOLDINGS 2, INC., a Delaware corporation, solely in its capacity as the Stockholders’ Representative (“Stockholders’ Representative”). Beyond6, Parent, Sub and the Stockholders’ Representative are also referred to herein individually as a “Party” and collectively as the “Parties”. Capitalized terms used, but not otherwise defined, herein shall have the meanings attributed to such terms in the Merger Agreement (as defined below).
WHEREAS, the Parties entered into that certain Agreement and Plan of Merger, dated as of December 30, 2020 (the “Merger Agreement”); and
WHEREAS, in accordance with Section 11.5 of the Merger Agreement, the Parties desire to amend the Merger Agreement, as more fully set forth herein.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Parties hereby agree as follows:
1.Amendment. The Merger Agreement is hereby amended as follows:
(a)Section 1.1 of the Merger Agreement is hereby amended and restated as follows:
(1)The definition of “Confidentiality Agreement” is hereby deleted and replaced in its entirety with the following:
““Confidentiality Agreement” means that certain Confidentiality Agreement, dated September 17, 2020, between HC2 Holdings Inc. and Mercuria Investments US, Inc., as amended by that certain Amendment No. 1 to Confidentiality Agreement, dated January 4, 2021, as may be further amended.”
(2)The definition of “Escrow Agreement” is hereby deleted and replaced in its entirety with the following:
““Escrow Agreement” means the Escrow Agreement, by and among Beyond6, Stockholders’ Representative, Parent and the Paying Agent, in a form and substance reasonably acceptable to the parties thereto.”
(3)The following definition is hereby added to Section 1.1 of the Merger Agreement:
“West Firm” means The West Firm, PLLC.
(b)Section 2.2 of the Merger Agreement is hereby amended by replacing the words “The West Firm, PLLC” used therein with the words “the West Firm”.
(c)Section 3.1(c) of the Merger Agreement is hereby amended by replacing the defined term “Paying Agent” used therein with the defined term “West Firm”.
(d)Section 3.1(d) of the Merger Agreement is hereby amended by replacing the defined term “Paying Agent” used therein with the defined term “West Firm”.
(e)Section 3.2(a) of the Merger Agreement is hereby amended and restated in its entirety to read as follows:
“(a) Paying Agent. The Paying Agent shall, at the joint written instruction of Parent and Stockholders’ Representative, and at Parent’s cost and expense, receive and disburse the Closing Date Cash Payment and the Escrow Funds, all in accordance with the terms of the Escrow Agreement and this Agreement, including Section 3.2, Section 3.3, Section 3.4 and Section 7.8.”
(f)Section 3.2(b)(ii) of the Merger Agreement is hereby amended by replacing the defined term “Paying Agent” used therein with the defined term “West Firm”.
(g)The “Heading” and first two sentences of Section 3.2(c) of the Merger Agreement is hereby amended and restated in its entirety to read as follows:
“(c) Exchange Procedures. As soon as reasonably practicable after the date on which Parent and Beyond6 mutually agree upon the form and substance of the Letter of Transmittal and in any event within five (5) Business Days following such date, the Company shall cause the West Firm to mail to each holder of record of a Certificate whose shares of Company Common Stock were converted into the right to receive a portion of the Merger Consideration pursuant to the terms of this Agreement, (i) a Letter of Transmittal (which shall include an accompanying IRS Form W-9 or the applicable IRS Form W-8, shall specify that delivery shall be effected and risk of loss and title to the Certificates held by such person shall pass only upon proper delivery of the Certificates to the West Firm) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for a portion of the Merger Consideration. Upon surrender of a Certificate for cancellation to the West Firm or to such other agent or agents as may be appointed by the Company, together with such Letter of Transmittal, duly completed and validly executed, and such other documents as may reasonably be required by the West Firm, the holder of such Certificate shall be entitled to receive in exchange therefor the amount of cash equal to that portion of the Merger Consideration that such holder has the right to receive pursuant to the terms of this Agreement, including Section 3.2, Section 3.3 and Section 3.4, and the Certificate so surrendered shall forthwith be canceled.
(h)Section 3.2(d) of the Merger Agreement is hereby amended by replacing the defined term “Paying Agent” used therein with the defined term “West Firm”.
(i)Section 3.2(e) of the Merger Agreement is hereby amended and restated in its entirety to read as follows:
“(e) No Liability. None of Beyond6, Parent, Surviving Corporation, the West Firm or the Paying Agent shall be liable to any person in respect of any portion of the Merger Consideration that would otherwise have been payable in respect of any Certificate which is delivered to a public official in accordance with any applicable
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abandoned property, escheat or similar Law. If any Certificate shall not have been surrendered prior to two (2) years after the Effective Time (or immediately prior to such earlier date on which any portion of the Merger Consideration would otherwise escheat to or become the property of any Governmental Authority), any Merger Consideration payable in accordance with this Article 3 in respect thereof shall, to the extent permitted by applicable Law, become the property of the Surviving Corporation, free and clear of all claims or interest of any person previously entitled thereto.”
(j)Section 3.2(f) of the Merger Agreement is hereby amended and restated in its entirety to read as follows:
“(f) Lost Certificates. If any Certificate shall have been lost, stolen, defaced or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen, defaced or destroyed and, if required by the Surviving Corporation, the giving of an indemnification agreement, or the posting by such person of a bond in such amount as the Surviving Corporation may direct as indemnity, against any claim that may be made against it with respect to such Certificate, the Paying Agent, at the joint written instruction of Parent and Stockholders’ Representative, or the Surviving Corporation, as the case may be, shall pay the Merger Consideration in respect of such lost, stolen, defaced or destroyed Certificate.”
(k)Section 3.2(i) of the Merger Agreement is hereby amended by adding the word “with” before the reference to Section 3.2(b).
(l)Section 3.6(a) of the Merger Agreement is hereby amended by replacing the first two uses of the defined term “Paying Agent” therein with the defined term “West Firm” and by adding the words “and/or to the West Firm” immediately after the defined term “Paying Agent” in clause (iv) thereof.
(m)Section 3.6(e) of the Merger Agreement is hereby amended by replacing the defined term “Paying Agent” used therein with the defined term “West Firm”.
(n)Section 7.2(a) of the Merger Agreement is hereby amended by replacing the words “Confidential Information” used therein with the words “Evaluation Material”.
(o)Section 7.18 of the Merger Agreement is hereby amended (i) to delete the words “and Paying Agent” in the first sentence thereof; and (ii) to amend and restate the last sentence thereof in its entirety to read as follows: “The Paying Agent, at the joint written instruction of the Parent and Stockholders’ Representative, shall be responsible for the distribution of all amounts delivered by Parent to the Paying Agent in accordance with the Allocation Schedule.”
(p)Section 9.1 of the Merger Agreement is hereby amended (i) to delete the word “and” at the end of clause (i) thereof, (ii) delete the period at the end of clause (j) thereof and replace it with “; and”; and (iii) insert a new clause (k) at the end thereof which reads in its entirety as follows:
“(k) a joint instruction letter, duly executed by Stockholders’ Representative, delivered to the Paying Agent, directing the issuance of the Closing Date Cash Payment in the names and amounts set forth on the Allocation Schedule.”
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(q)Section 9.2(b) of the Merger Agreement is hereby amended and restated in its entirety to read as follows:
“(b) a joint instruction letter, duly executed by Parent, delivered to the Paying Agent, directing the issuance of the Closing Date Cash Payment in the names and amounts set forth on the Allocation Schedule;”
(r)Section 9.2(d) of the Merger Agreement is hereby amended and restated in its entirety to read as follows:
“(d) the Escrow Agreement, duly executed by the Parent and the Paying Agent;”
(s)Section 11.15 of the Merger Agreement is hereby amended by replacing each use of “The West Firm, PLLC” therein with the words “the West Firm”.
2.Reaffirmation. Except as expressly modified and amended hereby, the Merger Agreement shall continue in full force and effect, and the Parties ratify and confirm the Merger Agreement as modified and amended hereby. The Parties hereby covenant and agree that the Merger Agreement, as amended by this Amendment, the Exhibits and Schedules to the Merger Agreement and the Transaction Documents contain the complete agreement among the Parties and supersede any prior understandings, agreements or representations by or among the Parties, written or oral, which may have related to the subject matter hereof or thereof in any way. If any provision of this Amendment is construed to conflict with any provision of the Merger Agreement, the provisions of this Amendment shall be deemed controlling to the extent of that conflict.
3.References to Merger Agreement. The Merger Agreement, and any and all other agreements, documents, certificates or instruments now or hereafter executed and delivered pursuant to the terms thereof, as amended hereby, are hereby amended so that any reference in the Merger Agreement and such other documents to the “Agreement” shall mean a reference to the Merger Agreement, as amended hereby.
4.Miscellaneous. The terms and provisions of Section 1.2 (Rules of Construction), Section 11.3 (Notices), Section 11.5 (Amendments), Section 11.6 (Governing Law; Jurisdiction), Section 11.7 (No Waiver), Section 11.9 (Jury Waiver), Section 11.11 (Further Assurances), Section 11.13 (Headings) and Section 11.17 (Counterparts) of the Merger Agreement shall be deemed to apply mutatis mutandis to this Amendment.
* * * *
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IN WITNESS WHEREOF, the Parties have executed this Amendment as of the date first written above.
BEYOND6:
BEYOND6, INC.,
a Delaware corporation
By: /s/ Andrew D. West
Name: Andrew D. West
Title: President and CEO
[Signature Page to First Amendment to Agreement and Plan of Merger]
PARENT:
GREENFILL, INC.,
a Delaware corporation
By: /s/ Brian Falik
Name: Brian Falik
Title: President
[Signature Page to First Amendment to Agreement and Plan of Merger]
SUB:
GREENFILL MERGER, INC.,
a Delaware corporation
By: /s/ Bran Falik
Name: Brian Falik
Title: President
[Signature Page to First Amendment to Agreement and Plan of Merger]
STOCKHOLDERS’ REPRESENTATIVE:
HC2 HOLDINGS 2, INC.,
a Delaware corporation
By: /s/ Michael Sena
Name: Michael Sena
Title: CFO
[Signature Page to First Amendment to Agreement and Plan of Merger]
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
HC2 Completes Sale of Beyond6 Clean Energy Business
HC2 to Use Proceeds to Enhance Capital Structure as Company Sharpens Focus
NEW YORK, January 19, 2021 -- HC2 Holdings, Inc. (“HC2” or “the Company”) (NYSE: HCHC) announced today that it has completed the previously announced sale of its majority-owned clean energy subsidiary Beyond6, Inc. (“Beyond6”) to Mercuria Investments US, Inc. (“Mercuria”) for approximately $169 million.
HC2, which owned approximately 61% of Beyond6 on a fully diluted basis, received approximately $70 million in cash, which will be used to reduce debt.
“Completing this transaction marks another positive step forward for HC2. The net proceeds will reduce debt and further improve our capital structure, providing increased flexibility and enabling us to more effectively allocate resources to high growth, value generating areas of our business,” said Wayne Barr, Jr., Chief Executive Officer of HC2.
The transaction was previously announced on December 31, 2020. Goldman Sachs & Co. LLC acted as advisor to Beyond6 in connection with the transaction. Kramer Levin Naftalis & Frankel LLP acted as legal advisor to HC2, and Vinson & Elkins LLP acted as legal advisor to Mercuria.
About HC2
HC2 Holdings, Inc. (NYSE: HCHC) has a class-leading portfolio of assets primarily in Infrastructure, Life Sciences, Spectrum and Insurance. HC2 is headquartered in New York, New York and through its subsidiaries employs 2,864 people.
About Beyond6, Inc.
At Beyond6, Inc., the future is within reach and we can bring you closer to doing your part for sustainability. Beyond6, Inc. is a diversified energy solutions company focused on decarbonization. Through our growing network of CNG stations for the transportation industry and other decarbonization services, we are delivering opportunity to fleets across the country. Our team of highly-trained strategists, designers and operations professionals are changing perspectives as we move the alternative fuel industry forward. To learn more, visit www.beyond6.com.
About Mercuria Energy Group
Founded in 2004, Mercuria is one of the largest independent energy and commodity groups in the world, bringing efficiency to the commodity value chain with cutting-edge technology and unmatched expertise and solutions. Mercuria’s business includes trading flows, strategic assets and structuring activities that generate more than USD 120 billion in turnover. It operates from offices around the world, with a strong presence in the Americas, Asia and Europe. Information on Mercuria can be found on its website at www.mercuria.com.
Cautionary Statement Regarding Forward-Looking Statements
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This press release contains, and certain oral statements made by our representatives from time to time may contain, forward-looking statements regarding the sale of Beyond6 to Mercuria and our expected use of proceeds thereof, as well as our expectations regarding our ongoing evaluation of our business, capital structure and allocation of resources, including, without limitation, any statements regarding evaluation of our businesses, monetization of assets, allocation of resources and debt reduction, as well as those that may be identified by words such as “will,” “intend,” “expect,” “anticipate,” “should,” “could” and similar expressions, all of which involve risks, assumptions and uncertainties, many of which are outside of the Company’s control, and are subject to change. All forward-looking statements speak only as of the date made, and unless legally required, HC2 undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. HC2’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 statements and reports filed with the Securities and Exchange Commission (“SEC”), including in our reports on Forms 10-K, 10-Q, and 8-K. 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 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.
Media Contact:
Reevemark
Paul Caminiti/Pam Greene/Luc Herbowy
HC2@reevemark.com
(212) 433-4600
Investor Contact:
FNK IR
Matt Chesler, CFA
ir@hc2.com
(212) 235-2691
Exhibit 99.2
HC2 HOLDINGS, INC.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
On January 15, 2021, HC2 Holdings, Inc., a Delaware corporation (“HC2” or the "Company"), closed on the previously announced sale of its majority-owned subsidiary Beyond6, Inc. (“Beyond6”) to an affiliate of Mercuria Investments US, Inc., pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) among Beyond6, Greenfill, Inc., a Delaware corporation (“Parent”), Greenfill Merger, Inc., a newly-formed Delaware corporation and wholly-owned subsidiary of Parent, and an affiliate of HC2 as the Stockholder Representative for the Beyond6 stockholders. The purchase price of the transaction payable at closing to selling holders of Beyond6’s equity, net of Beyond6’s debt and transaction expenses, customary purchase price adjustments and escrow arrangements as set forth in the Merger Agreement was $106.5 million. Net proceeds received by HC2 at closing was $70.0 million in cash, which HC2 intends to use to reduce debt.
The disposition of Beyond6 pursuant to the Merger Agreement (the "Beyond6 Disposition") constituted a significant disposition for purposes of Item 2.01 of Form 8-K. As a result, the Company prepared the accompanying unaudited pro forma condensed consolidated financial statements in accordance with Article 8 and Article 11 of Regulation S-X. The Beyond6 Disposition qualifies as discontinued operations as it represents a strategic shift that will have a major effect on the Company's operations or financial results.
The following unaudited pro forma condensed consolidated balance sheet as of September 30, 2020 gives effect to the Beyond6 Disposition as if the transaction had occurred on September 30, 2020. The unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2020 and the year ended December 31, 2019 of the Company gives effect to the Beyond6 Disposition as if the transaction had occurred on January 1, 2019.
The unaudited pro forma condensed consolidated financial statements and the notes to the unaudited pro forma condensed consolidated financial statements are based on, and should be read in conjunction with:
•Our historical unaudited consolidated financial statements, related notes, and the section entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Quarterly Report on Form 10-Q as of and for the nine months ended September 30, 2020, filed on November 11, 2020.
•Our historical audited consolidated financial statements, related notes, and the section entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K as of and for the year ended December 31, 2019, filed on March 16, 2020 and recasted on Form 8-K filed on October 7, 2020.
The historical consolidated financial statements have been adjusted to reflect factually supportable items that are directly attributable to the transaction and, with respect to the unaudited pro forma condensed consolidated statements of operations, are expected to have a continuing impact on the results of operations of the Company.
The unaudited pro forma condensed consolidated financial statements have been prepared by HC2’s management in a manner consistent with the accounting policies adopted by the Company and are not necessarily indicative of the financial position or results of operations that would have been realized had the disposal been completed as of the dates indicated, nor are they meant to be indicative of the Company's anticipated financial position or future results of operations that the Company will experience after the disposal.
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| HC2 HOLDINGS, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET As of September 30, 2020 (in millions) | ||||||||||||||||||||||||||||||||||||||
| Historical | Pro Forma Adjustments | Total Pro Forma | ||||||||||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||||||||
| Investments: | ||||||||||||||||||||||||||||||||||||||
| Fixed maturity securities, available-for-sale at fair value | $ | 4,295.2 | $ | — | $ | 4,295.2 | ||||||||||||||||||||||||||||||||
| Equity securities | 74.2 | — | 74.2 | |||||||||||||||||||||||||||||||||||
| Mortgage loans | 121.1 | — | 121.1 | |||||||||||||||||||||||||||||||||||
| Policy loans | 18.2 | — | 18.2 | |||||||||||||||||||||||||||||||||||
| Other invested assets | 60.7 | — | 60.7 | |||||||||||||||||||||||||||||||||||
| Total investments | 4,569.4 | — | 4,569.4 | |||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | 163.6 | 60.5 | (a) | 224.1 | ||||||||||||||||||||||||||||||||||
| Accounts receivable, net | 252.3 | (15.0) | (b) | 237.3 | ||||||||||||||||||||||||||||||||||
| Recoverable from reinsurers | 961.4 | — | 961.4 | |||||||||||||||||||||||||||||||||||
| Deferred tax asset | 1.8 | — | 1.8 | |||||||||||||||||||||||||||||||||||
| Property, plant and equipment, net | 213.8 | (90.1) | (b) | 123.7 | ||||||||||||||||||||||||||||||||||
| Goodwill | 112.7 | (2.1) | (b) | 110.6 | ||||||||||||||||||||||||||||||||||
| Intangibles, net | 202.2 | (9.8) | (b) | 192.4 | ||||||||||||||||||||||||||||||||||
| Assets held for sale | 5.6 | — | 5.6 | |||||||||||||||||||||||||||||||||||
| Other assets | 205.6 | (4.0) | (b) | 201.6 | ||||||||||||||||||||||||||||||||||
| Total assets | $ | 6,688.4 | $ | (60.5) | $ | 6,627.9 | ||||||||||||||||||||||||||||||||
| Liabilities, temporary equity and stockholders’ equity | ||||||||||||||||||||||||||||||||||||||
| Life, accident and health reserves | $ | 4,622.9 | $ | — | $ | 4,622.9 | ||||||||||||||||||||||||||||||||
| Annuity reserves | 230.9 | — | 230.9 | |||||||||||||||||||||||||||||||||||
| Value of business acquired | 205.0 | — | 205.0 | |||||||||||||||||||||||||||||||||||
| Accounts payable and other current liabilities | 298.6 | (15.4) | (b) | 283.2 | ||||||||||||||||||||||||||||||||||
| Deferred tax liability | 113.2 | (2.1) | (b) | 111.1 | ||||||||||||||||||||||||||||||||||
| Debt obligations | 646.4 | (56.7) | (b) | 589.7 | ||||||||||||||||||||||||||||||||||
| Liabilities held for sale | 0.1 | — | 0.1 | |||||||||||||||||||||||||||||||||||
| Other liabilities | 135.7 | (9.1) | (b) | 126.6 | ||||||||||||||||||||||||||||||||||
| Total liabilities | 6,252.8 | (83.3) | 6,169.5 | |||||||||||||||||||||||||||||||||||
| Commitments and contingencies | ||||||||||||||||||||||||||||||||||||||
| Temporary equity | ||||||||||||||||||||||||||||||||||||||
| Preferred stock | 15.9 | — | 15.9 | |||||||||||||||||||||||||||||||||||
| Redeemable noncontrolling interest | 7.0 | — | 7.0 | |||||||||||||||||||||||||||||||||||
| Total temporary equity | 22.9 | — | 22.9 | |||||||||||||||||||||||||||||||||||
| Stockholders’ equity | ||||||||||||||||||||||||||||||||||||||
| Common stock, $0.001 par value | — | — | — | |||||||||||||||||||||||||||||||||||
| Shares authorized: 80,000,000 at September 30, 2020 and December 31, 2019; | — | |||||||||||||||||||||||||||||||||||||
| Shares issued: 48,413,438 and 46,810,676 at September 30, 2020 and December 31, 2019; | — | |||||||||||||||||||||||||||||||||||||
| Shares outstanding: 47,303,687 and 46,067,852 at September 30, 2020 and December 31, 2019, respectively | — | |||||||||||||||||||||||||||||||||||||
| Additional paid-in capital | 293.6 | — | 293.6 | |||||||||||||||||||||||||||||||||||
| Treasury stock, at cost | (4.2) | — | (4.2) | |||||||||||||||||||||||||||||||||||
| Accumulated deficit | (184.0) | 37.3 | (c) | (146.7) | ||||||||||||||||||||||||||||||||||
| Accumulated other comprehensive income | 266.4 | — | 266.4 | |||||||||||||||||||||||||||||||||||
| Total HC2 Holdings, Inc. stockholders’ equity | 371.8 | 37.3 | 409.1 | |||||||||||||||||||||||||||||||||||
| Noncontrolling interest | 40.9 | (14.5) | (b) | 26.4 | ||||||||||||||||||||||||||||||||||
| Total stockholders’ equity | 412.7 | 22.8 | 435.5 | |||||||||||||||||||||||||||||||||||
| Total liabilities, temporary equity and stockholders’ equity | $ | 6,688.4 | $ | (60.5) | $ | 6,627.9 | ||||||||||||||||||||||||||||||||
See notes to unaudited pro forma condensed consolidated financial statements
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| HC2 HOLDINGS, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS For the Nine Months Ended September 30, 2020 (in millions, except per share amounts) | |||||||||||||||||||||||||||||||||||||||||
| Historical | Pro Forma Adjustments | Financing Adjustments | Pro Forma | ||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 1,000.0 | $ | (31.0) | (d) | $ | — | $ | 969.0 | ||||||||||||||||||||||||||||||||
| Life, accident and health earned premiums, net | 86.8 | — | — | 86.8 | |||||||||||||||||||||||||||||||||||||
| Net investment income | 147.1 | — | — | 147.1 | |||||||||||||||||||||||||||||||||||||
| Net realized and unrealized losses on investments | (18.8) | — | — | (18.8) | |||||||||||||||||||||||||||||||||||||
| Net revenue | 1,215.1 | (31.0) | — | 1,184.1 | |||||||||||||||||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||||||||||||||||||||
| Cost of revenue | 886.9 | (14.8) | (d) | — | 872.1 | ||||||||||||||||||||||||||||||||||||
| Policy benefits, changes in reserves, and commissions | 195.0 | — | — | 195.0 | |||||||||||||||||||||||||||||||||||||
| Selling, general and administrative | 145.6 | (4.5) | (e) | — | 141.1 | ||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 4.1 | (6.3) | (f) | — | (2.2) | ||||||||||||||||||||||||||||||||||||
| Other operating expense, net | 7.5 | — | — | 7.5 | |||||||||||||||||||||||||||||||||||||
| Total operating expenses | 1,239.1 | (25.6) | — | 1,213.5 | |||||||||||||||||||||||||||||||||||||
| Loss from operations | (24.0) | (5.4) | — | (29.4) | |||||||||||||||||||||||||||||||||||||
| Interest expense | (62.4) | 3.0 | (g) | 6.0 | (k) | (53.4) | |||||||||||||||||||||||||||||||||||
| Loss on early extinguishment or restructuring of debt | (13.4) | 5.0 | (g) | — | (8.4) | ||||||||||||||||||||||||||||||||||||
| Loss from equity investees | (4.0) | — | — | (4.0) | |||||||||||||||||||||||||||||||||||||
| Gain on bargain purchase | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Other income, net | 74.1 | 0.8 | (h) | — | 74.9 | ||||||||||||||||||||||||||||||||||||
| Loss before income taxes | (29.7) | 3.4 | 6.0 | (20.3) | |||||||||||||||||||||||||||||||||||||
| Income tax expense | (4.4) | — | — | (4.4) | |||||||||||||||||||||||||||||||||||||
| (Loss) from continuing operations | (34.1) | 3.4 | 6.0 | (24.7) | |||||||||||||||||||||||||||||||||||||
| Loss attributable to noncontrolling interest and redeemable noncontrolling interest from continuing operations | (8.5) | (1.0) | (j) | — | (9.5) | ||||||||||||||||||||||||||||||||||||
| Loss income from continuing operations attributable to the Company | (42.6) | 2.4 | 6.0 | (34.2) | |||||||||||||||||||||||||||||||||||||
| Less: Preferred dividends, deemed dividends and repurchase gains | 1.2 | — | — | 1.2 | |||||||||||||||||||||||||||||||||||||
| Loss from continuing operations attributable to HC2 common stockholders | $ | (43.8) | $ | 2.4 | $ | 6.0 | $ | (35.4) | |||||||||||||||||||||||||||||||||
| Loss per share - continuing operations | |||||||||||||||||||||||||||||||||||||||||
| Basic | $ | (0.94) | $ | (0.76) | (l) | ||||||||||||||||||||||||||||||||||||
| Diluted | $ | (0.94) | $ | (0.76) | (l) | ||||||||||||||||||||||||||||||||||||
| Weighted average common shares outstanding | |||||||||||||||||||||||||||||||||||||||||
| Basic | 46.7 | 46.7 | |||||||||||||||||||||||||||||||||||||||
| Diluted | 46.7 | 46.7 | |||||||||||||||||||||||||||||||||||||||
See notes to unaudited pro forma condensed consolidated financial statements
3
| HC2 HOLDINGS, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS For the Year Ended December 31, 2019 (in millions, except per share amounts) | |||||||||||||||||||||||||||||||||||||||||
| Historical | Pro Forma Adjustments | Financing Adjustments | Pro Forma | ||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 1,490.2 | $ | (39.0) | (d) | $ | — | $ | 1,451.2 | ||||||||||||||||||||||||||||||||
| Life, accident and health earned premiums, net | 116.9 | — | — | 116.9 | |||||||||||||||||||||||||||||||||||||
| Net investment income | 203.8 | — | — | 203.8 | |||||||||||||||||||||||||||||||||||||
| Net realized and unrealized gains on investments | 0.7 | — | — | 0.7 | |||||||||||||||||||||||||||||||||||||
| Net revenue | 1,811.6 | (39.0) | — | 1,772.6 | |||||||||||||||||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||||||||||||||||||||
| Cost of revenue | 1,297.8 | (17.1) | (d) | — | 1,280.7 | ||||||||||||||||||||||||||||||||||||
| Policy benefits, changes in reserves, and commissions | 234.5 | — | — | 234.5 | |||||||||||||||||||||||||||||||||||||
| Selling, general and administrative | 190.1 | (4.9) | (e) | — | 185.2 | ||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 6.3 | (6.9) | (f) | — | (0.6) | ||||||||||||||||||||||||||||||||||||
| Other operating expense, net | 49.4 | — | — | 49.4 | |||||||||||||||||||||||||||||||||||||
| Total operating expenses | 1,778.1 | (28.9) | — | 1,749.2 | |||||||||||||||||||||||||||||||||||||
| Income from operations | 33.5 | (10.1) | — | 23.4 | |||||||||||||||||||||||||||||||||||||
| Interest expense | (79.5) | 3.5 | (g) | 6.1 | (k) | (69.9) | |||||||||||||||||||||||||||||||||||
| Loss on early extinguishment or restructuring of debt | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Income from equity investees | 1.6 | — | — | 1.6 | |||||||||||||||||||||||||||||||||||||
| Gain on bargain purchase | 1.1 | — | — | 1.1 | |||||||||||||||||||||||||||||||||||||
| Other income, net | 6.2 | 1.3 | (h) | — | 7.5 | ||||||||||||||||||||||||||||||||||||
| Loss before income taxes | (37.1) | (5.3) | 6.1 | (36.3) | |||||||||||||||||||||||||||||||||||||
| Income tax benefit | 20.3 | (0.8) | (i) | — | 19.5 | ||||||||||||||||||||||||||||||||||||
| Loss from continuing operations | (16.8) | (6.1) | 6.1 | (16.8) | |||||||||||||||||||||||||||||||||||||
| Loss attributable to noncontrolling interest and redeemable noncontrolling interest from continuing operations | 2.4 | 1.8 | (j) | — | 4.2 | ||||||||||||||||||||||||||||||||||||
| Loss income from continuing operations attributable to the Company | (14.4) | (4.3) | 6.1 | (12.6) | |||||||||||||||||||||||||||||||||||||
| Less: Preferred dividends, deemed dividends and repurchase gains | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Loss from continuing operations attributable to HC2 common stockholders | $ | (14.4) | $ | (4.3) | $ | 6.1 | $ | (12.6) | |||||||||||||||||||||||||||||||||
| Loss per share - continuing operations | |||||||||||||||||||||||||||||||||||||||||
| Basic | $ | (0.32) | $ | (0.28) | (l) | ||||||||||||||||||||||||||||||||||||
| Diluted | $ | (0.32) | $ | (0.28) | (l) | ||||||||||||||||||||||||||||||||||||
| Weighted average common shares outstanding | |||||||||||||||||||||||||||||||||||||||||
| Basic | 44.8 | 44.8 | |||||||||||||||||||||||||||||||||||||||
| Diluted | 44.8 | 44.8 | |||||||||||||||||||||||||||||||||||||||
See notes to unaudited pro forma condensed consolidated financial statements
4
HC2 HOLDINGS, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The unaudited pro forma condensed consolidated balance sheet as of September 30, 2020 gives effect to the Beyond6 Disposition as if it had occurred on September 30, 2020. The unaudited pro forma statements of operations give effect to the Beyond6 Disposition as if it had occurred on January 1, 2019.
The unaudited pro forma condensed consolidated balance sheet is derived from the unaudited historical financial statements of HC2 for the nine months ended September 30, 2020. The unaudited pro forma condensed consolidated statement of operations are derived from the unaudited historical financial statements of September 30, 2020 and December 31, 2019, as adjusted to give effect to the transaction.
The unaudited pro forma condensed consolidated financial statements are not necessarily indicative of what the financial position and results from operations actually would have been had the disposition been completed at the date indicated and includes adjustments which are preliminary and may be revised. Such revisions may result in material changes. The financial position shown herein is not necessarily indicative of what the past financial position of the consolidated companies would have been, nor necessarily indicative of the financial position of the consolidated Company in the future.
2. Unaudited Pro Forma Balance Sheet Adjustments
Adjustments included in the "Pro Forma Adjustments" column in the accompanying unaudited pro forma condensed consolidated balance sheet as of September 30, 2020 are as follows:
| (a) | This adjustment represents the proceeds received at the close of the transaction, less the cash and cash equivalents of Beyond6. Proceeds will be used to reduce debt within the 60 day redemption period. | |||||||
| (b) | These adjustments represent the elimination of assets, liabilities, and noncontrolling interest attributable to the transaction. | |||||||
| (c) | This adjustment represents the gain arising from the sale of Beyond6. This estimated gain has not been reflected in the pro forma consolidated statement of operations as it is considered to be nonrecurring in nature. | |||||||
3. Unaudited Pro Forma Statements of Operations Adjustments
Adjustments included in the "Pro Forma Adjustments" column in the accompanying unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2020 and the year ended December 31, 2019 are as follows:
| (d) | This adjustment reflects the elimination of revenues and cost of goods sold of the disposed entity. | |||||||
| (e) | This adjustment reflects the elimination of operating and administrative expenses of the disposed entity. Not included in the pro-forma results are anticipated savings due to costs that may be reduced or eliminated. | |||||||
| (f) | This adjustment reflects the elimination of depreciation and amortization expense of the disposed entity. | |||||||
| (g) | This adjustment reflects the elimination of interest expense and extinguishment loss of debt instruments of the disposed entity. | |||||||
| (h) | This adjustment reflects the elimination of other income of the disposed entity. | |||||||
| (i) | This adjustment reflects the elimination of income tax expense of the disposed entity. | |||||||
| (j) | This adjustment reflects the elimination of noncontrolling interest of the disposed entity. | |||||||
Financing updates included in the unaudited pro forma condensed consolidated Statements of Operations for the periods presented are as follows:
| Nine Months Ended September 30, 2020 | Year Ended December 31, 2019 | ||||||||||||||||||||||
| (k) | Interest Expense | ||||||||||||||||||||||
| Adjustment to reflect interest expense on the HC2 Senior Secured notes at 11.5% per annum | $ | 4.7 | $ | 5.3 | |||||||||||||||||||
| Adjustment to reflect interest expense on the HC2 LIBOR plus 6.75% Line of Credit | 0.6 | — | |||||||||||||||||||||
| Adjustment to reflect deferred financing costs and original issuance discount on the HC2 Senior Secured notes at 11.5% per annum | 0.6 | 0.8 | |||||||||||||||||||||
| Adjustment to reflect deferred financing costs on the HC2 LIBOR plus 6.75% Line of Credit | 0.1 | — | |||||||||||||||||||||
| $ | 6.0 | $ | 6.1 | ||||||||||||||||||||
5
| (l) | Basic and Diluted Income Per Share | |||||||
Earnings per share ("EPS") is calculated using the two-class method, which allocates earnings among common stock and participating securities to calculate EPS when an entity's capital structure includes either two or more classes of common stock or common stock and participating securities. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities. As such, shares of any unvested restricted stock of the Company are considered participating securities. The dilutive effect of options and their equivalents (including non-vested stock issued under stock-based compensation plans), is computed using the "treasury" method as this measurement was determined to be more dilutive between the two available methods in each period.
The Company had zero dilutive common share equivalents during the nine months ended September 30, 2020, due to the results being a loss from continuing operations and discontinued operations, net of tax.
The following table presents a reconciliation of net loss used in basic and diluted EPS from continuing operations, reflecting the Beyond6 Disposition (in millions, except per share amounts):
| Nine Months Ended September 30, 2020 | ||||||||||||||||||||||||||
| As Filed | Po forma Adjustments | Financing Adjustments | Total Pro Forma | |||||||||||||||||||||||
| Loss from continuing operations | $ | (34.1) | $ | 3.4 | $ | 6.0 | $ | (24.7) | ||||||||||||||||||
| Loss attributable to noncontrolling interest and redeemable noncontrolling interest from continuing operations | (8.5) | (1.0) | — | (9.5) | ||||||||||||||||||||||
| Loss income from continuing operations attributable to the Company | (42.6) | 2.4 | 6.0 | (34.2) | ||||||||||||||||||||||
| Less: Preferred dividends, deemed dividends and repurchase gains | 1.2 | — | — | 1.2 | ||||||||||||||||||||||
| Loss from continuing operations attributable to HC2 common stockholders | $ | (43.8) | $ | 2.4 | $ | 6.0 | $ | (35.4) | ||||||||||||||||||
| Earnings allocable to common shares: | ||||||||||||||||||||||||||
| Participating shares at end of period: | ||||||||||||||||||||||||||
| Weighted-average common stock outstanding | 46.7 | 46.7 | ||||||||||||||||||||||||
| Unvested restricted stock | — | — | ||||||||||||||||||||||||
| Preferred stock (as-converted basis) | 0.1 | 0.1 | ||||||||||||||||||||||||
| Total | 46.8 | 46.8 | ||||||||||||||||||||||||
| Percentage of income (loss) allocated to: | ||||||||||||||||||||||||||
| Common stock | 99.8 | % | 99.8 | % | ||||||||||||||||||||||
| Unvested restricted stock | — | % | — | % | ||||||||||||||||||||||
| Preferred stock | 0.2 | % | 0.2 | % | ||||||||||||||||||||||
| Numerator for earnings per share, basic: | ||||||||||||||||||||||||||
| Net loss from continuing operations attributable to common stock, basic | $ | (43.7) | $ | (35.3) | ||||||||||||||||||||||
| Earnings allocable to common shares, diluted: | ||||||||||||||||||||||||||
| Numerator for earnings per share, diluted | ||||||||||||||||||||||||||
| Effect of assumed shares for stock options, restricted shares and convertible instruments | $ | — | $ | — | ||||||||||||||||||||||
| Net loss from continuing operations attributable to common stock, diluted | $ | (43.7) | $ | (35.3) | ||||||||||||||||||||||
| Denominator for basic and dilutive earnings per share: | ||||||||||||||||||||||||||
| Weighted average common shares outstanding - basic | 46.7 | 46.7 | ||||||||||||||||||||||||
| Effect of assumed shares for stock options, restricted shares and convertible instruments | — | — | ||||||||||||||||||||||||
| Weighted average common shares outstanding - diluted | 46.7 | 46.7 | ||||||||||||||||||||||||
| Loss per share - continuing operations | ||||||||||||||||||||||||||
| Basic: | $ | (0.94) | $ | (0.76) | ||||||||||||||||||||||
| Diluted: | $ | (0.94) | $ | (0.76) | ||||||||||||||||||||||
6
The Company had no dilutive common share equivalents during the year ended December 31, 2019, due to the results of operations being a loss from continuing operations, net of tax.
The following table presents a reconciliation of net loss used in basic and diluted EPS from continuing operations, reflecting the Beyond6 Disposition (in millions, except per share amounts):
| Year Ended December 31, 2019 | ||||||||||||||||||||||||||
| As Recasted | Po forma Adjustments | Financing Adjustments | Total Pro Forma | |||||||||||||||||||||||
| Loss from continuing operations | $ | (16.8) | $ | (6.1) | $ | 6.1 | $ | (16.8) | ||||||||||||||||||
| Loss attributable to noncontrolling interest and redeemable noncontrolling interest from continuing operations | 2.4 | 1.8 | — | 4.2 | ||||||||||||||||||||||
| Loss income from continuing operations attributable to the Company | (14.4) | (4.3) | 6.1 | (12.6) | ||||||||||||||||||||||
| Less: Preferred dividends, deemed dividends and repurchase gains | — | — | — | — | — | — | ||||||||||||||||||||
| Loss from continuing operations attributable to HC2 common stockholders | $ | (14.4) | $ | (4.3) | $ | 6.1 | $ | (12.6) | ||||||||||||||||||
| Earnings allocable to common shares: | ||||||||||||||||||||||||||
| Participating shares at end of period: | ||||||||||||||||||||||||||
| Weighted-average common stock outstanding | 44.8 | 44.8 | ||||||||||||||||||||||||
| Unvested restricted stock | — | — | ||||||||||||||||||||||||
| Preferred stock (as-converted basis) | — | — | ||||||||||||||||||||||||
| Total | 44.8 | 44.8 | ||||||||||||||||||||||||
| Percentage of loss allocated to: | ||||||||||||||||||||||||||
| Common stock | 100.0 | % | 100.0 | % | ||||||||||||||||||||||
| Unvested restricted stock | — | % | — | % | ||||||||||||||||||||||
| Preferred stock | — | % | — | % | ||||||||||||||||||||||
| Numerator for earnings per share, basic: | ||||||||||||||||||||||||||
| Net loss from continuing operations attributable to common stock, basic | $ | (14.4) | $ | (12.6) | ||||||||||||||||||||||
| Earnings allocable to common shares, diluted: | ||||||||||||||||||||||||||
| Numerator for earnings per share, diluted | ||||||||||||||||||||||||||
| Effect of assumed shares for stock options, restricted shares and convertible instruments | — | — | ||||||||||||||||||||||||
| Net loss from continuing operations attributable to common stock, diluted | $ | (14.4) | $ | (12.6) | ||||||||||||||||||||||
| Denominator for basic and dilutive earnings per share | ||||||||||||||||||||||||||
| Weighted average common shares outstanding - basic | 44.8 | 44.8 | ||||||||||||||||||||||||
| Effect of assumed shares for stock options, restricted shares and convertible instruments | — | — | ||||||||||||||||||||||||
| Weighted average common shares outstanding - diluted | 44.8 | 44.8 | ||||||||||||||||||||||||
| Loss per share - continuing operations | ||||||||||||||||||||||||||
| Basic: | $ | (0.32) | $ | (0.28) | ||||||||||||||||||||||
| Diluted: | $ | (0.32) | $ | (0.28) | ||||||||||||||||||||||
7