INNOVATE Corp. - FORM 8-K - EX-99.4 - EXHIBIT 99.4 - November 3, 2014

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8-K - FORM 8-K - INNOVATE Corp.s000650x1_8k.htm
EX-99.3 - EXHIBIT 99.3 - INNOVATE Corp.s000650x1_ex99-3.htm
EX-99.2 - EXHIBIT 99.2 - INNOVATE Corp.s000650x1_ex99-2.htm
EX-99.6 - EXHIBIT 99.6 - INNOVATE Corp.s000650x1_ex99-6.htm
EX-99.10 - EXHIBIT 99.10 - INNOVATE Corp.s000650x1_ex99-10.htm
EX-99.9 - EXHIBIT 99.9 - INNOVATE Corp.s000650x1_ex99-9.htm
EX-99.12 - EXHIBIT 99.12 - INNOVATE Corp.s000650x1_ex99-12.htm
EX-99.11 - EXHIBIT 99.11 - INNOVATE Corp.s000650x1_ex99-11.htm
EX-99.8 - EXHIBIT 99.8 - INNOVATE Corp.s000650x1_ex99-8.htm
EX-99.5 - EXHIBIT 99.5 - INNOVATE Corp.s000650x1_ex99-5.htm
EX-99.1 - EXHIBIT 99.1 - INNOVATE Corp.s000650x1_ex99-1.htm
EX-99.7 - EXHIBIT 99.7 - INNOVATE Corp.s000650x1_ex99-7.htm

Exhibit 99.4

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF HC2 HOLDINGS, INC.

The following unaudited pro forma condensed consolidated financial statements have been derived from the historical audited and unaudited data for HC2, Bridgehouse Marine (the parent and holding company of Global Marine) and Schuff for the periods specified, on a combined basis, after giving effect to certain transactions that have occurred since June 30, 2014.

The following unaudited pro forma condensed consolidated financial statements have been prepared to give effect to the Schuff Acquisition, the Global Marine Acquisition, the offering of the notes and the use of proceeds therefrom and the following related transactions: the receipt of cash upon the release of certain escrows, the sale of PTI, the exercise of warrants previously issued by us, the borrowings under certain credit facilities, the purchase of a partial ownership interest in Novatel, the issuance of preferred stock, the repayments of credit facilities, the tender of Schuff common stock and the entry into a credit facility by HC2 to finance the Global Marine Acquisition all as more fully described in the accompanying Notes (the “Related Transactions”). The unaudited pro forma condensed consolidated balance sheet as of June 30, 2014 gives effect to the offering of the notes and the use of proceeds therefrom, the Global Marine Acquisition and Related Transactions as if they had occurred on June 30, 2014. The unaudited pro forma condensed consolidated balance sheet is derived from the unaudited historical financial statements of HC2 and Bridgehouse Marine as of June 30, 2014. The unaudited historical balance sheet of Bridgehouse Marine has been translated from GBP to USD using the June 30, 2014 exchange rate of 1.7105.

The following unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2013 and the unaudited pro forma condensed consolidated statement of operations for the six months ended June 30, 2014 and 2013 give effect to the Schuff Acquisition, the Global Marine Acquisition, the offering of the notes and the use of proceeds therefrom and Related Transactions as if they had occurred on January 1, 2013. The unaudited pro forma condensed consolidated statement of operations is derived from the audited historical financial statements of HC2 and Bridgehouse Marine as of and for the year ended December 31, 2013 and Schuff as of and for the year ended December 29, 2013 and the unaudited historical financial statements of HC2 and Bridgehouse Marine as of and for the six months ended June 30, 2014 and 2013 and Schuff as of June 29, 2014 and June 30, 2013 and for the six months ended June 29, 2014 and June 30, 2013. The audited historical statement of operations of Bridgehouse Marine has been translated from GBP to USD using the average exchange rate for the twelve month period ended December 31, 2013 of 1.5642, while the unaudited historical statement of operations of Bridgehouse Marine has been translated from GBP to USD using the average exchange rate for the six month period ended June 30, 2014 and 2013 of 1.6694 and 1.5434, respectively.

The following unaudited pro forma condensed consolidated statement of operations for the LTM Period gives effect to the offering of the notes and the use of proceeds therefrom, the Schuff Acquisition, Global Marine Acquisition and Related Transactions as if they had occurred on January 1, 2013.

The Global Marine Acquisition was accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total estimated purchase price, calculated as described in Note 2 to these unaudited pro forma condensed consolidated financial statements, is allocated to the tangible and intangible assets acquired and liabilities assumed in connection with the Global Marine Acquisition, based on their estimated fair values as of the effective date of the Global Marine Acquisition. The preliminary allocation of the purchase price was based upon management’s preliminary valuation of the fair value of tangible assets acquired and liabilities assumed and such estimates and assumptions are subject to change.

The unaudited pro forma condensed consolidated financial statements do not include any adjustments regarding liabilities incurred or cost savings achieved resulting from the integration of the companies, as management is in the process of assessing what, if any, future actions are necessary. The unaudited pro forma condensed consolidated financial statements are not intended to represent or be indicative of the consolidated results of operations or financial condition of HC2 that would have been reported had the acquisition been completed as of the dates presented, and should not be construed as representative of the future consolidated results of operations or financial condition of the combined entity.

The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the historical audited and unaudited consolidated financial statements of Schuff and Bridgehouse Marine and the exhibits entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of HC2,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Schuff” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Global Marine”.

 

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2014

Pro Forma Adjustments
HC2 Holdings, Inc.
June 30, 2014
Bridgehouse
Marine
Limited
June 30, 2014
Bridgehouse
Marine
Limited
Purchase Price
Accounting
Adjustments
Other
Pro Forma
Adjustments
Pro Forma
June 30, 2014
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
40,831
 
$
33,300
 
$
(136,556
)
 
(BM1
)
$
731
 
 
(1
)
$
83,622
 
 
 
 
 
 
 
 
4,097
 
 
(BM3
)
 
1,720
 
 
(2
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(607
)
 
(3
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,988
 
 
(4
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17,000
 
 
(5
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(14,412
)
 
(6
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(68,817
)
 
(7
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11,000
 
 
(8
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
201,126
 
 
(9
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
36,000
 
 
(10
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(37,529
)
 
(11
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(250,000
)
 
(12
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
240,750
 
 
(13
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments - current
 
757
 
 
—
 
 
 
 
 
 
 
 
 
 
 
 
 
 
757
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accounts receivable (net of allowance for doubtful accounts receivable)
 
138,043
 
 
38,573
 
 
—
 
 
 
 
 
—
 
 
 
 
 
176,616
 
Cost and recognized earnings in excess of billings on uncompleted contracts
 
25,737
 
 
—
 
 
—
 
 
 
 
 
—
 
 
 
 
 
25,737
 
Inventory
 
16,990
 
 
12,550
 
 
—
 
 
 
 
 
—
 
 
 
 
 
29,540
 
Prepaid expenses and other current assets
 
37,826
 
 
38,873
 
 
—
 
 
 
 
 
(19,491
)
 
(1
)
 
54,207
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(3,001
)
 
(2
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets held for sale
 
9,251
 
 
—
 
 
—
 
 
 
 
 
(5,656
)
 
(3
)
 
3,595
 
Total current assets
 
269,435
 
 
123,296
 
 
(132,459
)
 
 
 
 
113,802
 
 
 
 
 
374,074
 
Restricted cash
 
—
 
 
2,934
 
 
—
 
 
 
 
 
—
 
 
 
 
 
2,934
 
Property and equipment – net
 
83,226
 
 
117,800
 
 
47,205
 
 
(BM7
)
 
—
 
 
 
 
 
248,231
 
Goodwill
 
27,911
 
 
—
 
 
136,556
 
 
(BM1
)
 
—
 
 
 
 
 
36,691
 
 
 
 
 
 
 
 
(114,244
)
 
(BM2
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(4,276
)
 
(BM4
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(5,816
)
 
(BM5
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2,224
)
 
(BM6
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(47,205
)
 
(BM7
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1,382
)
 
(BM8
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
47,371
 
 
(BM9
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other intangible assets – net
 
4,615
 
 
—
 
 
4,276
 
 
(BM4
)
 
—
 
 
 
 
 
16,931
 
 
 
 
 
 
 
 
5,816
 
 
(BM5
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,224
 
 
(BM6
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment - long-term
 
—
 
 
77,005
 
 
(47,371
)
 
(BM9
)
 
14,412
 
 
(6
)
 
44,046
 
Other assets
 
6,568
 
 
7,636
 
 
—
 
 
 
 
 
(394
)
 
(7
)
 
23,060
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,899
 
 
(9
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(5,899
)
 
(12
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9,250
 
 
(13
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
391,755
 
$
328,671
 
$
(111,529
)
 
 
 
$
137,070
 
 
 
 
$
745,967
 

(in thousands)

 

 

Pro Forma Adjustments
HC2 Holdings, Inc.
June 30, 2014
Bridgehouse
Marine
Limited
June 30, 2014
Bridgehouse
Marine
Limited
Purchase Price
Accounting
Adjustments
Other
Pro Forma
Adjustments
Pro Forma
June 30, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
$
51,247
 
$
14,245
 
$
—
 
 
 
 
$
—
 
 
 
 
$
65,492
 
Accrued interconnection costs
 
9,815
 
 
—
 
 
—
 
 
 
 
 
—
 
 
 
 
 
9,815
 
Accrued payroll and employee benefits
 
13,366
 
 
—
 
 
—
 
 
 
 
 
—
 
 
 
 
 
13,366
 
Accrued expenses and other current liabilities
 
17,715
 
 
15,646
 
 
(1,382
)
 
(BM8
)
 
(3,000
)
 
(3
)
 
28,979
 
Billings in excess of costs and recognized earnings on uncompleted contracts
 
58,218
 
 
29,292
 
 
—
 
 
 
 
 
—
 
 
 
 
 
87,510
 
Accrued income taxes
 
—
 
 
1,259
 
 
—
 
 
 
 
 
—
 
 
 
 
 
1,259
 
Accrued interest
 
712
 
 
—
 
 
—
 
 
 
 
 
(638
)
 
(7
)
 
74
 
Current portion of long-term obligations
 
36,781
 
 
3,690
 
 
—
 
 
 
 
 
(18,760
)
 
(1
)
 
15,004
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1,281
)
 
(2
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(4,988
)
 
(4
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17,000
 
 
(5
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(438
)
 
(7
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(17,000
)
 
(7
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
207,025
 
 
(9
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
36,000
 
 
(10
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(243,025
)
 
(12
)
 
 
 
Liabilities held for sale
 
4,259
 
 
—
 
 
—
 
 
 
 
 
(4,259
)
 
(3
)
 
—
 
Total current liabilities
 
192,113
 
 
64,132
 
 
(1,382
)
 
 
 
 
(33,364
)
 
 
 
 
221,499
 
Long-term obligations
 
49,170
 
 
86,546
 
 
—
 
 
 
 
 
(44,847
)
 
(7
)
 
340,869
 
 
 
 
 
 
 
 
 
 
 
 
 
 
250,000
 
 
(13
)
 
 
 
Pension liability
 
—
 
 
49,967
 
 
—
 
 
 
 
 
—
 
 
 
 
 
49,967
 
Deferred tax liability
 
7,799
 
 
1,037
 
 
—
 
 
 
 
 
—
 
 
 
 
 
8,836
 
Other liabilities
 
1,028
 
 
1,240
 
 
—
 
 
 
 
 
—
 
 
 
 
 
2,268
 
Total liabilities
 
250,110
 
 
202,922
 
 
(1,382
)
 
 
 
 
171,789
 
 
 
 
 
623,439
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Temporary equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock
 
29,075
 
 
—
 
 
—
 
 
 
 
 
11,000
 
 
(8
)
 
40,075
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stockholders’ equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock
 
21
 
 
2,165
 
 
(2,165
)
 
(BM2
)
 
—
 
 
 
 
 
21
 
Additional paid-in capital
 
119,724
 
 
—
 
 
—
 
 
 
 
 
9,976
 
 
(4
)
 
133,522
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,822
 
 
(11
)
 
 
 
Retained earnings
 
(38,281
)
 
112,079
 
 
(112,079
)
 
(BM2
)
 
996
 
 
(3
)
 
(56,447
)
 
 
 
 
 
 
 
 
 
 
 
 
 
(6,288
)
 
(7
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(12,874
)
 
(12
)
 
 
 
Treasury stock, at cost
 
(378
)
 
—
 
 
—
 
 
 
 
 
—
 
 
 
 
 
(378
)
Accumulated other comprehensive loss
 
(14,188
)
 
—
 
 
—
 
 
 
 
 
—
 
 
 
 
 
(14,188
)
Total HC2 Holdings, Inc. stockholders’ equity before noncontrolling interest
 
66,898
 
 
114,244
 
 
(114,244
)
 
 
 
 
(4,368
)
 
 
 
 
62,530
 
Noncontrolling interest
 
45,672
 
 
11,505
 
 
4,097
 
 
(BM3
)
 
(41,351
)
 
(11
)
 
19,923
 
Total permanent equity
 
112,570
 
 
125,749
 
 
(110,147
)
 
 
 
 
(45,719
)
 
 
 
 
82,453
 
Total liabilities and stockholders’ equity
$
391,755
 
$
328,671
 
$
(111,529
)
 
 
 
$
137,070
 
 
 
 
$
745,967
 

(in thousands)

See notes to unaudited pro forma condensed consolidated financial statements

 

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2013

Pro Forma Adjustments
HC2
Holdings,
Inc.
Year Ended
December 31,
2013
Schuff
International,
Inc.
Year Ended
December 31,
2013
Bridgehouse
Marine
Limited
Year Ended
December 31,
2013
Bridgehouse
Marine
Limited
Purchase
Price
Accounting
Adjustments
Schuff
International,
Inc.

Purchase
Price
Accounting
Adjustments
Other
Pro Forma
Adjustments
Pro Forma
Year Ended
December 31,
2013
Net revenue
$
230,686
 
$
416,142
 
$
154,862
 
$
(1,264
)
 
(BM11
)
$
—
 
 
 
 
$
—
 
 
 
 
$
800,426
 
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
 
220,315
 
 
355,951
 
 
112,486
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
688,752
 
Selling, general and administrative
 
34,692
 
 
32,275
 
 
9,825
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
76,792
 
Depreciation and amortization
 
12,032
 
 
8,252
 
 
9,671
 
 
6,353
 
 
(BM10
)
 
1,692
 
 
(S1
)
 
—
 
 
 
 
 
38,000
 
(Gain) loss on sale or disposal of assets
 
(8
)
 
28
 
 
(63
)
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
(43
)
Asset impairment expense
 
2,791
 
 
—
 
 
—
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
2,791
 
Total operating expenses
 
269,822
 
 
396,506
 
 
131,919
 
 
6,353
 
 
 
 
 
1,692
 
 
 
 
 
—
 
 
 
 
 
806,292
 
Income (loss) from operations
 
(39,136
)
 
19,636
 
 
22,943
 
 
(7,617
)
 
 
 
 
(1,692
)
 
 
 
 
—
 
 
 
 
 
(5,866
)
Interest expense
 
(8
)
 
(3,669
)
 
(7,463
)
 
—
 
 
 
 
 
—
 
 
 
 
 
(26,250
)
 
(14
)
 
(37,390
)
Amortization of debt discount
 
—
 
 
—
 
 
—
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
Loss on early extinguishment or restructuring of debt
 
—
 
 
(1,426
)
 
—
 
 
—
 
 
 
 
 
—
 
 
 
 
 
 
 
 
 
 
 
(1,426
)
Gain from contingent value rights valuation
 
14,904
 
 
—
 
 
—
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
14,904
 
Interest income and other income (expense), net
 
(226
)
 
729
 
 
1,866
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
2,369
 
Foreign currency transaction gain (loss)
 
(588
)
 
—
 
 
1,553
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
965
 
Income from continuing operations before income taxes and income (loss) from equity investees
 
(25,054
)
 
15,270
 
 
18,899
 
 
(7,617
)
 
 
 
 
(1,692
)
 
 
 
 
(26,250
)
 
 
 
 
(26,444
)
Income (loss) from equity investees
 
—
 
 
—
 
 
5,095
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
5,095
 
Income tax benefit (expense)
 
7,442
 
 
(2,650
)
 
(734
)
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
4,058
 
Income (loss) from continuing operations
 
(17,612
)
 
12,620
 
 
23,260
 
 
(7,617
)
 
 
 
 
(1,692
)
 
 
 
 
(26,250
)
 
 
 
 
(17,291
)
Less: Net (income) loss attributable to the noncontrolling interest
 
—
 
 
88
 
 
(2,130
)
 
(405
)
 
(BM12
)
 
—
 
 
 
 
 
 
 
 
 
 
 
(2,447
)
Income (loss) from continuing operations attributable to HC2 Holdings, Inc.
$
(17,612
)
$
12,708
 
$
21,130
 
$
(8,022
)
 
 
 
$
(1,692
)
 
 
 
$
(26,250
)
 
 
 
$
(19,738
)

(in thousands)

See notes to unaudited pro forma condensed consolidated financial statements

 

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2014

Pro Forma Adjustments
HC2
Holdings,
Inc.
Six Months
Ended
June 30, 2014
Schuff
International,
Inc.
Five Months
Ended
May 26,
2014
Bridgehouse
Marine
Limited
Six Months
Ended
June 30,
2014
Bridgehouse
Marine
Limited
Purchase
Price
Accounting
Adjustments
Schuff
International,
Inc.
Purchase
Price
Accounting
Adjustments
Other
Pro Forma
Adjustments
Pro Forma
Six Months
Ended
June 30,
2014
Net revenue
$
139,940
 
$
177,823
 
$
88,029
 
$
—
 
 
(BM11
)
$
—
 
 
 
 
$
—
 
 
 
 
$
405,792
 
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
 
123,967
 
 
149,226
 
 
62,718
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
335,911
 
Selling, general and administrative
 
20,236
 
 
14,385
 
 
5,684
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
40,305
 
Depreciation and amortization
 
554
 
 
3,086
 
 
4,689
 
 
3,391
 
 
(BM10
)
 
(298
)
 
(S1
)
 
—
 
 
 
 
 
11,422
 
(Gain) loss on sale or disposal of assets
 
367
 
 
208
 
 
—
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
575
 
Asset impairment expense
 
—
 
 
—
 
 
—
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
Total operating expenses
 
145,124
 
 
166,905
 
 
73,091
 
 
3,391
 
 
 
 
 
(298
)
 
 
 
 
—
 
 
 
 
 
388,213
 
Income (loss) from operations
 
(5,184
)
 
10,918
 
 
14,938
 
 
(3,391
)
 
 
 
 
298
 
 
 
 
 
—
 
 
 
 
 
17,579
 
Interest expense
 
(1,013
)
 
(1,033
)
 
(2,379
)
 
—
 
 
 
 
 
—
 
 
 
 
 
(13,125
)
 
(14
)
 
(17,550
)
Amortization of debt discount
 
(576
)
 
—
 
 
—
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
(576
)
Loss on early extinguishment or restructuring of debt
 
—
 
 
—
 
 
—
 
 
—
 
 
 
 
 
—
 
 
 
 
 
(6,288
)
 
(7
)
 
(19,162
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(12,874
)
 
(12
)
 
 
 
Gain from contingent value rights valuation
 
—
 
 
—
 
 
—
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
Interest income and other income (expense), net
 
1,616
 
 
(37
)
 
1,806
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
3,385
 
Foreign currency transaction gain (loss)
 
403
 
 
—
 
 
2,102
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
2,505
 
Income from continuing operations before income taxes and income (loss) from equity investees
 
(4,754
)
 
9,848
 
 
16,467
 
 
(3,391
)
 
 
 
 
298
 
 
 
 
 
(32,287
)
 
 
 
 
(13,819
)
Income (loss) from equity investees
 
—
 
 
—
 
 
2,848
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
2,848
 
Income tax benefit (expense)
 
(1,955
)
 
(3,619
)
 
(740
)
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
(6,314
)
Income (loss) from continuing operations
 
(6,709
)
 
6,229
 
 
18,575
 
 
(3,391
)
 
 
 
 
298
 
 
 
 
 
(32,287
)
 
 
 
 
(17,285
)
Less: Net (income) loss attributable to the noncontrolling interest
 
(1,059
)
 
(58
)
 
(1,471
)
 
(411
)
 
(BM12
)
 
—
 
 
 
 
 
 
 
 
 
 
 
(2,999
)
Income (loss) from continuing operations attributable to HC2 Holdings, Inc.
$
(7,768
)
$
6,171
 
$
17,104
 
$
(3,802
)
 
 
 
$
298
 
 
 
 
$
(32,287
)
 
 
 
$
(20,284
)

(in thousands)

See notes to unaudited pro forma condensed consolidated financial statements

 

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2013

Pro Forma Adjustments
HC2
Holdings,
Inc.
Six Months
 Ended
June 30,
 2013
Schuff
 International,
 Inc.
Six Months
 Ended
June 30,
 2013
Bridgehouse
 Marine
 Limited
Six Months
 Ended
June 30,
 2013
Bridgehouse
 Marine
 Limited
 Purchase
 Price
Accounting
Adjustments
Schuff
International,
 Inc.
Purchase
 Price
Accounting
Adjustments
Other
Pro Forma
Adjustments
Pro Forma
Six Months
 Ended
June 30,
 2013
Net revenue
$
117,410
 
$
187,590
 
$
72,753
 
$
(849
)
 
(BM11
)
$
—
 
 
 
 
$
—
 
 
 
 
$
376,904
 
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
 
110,952
 
 
161,348
 
 
43,954
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
316,254
 
Selling, general and administrative
 
23,456
 
 
14,886
 
 
4,788
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
43,130
 
Depreciation and amortization
 
1
 
 
4,121
 
 
4,454
 
 
3,134
 
 
(BM10
)
 
530
 
 
(S1
)
 
—
 
 
 
 
 
12,240
 
(Gain) loss on sale or disposal of assets
 
(6
)
 
—
 
 
(130
)
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
(136
)
Asset impairment expense
 
—
 
 
—
 
 
—
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
Total operating expenses
 
134,403
 
 
180,355
 
 
53,066
 
 
3,134
 
 
 
 
 
530
 
 
 
 
 
—
 
 
 
 
 
371,488
 
Income (loss) from operations
 
(16,993
)
 
7,235
 
 
19,687
 
 
(3,983
)
 
 
 
 
(530
)
 
 
 
 
—
 
 
 
 
 
5,416
 
Interest expense
 
(5
)
 
(2,093
)
 
(3,798
)
 
—
 
 
 
 
 
—
 
 
 
 
 
(13,125
)
 
(14
)
 
(19,021
)
Amortization of debt discount
 
—
 
 
—
 
 
—
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
Loss on early extinguishment or restructuring of debt
 
—
 
 
(160
)
 
—
 
 
—
 
 
 
 
 
—
 
 
 
 
 
 
 
 
 
 
 
(160
)
Gain from contingent value rights valuation
 
14,904
 
 
—
 
 
—
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
14,904
 
Interest income and other income (expense), net
 
(108
)
 
130
 
 
57
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
79
 
Foreign currency transaction gain (loss)
 
(251
)
 
—
 
 
(2,394
)
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
(2,645
)
Income from continuing operations before income taxes and income (loss) from equity investees
 
(2,453
)
 
5,112
 
 
13,552
 
 
(3,983
)
 
 
 
 
(530
)
 
 
 
 
(13,125
)
 
 
 
 
(1,427
)
Income (loss) from equity investees
 
—
 
 
—
 
 
2,465
 
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
2,465
 
Income tax benefit (expense)
 
(218
)
 
(1,975
)
 
(327
)
 
—
 
 
 
 
 
—
 
 
 
 
 
—
 
 
 
 
 
(2,520
)
Income (loss) from continuing operations
 
(2,671
)
 
3,137
 
 
15,690
 
 
(3,983
)
 
 
 
 
(530
)
 
 
 
 
(13,125
)
 
 
 
 
(1,482
)
Less: Net (income) loss attributable to the noncontrolling interest
 
—
 
 
(58
)
 
(1,165
)
 
(316
)
 
(BM12
)
 
 
 
 
 
 
 
 
 
 
 
 
 
(1,539
)
Income (loss) from continuing operations attributable to HC2 Holdings, Inc.
$
(2,671
)
$
3,079
 
$
14,525
 
$
(4,299
)
 
 
 
$
(530
)
 
 
 
$
(13,125
)
 
 
 
$
(3,021
)

(in thousands)

See notes to unaudited pro forma condensed consolidated financial statements

 

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE TWELVE MONTHS ENDED JUNE 30, 2014

HC2 Holdings, Inc.
Pro Forma
Year Ended
December 31, 2013
HC2 Holdings, Inc.
Pro Forma
Six Months Ended
June 30, 2013
HC2 Holdings, Inc.
Pro Forma
Six Months Ended
June 30, 2014
HC2 Holdings, Inc.
LTM Pro Forma
Twelve Months Ended
June 30, 2014
Net revenue
$
800,426
 
$
376,904
 
$
405,792
 
$
829,314
 
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
 
688,752
 
 
316,254
 
 
335,911
 
 
708,409
 
Selling, general and administrative
 
76,792
 
 
43,130
 
 
40,305
 
 
73,967
 
Depreciation and amortization
 
38,000
 
 
12,240
 
 
11,422
 
 
37,182
 
(Gain) loss on sale or disposal of assets
 
(43
)
 
(136
)
 
575
 
 
668
 
Asset impairment expense
 
2,791
 
 
—
 
 
—
 
 
2,791
 
Total operating expenses
 
806,292
 
 
371,488
 
 
388,213
 
 
823,017
 
Income (loss) from operations
 
(5,866
)
 
5,416
 
 
17,579
 
 
6,297
 
Interest expense
 
(37,390
)
 
(19,021
)
 
(17,550
)
 
(35,919
)
Amortization of debt discount
 
—
 
 
—
 
 
(576
)
 
(576
)
Loss on early extinguishment or restructuring of debt
 
(1,426
)
 
(160
)
 
(19,162
)
 
(20,428
)
Gain from contingent value rights valuation
 
14,904
 
 
14,904
 
 
—
 
 
—
 
Interest income and other income (expense), net
 
2,369
 
 
79
 
 
3,385
 
 
5,675
 
Foreign currency transaction gain (loss)
 
965
 
 
(2,645
)
 
2,505
 
 
6,115
 
Income from continuing operations before income taxes and income (loss) from equity investees
 
(26,444
)
 
(1,427
)
 
(13,819
)
 
(38,836
)
Income (loss) from equity investees
 
5,095
 
 
2,465
 
 
2,848
 
 
5,478
 
Income tax benefit (expense)
 
4,058
 
 
(2,520
)
 
(6,314
)
 
264
 
Income (loss) from continuing operations
 
(17,291
)
 
(1,482
)
 
(17,285
)
 
(33,094
)
Less: Net (income) loss attributable to the noncontrolling interest
 
(2,447
)
 
(1,539
)
 
(2,999
)
 
(3,908
)
Income (loss) from continuing operations attributable to HC2 Holdings, Inc.
$
(19,738
)
$
(3,021
)
$
(20,284
)
$
(37,002
)

(in thousands)

The pro forma results for the twelve months ended June 30, 2014 were calculated by subtracting the pro forma results for the six months ended June 30, 2013 from the pro forma results for the year ended December 31, 2013, and adding the pro forma results for the six months ended June 30, 2014.

See notes to unaudited pro forma condensed consolidated financial statements

 

 

NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1.    Basis of Pro Forma Presentation

The Global Marine Acquisition will be accounted for under the acquisition method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) No. 805, Business Combinations (“ASC 805”). Under the acquisition method of accounting, we will allocate the purchase price to the tangible and intangible net assets acquired based on their relative fair values as of the date of acquisition.

The unaudited pro forma condensed consolidated financial statements are provided for informational purposes only and do not purport to be indicative of the Company’s consolidated financial position or consolidated results of operations which would actually have been obtained had such transactions been completed as of the date or for the periods presented, or of the consolidated financial position or consolidated results of operations that may be obtained in the future.

Note 2.    Preliminary Purchase Price Allocation

Based on management’s preliminary valuation of the fair value of tangible and intangible assets acquired and liabilities assumed, which are based on estimates and assumptions that are subject to change, and other factors as described in the introduction to these unaudited pro forma consolidated financial statements, the preliminary estimated purchase price is allocated as follows:

Cash and cash equivalents
$
33,300
 
Accounts receivable
 
38,573
 
Prepaid expenses and other current assets
 
38,873
 
Inventories
 
12,550
 
Restricted cash
 
2,934
 
Property and equipment, net
 
165,005
 
Goodwill
 
8,780
 
Trade names
 
5,816
 
Customer contracts
 
4,276
 
Developed technology
 
2,224
 
Investments
 
29,634
 
Other assets
 
7,636
 
Total assets acquired
 
349,601
 
Accounts payable
 
14,245
 
Accrued expenses and other current liabilities
 
14,264
 
Billings in excess of costs and recognized earnings on uncompleted contracts
 
29,292
 
Accrued income taxes
 
1,259
 
Current portion of long-term debt
 
3,690
 
Long-term debt
 
86,546
 
Pension liability
 
49,967
 
Deferred tax liability
 
1,037
 
Other liabilities
 
1,240
 
Noncontrolling interest
 
11,505
 
Total liabilities assumed
 
213,045
 
Enterprise value
 
136,556
 
Less: fair value of noncontrolling interest
 
4,097
 
Purchase price attributable to controlling interest
$
132,459
 

(in thousands)

 

 

The fair values used in the allocation of purchase price for the Global Marine Acquisition were estimated with the assistance of a third party valuation firm. The allocation of the estimated purchase price is based on the net assets as of September 22, 2014 and is in a preliminary stage as the Company is currently in the process of finalizing many of the purchase amounts presented herein. Prior to the end of the measurement period for finalizing the purchase price allocation, if information becomes available which would indicate material adjustments are required to the purchase price allocation, such adjustments will be included in the purchase price allocation retrospectively.

Based on the preliminary results of the valuation, we have allocated $12.3 million of the purchase price to acquired intangible assets. The following table summarizes the major classes of acquired intangible assets, as well as the respective weighted-average amortization periods:

Amount
Weighted-Average
Amortization
Period
(in thousands) (years)
Trade name
$
5,816
 
 
15
 
Customer contracts
 
4,276
 
 
4
 
Developed technology
 
2,224
 
 
8
 
Total
$
12,316
 
 
 
 

The amortization expense associated with the definite-lived intangible assets is not deductible for tax purposes.

The definite-lived intangible assets acquired will result in approximately the following annual amortization expense:

2014
$
1,113
 
2015
 
2,227
 
2016
 
1,542
 
2017
 
858
 
2018
 
858
 
Thereafter
 
5,718
 
$
12,316
 

(In thousands)

Of the total estimated purchase price, approximately $8.8 million has been allocated to goodwill and is not deductible for tax purposes. Goodwill represents the excess of the purchase price of an acquired business over the fair value of the net tangible liabilities assumed and intangible assets acquired. Goodwill will not be amortized but instead will be tested for impairment at least annually (more frequently if indicators of impairment arise). In the event that management determines that the goodwill has become impaired, the Company will incur an accounting charge for the amount of the impairment during the fiscal quarter in which the determination is made.

Note 3. Pro Forma Adjustments

Bridgehouse Marine (“BM”) Purchase Price Accounting Adjustments

Pro forma adjustments are made to reflect the purchase price of Bridgehouse Marine, adjustments of Bridgehouse Marine’s net assets and liabilities to estimates of the fair values of those assets and liabilities, the recording of intangible assets, the noncontrolling interest, the adjustment to depreciation expense resulting from the increase in net book value of property and equipment, the amortization expense related to the intangible assets and the adjustment to net income (loss) for the noncontrolling interest.

 

 

The specific purchase price accounting adjustments included in the unaudited pro forma condensed consolidated financial statements are as follows:

(BM1)To reflect the acquisition of approximately 100% of the outstanding common stock of Bridgehouse Marine.
(BM2)To eliminate Bridgehouse Marine’s common stock and retained earnings, in connection with the Global Marine Acquisition.
(BM3)To record the noncontrolling interest portion of approximately 3% of Bridgehouse Marine’s net assets.
(BM4)To reflect the estimated fair value of customer contracts of $4.3 million acquired with the purchase of Bridgehouse Marine.
(BM5)To reflect the estimated fair value of the trade name of $5.8 million acquired with the purchase of Bridgehouse Marine.
(BM6)To reflect the estimated fair value of developed technology of $2.2 million acquired with the purchase of Bridgehouse Marine.
(BM7)To record the estimated adjustment of Bridgehouse Marine’s property and equipment’s net book value to fair value of $47.2 million in connection with the purchase of Bridgehouse Marine.
(BM8)To record the adjustment to Bridgehouse Marine’s deferred revenue on installation and maintenance agreements.
(BM9)To record the estimated adjustment to Bridgehouse Marine’s investments.
(BM10)To reflect the adjustment to depreciation expense resulting from adjustment of net book value to fair value of Bridgehouse Marine’s property and equipment and the amortization of intangible assets arising from the acquisition of Bridgehouse Marine.
(BM11)To reflect the adjustment to installation and maintenance revenue.
(BM12)To reflect the noncontrolling interest income adjustment for the approximate 3% of net income (loss) not attributable to HC2’s ownership of Bridgehouse Marine.

Schuff (“S”) Purchase Price Accounting Adjustments

Purchase price accounting adjustments are made to reflect the adjustment to depreciation expense resulting from the increase in net book value of property and equipment, the amortization expense related to the intangible assets, the adjustment to net income (loss) for the noncontrolling interest and the issuance of common stock.

The specific purchase price accounting adjustments included in the unaudited pro forma condensed consolidated financial statements are as follows:

(S1)To reflect the adjustment to depreciation expense resulting from adjustment of net book value to fair value of Schuff’s property and equipment and the amortization of intangible assets arising from the acquisition of Schuff.

Other Pro Forma Adjustments

Pro forma adjustments are made to reflect the release of certain escrows, the sale of Primus Telecommunications, Inc., the exercise of warrants, the borrowings under a $17 million credit facility entered into in September 2014 (the “September Credit Facility”), the purchase of a partial ownership interest in Novatel, the issuance of $11 million of preferred stock, repayments of the balance of an $80 million credit facility entered into in May 2014 (the “May Credit Facility”), repayment of the September Credit Facility and the tender for Schuff common stock.

 

 

The specific pro forma adjustments included in the unaudited pro forma consolidated financial statements are as follows:

(1)To reflect the release of the BlackIron Data Indemnification escrow and paydown of the May Credit Facility, with the net to cash.
(2)To reflect the release of the PTI closing escrow and paydown of the May Credit Facility, with the net to cash.
(3)To reflect the sale of PTI by removing the held for sale assets and liabilities, reversing the deferred gain recognized initially in conjunction with the Closing escrow and recording gain on sale.
(4)To reflect the collection of proceeds associated with the exercise of HC2 warrants and paydown of May Credit Facility.
(5)To reflect the borrowings received from the September Credit Facility.
(6)To reflect the purchase of an approximate 20% ownership interest in Novatel.
(7)To reflect the payoff of the remaining balances on the May Credit Facility ($50.6 million) and September Credit Facility ($17 million). Also included is the write off of deferred financing costs and original issue discount to net income (loss); and accrued interest.
(8)To reflect the proceeds received from the issuance of 10,000 shares of HC2’s Series A-1 Preferred Stock at $1,000 per share.
(9)To reflect the net borrowings received from the Bridge Loan. The amount of the credit facility was $250.0 million, with an initial draw of $214.0 million, which includes a discount of $7.0 million and deferred financing costs of $5.9 million.
(10)To reflect the additional draw on the Bridge Loan of $36.0 million.
(11)To reflect the tender offer for Schuff common stock and open-market purchases of Schuff common stock which increased HC2’s ownership from 70% to approximately 90.6% and the anticipated short form merger that will increase HC2’s ownership of Schuff to 100%.
(12)To reflect the repayment of the Bridge Loan. Also included is the write off of deferred financing costs and original issue discount to net income (loss).
(13)To reflect the net proceeds received under this offering of $240.8 million, including deferred financing costs of $9.2 million.
(14)To reflect the interest expense on the debt associated with this offering at an assumed interest rate. A 0.125% change in this assumed interest rate would increase our interest expense by $3.125 million.

The unaudited pro forma condensed consolidated financial statements do not include adjustments for liabilities related to business integration activities for the Global Marine Acquisition as management is in the process of assessing what, if any, future actions are necessary. However, liabilities ultimately may be recorded for costs associated with business integration activities for the Global Marine Acquisition and such liabilities will be expensed as incurred in the HC2’s consolidated financial statements.

The Company has not identified any material pre-Global Marine Acquisition contingencies where the related asset, liability or impairment is probable and the amount of the asset, liability or impairment can be reasonably estimated.

 

 

Note 4. Unaudited Condensed Consolidated Financial Statements of Bridgehouse Marine Limited

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET ADJUSTED FOR US GAAP,
RECLASSIFICATIONS AND CURRENCY TRANSLATION
AS OF JUNE 30, 2014

UK GAAP
GBP £
Bridgehouse
Marine
Limited
June 30,
2014
US GAAP
Adjustments
GBP £
US GAAP
GBP £
Bridgehouse
Marine
Limited
June 30,
2014
Reclassifications
GBP £
Reclassified
US GAAP
GBP £
Bridgehouse
Marine
Limited
June 30,
2014
Exchange
Rate
US GAAP
USD $
Bridgehouse
Marine
Limited
June 30,
2014
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
£
19,468
 
£
0
 
£
19,468
 
£
0
 
£
19,468
 
 
1.7105
 
$
33,300
 
Investments - current
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
1.7105
 
 
—
 
Accounts receivable (net of allowance for doubtful accounts receivable)
 
22,551
 
 
—
 
 
22,551
 
 
—
 
 
22,551
 
 
1.7105
 
 
38,573
 
Cost and recognized earnings in excess of billings on uncompleted contracts
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
1.7105
 
 
—
 
Inventory
 
7,337
 
 
—
 
 
7,337
 
 
—
 
 
7,337
 
 
1.7105
 
 
12,550
 
Prepaid expenses and other current assets
 
22,726
 
 
—
 
 
22,726
 
 
—
 
 
22,726
 
 
1.7105
 
 
38,873
 
Assets held for sale
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
1.7105
 
 
—
 
Total current assets
 
72,082
 
 
—
 
 
72,082
 
 
—
 
 
72,082
 
 
 
 
 
123,296
 
Restricted cash
 
1,715
 
 
-
 
 
1,715
 
 
—
 
 
1,715
 
 
1.7105
 
 
2,934
 
Property and equipment–net
 
96,466
 
 
(27,597
)
 
68,869
 
 
—
 
 
68,869
 
 
1.7105
 
 
117,800
 
Goodwill
 
(10,755
)
 
10,755
 
 
—
 
 
—
 
 
—
 
 
1.7105
 
 
—
 
Other intangible assets – net
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
1.7105
 
 
—
 
Investment – long–term
 
45,019
 
 
—
 
 
45,019
 
 
—
 
 
45,019
 
 
1.7105
 
 
77,005
 
Other assets
 
4,464
 
 
—
 
 
4,464
 
 
—
 
 
4,464
 
 
1.7105
 
 
7,636
 
Total assets
£
208,991
 
£
(16,842
)
£
192,149
 
£
0
 
£
192,149
 
 
1.7105
 
$
328,671
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
£
8,328
 
£
0
 
£
8,328
 
£
0
 
£
8,328
 
 
1.7105
 
$
14,245
 
Accrued interconnection costs
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
1.7105
 
 
—
 
Accrued payroll and employee benefits
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
1.7105
 
 
—
 
Accrued expenses and other current liabilities
 
9,147
 
 
—
 
 
9,147
 
 
—
 
 
9,147
 
 
1.7105
 
 
15,646
 
Billings in excess of costs and recognized earnings on uncompleted contracts
 
17,125
 
 
—
 
 
17,125
 
 
—
 
 
17,125
 
 
1.7105
 
 
29,292
 
Accrued income taxes
 
736
 
 
—
 
 
736
 
 
—
 
 
736
 
 
1.7105
 
 
1,259
 
Accrued interest
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
1.7105
 
 
—
 
Current portion of long–term obligations
 
—
 
 
—
 
 
—
 
 
2,157
 
 
2,157
 
 
1.7105
 
 
3,690
 
Liabilities held for sale
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
1.7105
 
 
—
 
Total current liabilities
 
35,336
 
 
—
 
 
35,336
 
 
2,157
 
 
37,493
 
 
1.7105
 
 
64,132
 
Long–term obligations
 
52,754
 
 
—
 
 
52,754
 
 
(2,157
)
 
50,597
 
 
1.7105
 
 
86,546
 
Pension liability
 
29,212
 
 
—
 
 
29,212
 
 
—
 
 
29,212
 
 
1.7105
 
 
49,967
 
Deferred tax liability
 
606
 
 
—
 
 
606
 
 
—
 
 
606
 
 
1.7105
 
 
1,037
 
Other liabilities
 
725
 
 
—
 
 
725
 
 
—
 
 
725
 
 
1.7105
 
 
1,240
 
Total liabilities
 
118,633
 
 
—
 
 
118,633
 
 
—
 
 
118,633
 
 
1.7105
 
 
202,922
 

(in thousands, except exchange rate)

 

 

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET ADJUSTED FOR US GAAP,
RECLASSIFICATIONS AND CURRENCY TRANSLATION
AS OF JUNE 30, 2014

UK GAAP
GBP £
Bridgehouse
Marine
Limited
June 30,
2014
US GAAP
Adjustments
GBP £
US GAAP
GBP £
Bridgehouse
Marine
Limited
June 30,
2014
Reclassifications
GBP £
Reclassified
US GAAP
GBP £
Bridgehouse
Marine
Limited
June 30,
2014
Exchange
Rate
US GAAP
USD $
Bridgehouse
Marine
Limited
June 30,
2014
Commitments and contingencies
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Temporary equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
1.7105
 
 
—
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stockholders’ equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock
 
1,266
 
 
—
 
 
1,266
 
 
—
 
 
1,266
 
 
1.7105
 
 
2,165
 
Additional paid–in capital
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
1.7105
 
 
—
 
Retained earnings
 
48,373
 
 
17,151
 
 
65,524
 
 
—
 
 
65,524
 
 
1.7105
 
 
112,079
 
Revaluation reserve
 
30,594
 
 
(30,594
)
 
—
 
 
—
 
 
—
 
 
1.7105
 
 
—
 
Treasury stock, at cost
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
1.7105
 
 
—
 
Accumulated other comprehensive loss
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
1.7105
 
 
—
 
Total HC2 Holdings, Inc. stockholders’ equity before noncontrolling interest
 
80,233
 
 
(13,443
)
 
66,790
 
 
—
 
 
66,790
 
 
1.7105
 
 
114,244
 
Noncontrolling interest
 
10,125
 
 
(3,399
)
 
6,726
 
 
—
 
 
6,726
 
 
1.7105
 
 
11,505
 
Total permanent equity
 
90,358
 
 
(16,842
)
 
73,516
 
 
—
 
 
73,516
 
 
1.7105
 
 
125,749
 
Total liabilities and stockholders’ equity
£
208,991
 
£
(16,842
)
£
192,149
 
£
0
 
£
192,149
 
 
1.7105
 
$
328,671
 

(in thousands, except exchange rate)

 

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS ADJUSTED FOR US GAAP, RECLASSIFICATIONS AND CURRENCY TRANSLATION
FOR THE YEAR ENDED DECEMBER 31, 2013

UK GAAP
GBP £
Bridgehouse
Marine
Limited
Year Ended
December 31,
2013
US GAAP
Adjustments
GBP £
US GAAP
GBP £
Bridgehouse
Marine
Limited
Year Ended
December 31,
2013
Reclassifications
GBP £
Reclassified
US GAAP
GBP £
Bridgehouse
Marine
Limited
Year Ended
December 31,
2013
Exchange
Rate
US GAAP
USD $
Bridgehouse
Marine
Limited
Year Ended
December 31,
2013
Net revenue
£
99,004
 
£
—
 
£
99,004
 
£
—
 
£
99,004
 
 
1.5642
 
$
154,862
 
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
 
71,913
 
 
—
 
 
71,913
 
 
—
 
 
71,913
 
 
1.5642
 
 
112,486
 
Selling, general and administrative
 
6,281
 
 
—
 
 
6,281
 
 
—
 
 
6,281
 
 
1.5642
 
 
9,825
 
Depreciation and amortization
 
9,902
 
 
(3,719
)
 
6,183
 
 
—
 
 
6,183
 
 
1.5642
 
 
9,671
 
(Gain) loss on sale or disposal of assets
 
(40
)
 
—
 
 
(40
)
 
—
 
 
(40
)
 
1.5642
 
 
(63
)
Total operating expenses
 
88,056
 
 
(3,719
)
 
84,337
 
 
—
 
 
84,337
 
 
1.5642
 
 
131,919
 
Income (loss) from operations
 
10,948
 
 
3,719
 
 
14,667
 
 
—
 
 
14,667
 
 
1.5642
 
 
22,943
 
Interest expense
 
(4,771
)
 
—
 
 
(4,771
)
 
—
 
 
(4,771
)
 
1.5642
 
 
(7,463
)
Amortization of debt discount
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
1.5642
 
 
—
 
Loss on early extinguishment or restructuring of debt
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
1.5642
 
 
—
 
Gain from contingent value rights valuation
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
1.5642
 
 
—
 
Interest income and other income (expense), net
 
1,193
 
 
—
 
 
1,193
 
 
—
 
 
1,193
 
 
1.5642
 
 
1,866
 
Foreign currency transaction gain (loss)
 
913
 
 
80
 
 
993
 
 
—
 
 
993
 
 
1.5642
 
 
1,553
 
Income (loss) from continuing operations before income taxes and income (loss) from equity investees
 
8,283
 
 
3,799
 
 
12,082
 
 
—
 
 
12,082
 
 
1.5642
 
 
18,899
 
Income (loss) from equity investees
 
3,257
 
 
—
 
 
3,257
 
 
—
 
 
3,257
 
 
1.5642
 
 
5,095
 
Income tax benefit (expense)
 
(469
)
 
—
 
 
(469
)
 
—
 
 
(469
)
 
1.5642
 
 
(734
)
Income (loss) from continuing operations
 
11,071
 
 
3,799
 
 
14,870
 
 
—
 
 
14,870
 
 
1.5642
 
 
23,260
 
Less: Net (income) loss attributable to the noncontrolling interest
 
(1,362
)
 
—
 
 
(1,362
)
 
—
 
 
(1,362
)
 
1.5642
 
 
(2,130
)
Income (loss) from continuing operations attributable to Bridgehouse Marine Ltd.
£
9,709
 
£
3,799
 
£
13,508
 
£
—
 
£
13,508
 
 
1.5642
 
$
21,130
 

(in thousands, except exchange rate)

 

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS ADJUSTED FOR US GAAP, RECLASSIFICATIONS AND CURRENCY TRANSLATION
FOR THE SIX MONTHS ENDED JUNE 30, 2014

UK GAAP
GBP £
Bridgehouse
Marine
Limited
Six Months
Ended
June 30,
2014
US GAAP
Adjustments
GBP £
US GAAP
GBP £
Bridgehouse
Marine
Limited
Six Months
Ended
June 30,
2014
Reclassifications
GBP £
Reclassified
US GAAP
GBP £
Bridgehouse
Marine
Limited
Six Months
Ended
June 30,
2014
Exchange
Rate
US GAAP
USD $
Bridgehouse
Marine
Limited
Six Months
Ended
June 30,
2014
Net revenue
£
52,731
 
£
—
 
£
52,731
 
£
—
 
£
52,731
 
 
1.6694
 
$
88,029
 
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
 
37,569
 
 
—
 
 
37,569
 
 
—
 
 
37,569
 
 
1.6694
 
 
62,718
 
Selling, general and administrative
 
3,405
 
 
—
 
 
3,405
 
 
—
 
 
3,405
 
 
1.6694
 
 
5,684
 
Depreciation and amortization
 
4,699
 
 
(1,890
)
 
2,809
 
 
—
 
 
2,809
 
 
1.6694
 
 
4,689
 
(Gain) loss on sale or disposal of assets
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
1.6694
 
 
—
 
Total operating expenses
 
45,673
 
 
(1,890
)
 
43,783
 
 
—
 
 
43,783
 
 
1.6694
 
 
73,091
 
Income (loss) from operations
 
7,058
 
 
1,890
 
 
8,948
 
 
—
 
 
8,948
 
 
1.6694
 
 
14,938
 
Interest expense
 
(1,425
)
 
—
 
 
(1,425
)
 
—
 
 
(1,425
)
 
1.6694
 
 
(2,379
)
Amortization of debt discount
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
1.6694
 
 
—
 
Loss on early extinguishment or restructuring of debt
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
1.6694
 
 
—
 
Gain from contingent value rights valuation
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
1.6694
 
 
—
 
Interest income and other income (expense), net
 
1,082
 
 
—
 
 
1,082
 
 
—
 
 
1,082
 
 
1.6694
 
 
1,806
 
Foreign currency transaction gain (loss)
 
1,407
 
 
(148
)
 
1,259
 
 
—
 
 
1,259
 
 
1.6694
 
 
2,102
 
Income (loss) from continuing operations before income taxes and income (loss) from equity investees
 
8,122
 
 
1,742
 
 
9,864
 
 
—
 
 
9,864
 
 
1.6694
 
 
16,467
 
Income (loss) from equity investees
 
1,706
 
 
—
 
 
1,706
 
 
—
 
 
1,706
 
 
1.6694
 
 
2,848
 
Income tax benefit (expense)
 
(443
)
 
—
 
 
(443
)
 
—
 
 
(443
)
 
1.6694
 
 
(740
)
Income (loss) from continuing operations
 
9,385
 
 
1,742
 
 
11,127
 
 
—
 
 
11,127
 
 
1.6694
 
 
18,575
 
Less: Net (income) loss attributable to the noncontrolling interest
 
(881
)
 
—
 
 
(881
)
 
—
 
 
(881
)
 
1.6694
 
 
(1,471
)
Income (loss) from continuing operations attributable to Bridgehouse Marine Ltd.
£
8,504
 
£
1,742
 
£
10,246
 
£
—
 
£
10,246
 
 
1.6694
 
$
17,104
 

(in thousands, except exchange rate)

 

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS ADJUSTED FOR US GAAP, RECLASSIFICATIONS AND CURRENCY TRANSLATION
FOR THE SIX MONTHS ENDED JUNE 30, 2013

UK GAAP
GBP £
Bridgehouse
Marine
Limited
Six Months
Ended
June 30,
2013
US GAAP
Adjustments
GBP £
US GAAP
GBP £
Bridgehouse
Marine
Limited
Six Months
Ended
June 30,
2013
Reclassifications
GBP £
Reclassified
US GAAP
GBP £
Bridgehouse
Marine
Limited
Six Months
Ended
June 30,
2013
Exchange
Rate
US GAAP
USD $
Bridgehouse
Marine
Limited
Six Months
Ended
June 30,
2013
Net revenue
£
47,138
 
£
—
 
£
47,138
 
£
—
 
£
47,138
 
 
1.5434
 
$
72,753
 
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
 
28,479
 
 
—
 
 
28,479
 
 
—
 
 
28,479
 
 
1.5434
 
 
43,954
 
Selling, general and administrative
 
3,102
 
 
—
 
 
3,102
 
 
—
 
 
3,102
 
 
1.5434
 
 
4,788
 
Depreciation and amortization
 
4,746
 
 
(1,860
)
 
2,886
 
 
—
 
 
2,886
 
 
1.5434
 
 
4,454
 
(Gain) loss on sale or disposal of assets
 
(84
)
 
—
 
 
(84
)
 
—
 
 
(84
)
 
1.5434
 
 
(130
)
Total operating expenses
 
36,243
 
 
(1,860
)
 
34,383
 
 
—
 
 
34,383
 
 
1.5434
 
 
53,066
 
Income (loss) from operations
 
10,895
 
 
1,860
 
 
12,755
 
 
—
 
 
12,755
 
 
1.5434
 
 
19,687
 
Interest expense
 
(2,461
)
 
—
 
 
(2,461
)
 
—
 
 
(2,461
)
 
1.5434
 
 
(3,798
)
Amortization of debt discount
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
1.5434
 
 
—
 
Loss on early extinguishment or restructuring of debt
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
1.5434
 
 
—
 
Gain from contingent value rights valuation
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
1.5434
 
 
—
 
Interest income and other income (expense), net
 
37
 
 
—
 
 
37
 
 
—
 
 
37
 
 
1.5434
 
 
57
 
Foreign currency transaction gain (loss)
 
(1,551
)
 
—
 
 
(1,551
)
 
—
 
 
(1,551
)
 
1.5434
 
 
(2,394
)
Income (loss) from continuing operations before income taxes and income (loss) from equity investees
 
6,920
 
 
1,860
 
 
8,780
 
 
—
 
 
8,780
 
 
1.5434
 
 
13,552
 
Income (loss) from equity investees
 
1,597
 
 
—
 
 
1,597
 
 
—
 
 
1,597
 
 
1.5434
 
 
2,465
 
Income tax benefit (expense)
 
(212
)
 
—
 
 
(212
)
 
—
 
 
(212
)
 
1.5434
 
 
(327
)
Income (loss) from continuing operations
 
8,305
 
 
1,860
 
 
10,165
 
 
—
 
 
10,165
 
 
1.5434
 
 
15,690
 
Less: Net (income) loss attributable to the noncontrolling interest
 
(755
)
 
—
 
 
(755
)
 
—
 
 
(755
)
 
1.5434
 
 
(1,165
)
Income (loss) from continuing operations attributable to Bridgehouse Marine Ltd.
£
7,550
 
£
1,860
 
£
9,410
 
£
—
 
£
9,410
 
 
1.5434
 
$
14,525
 

(in thousands, except exchange rate)

 

 

Note 5. US GAAP Adjustments Explanatory Footnotes

Property and Equipment, net

U.K. GAAP: Uses historical cost or revalued amounts. Regular valuations of entire classes of assets are required when revaluation option is chosen. Bridgehouse Marine has chosen this option.

U.S. GAAP: Revaluations are not permitted.

The fixed asset register for all revalued equipment has been reworked to recalculate the depreciation charge and the net book value of these assets. The revaluation of the equipment has been reversed from the Revaluation Reserve line against the Net Book Value of the equipment, and the different depreciation charge has been reflected in retained reserves to align the accounts with U.S. GAAP conventions.

Goodwill

U.K. GAAP: Negative goodwill can occur when a firm is acquired at a bargain price; that is, it is purchased for below its fair market value. Any excess over the fair value of such assets is recognized in the income statement over the period likely to benefit.

U.S. GAAP: Negative goodwill is considered an extraordinary item under U.S. GAAP. Any amounts arising from a business combination is written off to earnings as amortization expense. It is presented separately on the face of the income statement, net of taxes. Disclosure of the tax impact is either on the face of the income statement or in the notes to the financial statement.

The goodwill was purchased in 2004 (with a useful life of 24 years) and a proportion of the gain has been recognized in the financial statements each year from that date. The balance will be written off in its entirety to align the accounts with U.S. GAAP conventions.

Joint Ventures

U.K. GAAP: Distinguishes between three types of joint ventures/arrangements: jointly controlled entities; joint arrangements that are not entities and contractual arrangements with the form but not the substance of a joint venture.

U.S. GAAP: Only refers to jointly controlled entities, where the arrangement is carried through a separate corporate entity.

Bridgehouse Marine joint ventures arrangements are solely of the former type so no adjustments are necessary.

Associates

An associate is an entity over which the investor has significant influence – that is, the power to participate in, but not control, the definition of an associate’s financial and operating policies. Participation in the entity’s financial and operating policies via representation on the entities board demonstrates significant influence. A 20% or more interest by an investor in an entity’s voting rights leads to a presumption of significant influence. The only difference between U.K. and U.S. GAAP is the presentation of results (operating profit, exceptional items, interest and tax) are reported separately. The Associates results in the financial statements will be amalgamated to reflect the U.S. GAAP results.

Deferred Taxes

U.K. GAAP: Under U.K. GAAP deferred taxation is provided in full on all material timing differences. Deferred tax assets are recognized where their recovery is considered more likely than not.

U.S. GAAP: U.S. GAAP requires deferred taxation to be provided in full using the liability method. In addition U.S. GAAP requires the recognition of the deferred tax consequences of differences between the assigned values and the tax bases of the identifiable intangible assets, with the exception of tax-deductible goodwill, in a purchase business combination.

 

 

A deduction of the asset amounts within the deferred tax balance has occurred to ensure adherence to the liability only method.

Provisions

UK GAAP and US GAAP have specific and very similar standards on accounting for provisions generally. With this in mind no adjustments are required.

Stock (Inventory)

Both US and UK GAAP define inventory as assets that are: held for sale in the ordinary course of the business; in the process of production or for sale in the form of materials; or supplies to be consumed in the production process or in rendering services. Therefore no adjustments are necessary for the Inventory balance.

Leases

There are no differences in accounting for Leases in US and UK GAAP.

Revenue (maintenance contracts)

For US GAAP, revenue is recognized on a straight line basis unless the pattern of costs indicates otherwise. A loss must be recognized immediately if the expected costs during the contract exceed unearned revenue. Bridgehouse Marine accounts for maintenance contracts in this fashion so no adjustments are necessary.

Pensions

Bridgehouse Marine’s defined benefit schemes have been calculated and accounted for under FRS17 with guidance from Aon Hewitt. For the period ended December 31, 2013, Global Marine Systems held a liability of £31.093 million for The Global Marine Systems Pension Plan.

Assumptions in reaching the Actuarial valuations can generally be taken as the same for US GAAP and FRS17 hence assets and liabilities are usually the same for balance sheet purposes. The key difference is in relation to the income statement and the recognition of gains and losses going forward. Gains and losses go through the Statement of Total Realised Gains and Losses (STRGL) rather than the Income Statement. For US GAAP, gains and losses are typically spread through the income statement to the extent they exceed a corridor. The corridor is typically measured as 10% of the maximum of the liabilities and the assets. It is possible to use a market related value of assets for assessing the return on assets that go through the Income Statement but to keep things as close as possible to FRS17 a company does not have to use a market related value for this and can just utilize the FRS17 method which uses the fair value of plan assets to determine the return on assets over the period.

There is an acknowledgment of these differences between the valuation methods of FRS17 and US GAAP (FAS 87), but it is considered that any movement in fund values and mortality assumptions will have no material effect on the Actuarial assumptions between the December 31, 2013 and June 30, 2014 balance sheet dates. Therefore no adjustments are to be made for the purpose of this exercise.

 

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