What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-11-09 compared with 2020-08-10 · 435 added, 351 removed, 1198 unchanged (40% of the section changed)

Financial Statements

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

9 unchanged sentences

Depreciation and amortization 2.4 2.2 4.1 3.7

Other operating income ( 2.2 ) ( 0.4 ) ( 2.0 ) ( 1.4 )

Other operating income (expense) 9.5 ( 0.3 ) 7.5 ( 1.7 )

Total operating expenses 395.4 420.0 1,239.1 1,289.0

Income (loss) from operations 4.9 33.6 ( 21.9 ) 59.2

(Loss) income from operations ( 2.1 ) 7.5 ( 24.0 ) 66.7

Interest expense ( 19.7 ) ( 20.1 ) ( 62.4 ) ( 58.0 )

Loss on early extinguishment or restructuring of debt ( 4.2 ) — ( 13.4 ) —

(Loss) income from equity investees ( 0.2 ) 7.2 ( 2.7 ) 1.3

Loss from equity investees ( 1.3 ) ( 1.3 ) ( 4.0 ) —

Gain on bargain purchase — — — 1.1

Other income (loss) 7.3 6.1 74.1 4.7

Income (loss) from continuing operations before income taxes 43.9 18.0 ( 9.7 ) 22.3

(Loss) income from continuing operations before income taxes ( 20.0 ) ( 7.8 ) ( 29.7 ) 14.5

Income tax expense ( 1.6 ) ( 1.1 ) ( 4.4 ) ( 6.2 )

Income (loss) from continuing operations 28.5 16.9 ( 12.5 ) 17.2

Loss from discontinued operations (including loss on disposal of $ 39.3 million)

(Loss) income from continuing operations ( 21.6 ) ( 8.9 ) ( 34.1 ) 8.3

Income (loss) from discontinued operations (including loss on disposal of $ 39.3 million)

— 0.6 ( 60.0 ) ( 13.7 )

Net income (loss) 28.5 9.2 ( 72.5 ) 2.9

Net (income) loss attributable to noncontrolling interest and redeemable noncontrolling interest ( 15.4 ) 0.2 2.5 3.7

Net income (loss) attributable to HC2 Holdings, Inc.

Net loss ( 21.6 ) ( 8.3 ) ( 94.1 ) ( 5.4 )

Net loss attributable to noncontrolling interest and redeemable noncontrolling interest 4.3 1.2 6.8 4.9

Net loss attributable to HC2 Holdings, Inc.

( 17.3 ) ( 7.1 ) ( 87.3 ) ( 0.5 )

Preferred dividends, deemed dividends and repurchase gains 0.4 0.4 1.2 ( 0.4 )

Net income (loss) attributable to common stock and participating preferred stockholders $ 12.7 $ 9.0 $ ( 70.8 ) $ 7.4

Income (loss) per share - continuing operations

Net loss attributable to common stock and participating preferred stockholders $ ( 17.7 ) $ ( 7.5 ) $ ( 88.5 ) $ ( 0.1 )

(Loss) income per share - continuing operations

$ ( 0.38 ) $ ( 0.16 ) $ ( 0.94 ) $ 0.28

3 unchanged sentences

$ — $ — $ ( 0.95 ) $ ( 0.21 )

Income (loss) per share - Net income (loss) attributable to participating securities

(Loss) income per share - Net (loss) income attributable to participating securities

$ ( 0.38 ) $ ( 0.16 ) $ ( 1.89 ) $ —

5 unchanged sentences

HC2 HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited, in millions)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Net income (loss) $ 28.5 $ 9.2 $ ( 72.5 ) $ 2.9

Other comprehensive income (loss)

Net loss $ ( 21.6 ) $ ( 8.3 ) $ ( 94.1 ) $ ( 5.4 )

Other comprehensive income

Foreign currency translation adjustment ( 0.5 ) ( 2.7 ) 3.5 ( 2.5 )

1 unchanged sentence

Dispositions — — 22.1 —

Other comprehensive income (loss) 286.9 80.7 33.9 229.8

Comprehensive income (loss) 315.4 89.9 ( 38.6 ) 232.7

Comprehensive income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests 16.2 0.4 7.3 3.6

Comprehensive income (loss) attributable to HC2 Holdings, Inc.

Other comprehensive income 64.5 79.7 98.4 309.5

Comprehensive income 42.9 71.4 4.3 304.1

Comprehensive (loss) income attributable to noncontrolling interests and redeemable noncontrolling interests ( 4.6 ) 1.9 2.7 5.5

Comprehensive income attributable to HC2 Holdings, Inc.

$ 38.3 $ 73.3 $ 7.0 $ 309.6

3 unchanged sentences

(Unaudited, in millions, except share amounts)

June 30, December 31,

September 30, December 31,

Fixed maturity securities, available-for-sale at fair value $ 4,295.2 $ 4,028.9

32 unchanged sentences

Shares authorized:

80,000,000 at June 30, 2020 and December 31, 2019;

80,000,000 at September 30, 2020 and December 31, 2019;

Shares issued:

47,660,135 and 46,810,676 at June 30, 2020 and December 31, 2019;

48,413,438 and 46,810,676 at September 30, 2020 and December 31, 2019;

Shares outstanding:

46,550,384 and 46,067,852 at June 30, 2020 and December 31, 2019, respectively

47,303,687 and 46,067,852 at September 30, 2020 and December 31, 2019, respectively

Additional paid-in capital 293.6 281.1

Treasury stock, at cost:

1,109,751 and 742,824 shares at June 30, 2020 and December 31, 2019, respectively

1,109,751 and 742,824 shares at September 30, 2020 and December 31, 2019, respectively

( 4.2 ) ( 3.3 )

Accumulated deficit ( 184.0 ) ( 96.7 )

Accumulated other comprehensive income (loss) 201.7 168.7

Accumulated other comprehensive income 266.4 168.7

Total HC2 Holdings, Inc.

7 unchanged sentences

(Unaudited, in millions)

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Common Stock Additional

3 unchanged sentences

Shares Amount

Balance as of March 31, 2020 46.5 $ — $ 282.7 $ ( 4.2 ) $ ( 179.8 ) $ ( 84.6 ) $ 14.1 $ 46.4 $ 60.5 $ 18.6

Balance as of June 30, 2020 46.6 $ — $ 288.5 $ ( 4.2 ) $ ( 166.7 ) $ 201.7 $ 319.3 $ 45.9 $ 365.2 $ 18.7

Share-based compensation — — 3.0 — — — 3.0 — 3.0 —

2 unchanged sentences

Issuance of common stock 0.7 — — — — — — — — —

Issuance of preferred stock — — — — — — — — — 5.6

Transactions with noncontrolling interests — — 0.8 — — — 0.8 ( 2.0 ) ( 1.2 ) —

Net income — — — — 13.1 — 13.1 14.0 27.1 1.4

Other comprehensive income — — — — — 286.3 286.3 0.7 287.0 0.1

Balance as of June 30, 2020

Other — — 1.7 — — — 1.7 — 1.7 —

Net loss — — — — ( 17.3 ) — ( 17.3 ) ( 2.8 ) ( 20.1 ) ( 1.5 )

Other comprehensive income (loss) — — — — — 64.7 64.7 ( 0.2 ) 64.5 ( 0.1 )

Balance as of September 30, 2020

47.3 $ — $ 293.6 $ ( 4.2 ) $ ( 184.0 ) $ 266.4 $ 371.8 $ 40.9 $ 412.7 $ 22.9

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Common Stock Additional Paid-In Capital Treasury Stock Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total HC2 Stockholders' Equity Non- controlling Interest Total Stockholders’ Equity Temporary Equity

6 unchanged sentences

Issuance of common stock 1.6 — — — — — — — — —

Issuance of preferred stock — — — — — — — — — 5.6

Transactions with noncontrolling interests — — 6.9 — — — 6.9 ( 57.3 ) ( 50.4 ) ( 4.0 )

Other — — 1.7 — — — 1.7 — 1.7 —

Net loss — — — — ( 87.3 ) — ( 87.3 ) ( 3.8 ) ( 91.1 ) ( 3.0 )

Other comprehensive income — — — — — 97.7 97.7 8.2 105.9 1.3

Balance as of June 30, 2020

Balance as of September 30, 2020

47.3 $ — $ 293.6 $ ( 4.2 ) $ ( 184.0 ) $ 266.4 $ 371.8 $ 40.9 $ 412.7 $ 22.9

3 unchanged sentences

(Unaudited, in millions)

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

Common Stock Additional

3 unchanged sentences

Shares Amount

Balance as of March 31, 2019 45.6 $ — $ 264.4 $ ( 3.2 ) $ ( 64.3 ) $ 36.2 $ 233.1 $ 99.1 $ 332.2 $ 17.6

Balance as of June 30, 2019 45.8 $ — $ 270.9 $ ( 3.2 ) $ ( 54.9 ) $ 117.1 $ 329.9 $ 100.9 $ 430.8 $ 20.6

Share-based compensation — — 2.0 — — — 2.0 — 2.0 —

Fair value adjustment of redeemable noncontrolling interest — — ( 1.1 ) — — — ( 1.1 ) — ( 1.1 ) 1.1

Preferred stock dividend — — ( 0.2 ) — — — ( 0.2 ) — ( 0.2 ) —

2 unchanged sentences

Other — — ( 0.3 ) — — — ( 0.3 ) — ( 0.3 ) —

Net income (loss) — — — — 9.4 — 9.4 ( 0.1 ) 9.3 ( 0.1 )

Net loss — — — — ( 7.1 ) — ( 7.1 ) ( 0.8 ) ( 7.9 ) ( 0.4 )

Other comprehensive income (loss) — — — — — 80.3 80.3 ( 0.6 ) 79.7 ( 0.1 )

Balance as of June 30, 2019

Balance as of September 30, 2019

45.9 $ — $ 272.6 $ ( 3.2 ) $ ( 62.0 ) $ 197.4 $ 404.8 $ 96.6 $ 501.4 $ 21.3

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

10 unchanged sentences

Other — — ( 0.7 ) — — — ( 0.7 ) — ( 0.7 ) —

Net income (loss) — — — — 6.6 — 6.6 ( 3.2 ) 3.4 ( 0.5 )

Other comprehensive income — — — — — 229.7 229.7 0.1 229.8 —

Balance as of June 30, 2019

Net loss — — — — ( 0.5 ) — ( 0.5 ) ( 4.0 ) ( 4.5 ) ( 0.9 )

Other comprehensive income (loss) — — — — — 310.0 310.0 ( 0.5 ) 309.5 ( 0.1 )

Balance as of September 30, 2019

45.9 $ — $ 272.6 $ ( 3.2 ) $ ( 62.0 ) $ 197.4 $ 404.8 $ 96.6 $ 501.4 $ 21.3

3 unchanged sentences

(Unaudited, in millions)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities

Net income (loss) $ ( 72.5 ) $ 2.9

Net loss $ ( 94.1 ) $ ( 5.4 )

Loss from discontinued operations, net of tax ( 60.0 ) ( 13.7 )

Income (loss) from continuing operations ( 12.5 ) 17.2

Adjustments to reconcile net income (loss) to cash provided by continuing operating activities

(Loss) income from continuing operations ( 34.1 ) 8.3

Adjustments to reconcile net (loss) income to cash provided by continuing operating activities

Depreciation and amortization 11.0 10.4

2 unchanged sentences

Loss on early extinguishment or restructuring of debt 13.4 —

Loss (income) from equity investees 2.7 ( 1.3 )

Loss from equity investees 4.0 —

Deferred income taxes 12.6 ( 1.9 )

27 unchanged sentences

Principal payments on debt obligations ( 207.7 ) ( 8.4 )

Proceeds from sale of preferred stock 5.6 —

Redemption of preferred stock of affiliate ( 9.6 ) —

Cash received by subsidiary to issue preferred stock — 9.0

18 unchanged sentences

While the Company generally intends to acquire controlling equity interests in its operating subsidiaries, the Company may invest to a limited extent in a variety of debt instruments or noncontrolling equity interest positions.

The Company’s shares of common stock trade on the NYSE under the symbol "HCHC".

The Company currently has seven reportable segments based on management’s organization of the enterprise - Construction, Energy, Telecommunications, Insurance, Life Sciences, Broadcasting, and Other, which includes businesses that do not meet the separately reportable segment thresholds.

Our Construction segment is comprised of DBM Global Inc.

The Company’s shares of common stock trade on the New York Stock Exchange ("NYSE") under the symbol "HCHC".

The Company currently has seven reportable segments based on management’s organization of the enterprise - Infrastructure, Clean Energy, Telecommunications, Insurance, Life Sciences, Spectrum, and Other, which includes businesses that do not meet the separately reportable segment thresholds.

Our Infrastructure segment (f/k/a Construction segment) is comprised of DBM Global Inc.

("DBMG") and its wholly-owned subsidiaries.

5 unchanged sentences

The Company maintains an approximately 92 % controlling interest in DBMG.

Our Energy segment is comprised of American Natural Energy Corp.

(f/k/a American Natural Gas, Inc.) ("ANG").

ANG is a premier distributor of natural gas motor fuel.

ANG designs, builds, owns, acquires, operates and maintains compressed natural gas fueling stations for transportation vehicles.

The Company maintains an approximately 69 % controlling interest in ANG.

Our Clean Energy segment (f/k/a Energy segment) is comprised of Beyond6, Inc.

(f/k/a American Natural Energy Corp.

and American Natural Gas, Inc.) ("Beyond6").

Beyond6 is a premier distributor of natural gas motor fuel.

Beyond6 designs, builds, owns, acquires, operates and maintains compressed natural gas fueling stations for transportation vehicles.

The Company maintains an approximately 69 % controlling interest in Beyond6.

Our Telecommunications segment is comprised of PTGi International Carrier Services, Inc.

11 unchanged sentences

Pansend also invests in other early stage or developmental stage healthcare companies including an approximately 47 % interest in MediBeacon Inc., and an investment in Triple Ring Technologies, Inc.

Our Broadcasting segment is comprised of HC2 Broadcasting Holdings Inc.

Our Spectrum segment (f/k/a Broadcasting segment) is comprised of HC2 Broadcasting Holdings Inc.

("HC2 Broadcasting") and its subsidiaries.

12 unchanged sentences

All intercompany profits, transactions and balances have been eliminated in consolidation.

As of June 30, 2020, the results of DBMG, GMH, ANG, ICS, CIG, Genovel, R2, and HC2 Broadcasting have been consolidated into the Company’s results based on guidance from the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC" 810, Consolidation) .

As of September 30, 2020, the results of DBMG, Beyond6, ICS, CIG, Genovel, R2, HC2 Broadcasting, and GMH have been consolidated into the Company’s results based on guidance from the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC" 810, Consolidation) .

The remaining interests not owned by the Company are presented as a noncontrolling interest component of total equity.

6 unchanged sentences

Certain prior amounts have been reclassified or combined to conform to the current year presentation.

These interim financial statements should be read in conjunction with the Company’s annual Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on March 16, 2020.

The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results for any subsequent periods or the entire fiscal year ending December 31, 2020.

The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results for any subsequent periods or the entire fiscal year ending December 31, 2020.

Use of Estimates and Assumptions

2 unchanged sentences

Actual results could differ from those estimates and assumptions used.

At this time, we believe that we will be able to continue to meet our liquidity requirements and fund our fixed obligations (such as debt service and operating leases) and other cash needs for our operations for at least the next twelve months through a combination of distributions from our subsidiaries and from raising of additional debt or equity, refinancing of certain of our indebtedness or preferred stock, other financing arrangements and/or the sale of assets and certain investments.

At this time, we believe that we will be able to continue to meet our liquidity requirements and fund our fixed obligations (such as debt service and operating leases) and other cash needs for our operations for at least the next twelve months from the issuance of the Condensed Consolidated Financial Statements through a combination of distributions from our subsidiaries and from raising of additional debt or equity, refinancing of certain of our indebtedness or preferred stock, other financing arrangements and/or the sale of assets and certain investments.

Historically, we have chosen to reinvest cash and receivables into the growth of our various businesses, and therefore have not kept a large amount of cash on hand at the holding company level, a practice which we expect to continue in the future.

5 unchanged sentences

There are many uncertainties regarding the current coronavirus ("COVID-19") pandemic, and the Company is closely monitoring the continued impact of the COVID-19 pandemic on all aspects of its business, including how it will impact its customers, employees, suppliers, vendors, business partners and distribution channels.

We are unable to predict the impact that COVID-19 will have on its financial position and operating results due to numerous uncertainties, however if the pandemic continues it may have an adverse effect on the Company’s results of operations, financial condition, or liquidity for fiscal year 2020.

We are unable to predict the impact that COVID-19 will have on its financial position and operating results due to numerous uncertainties, however as the pandemic continues, it may have an adverse effect on the Company’s results of operations, financial condition, or liquidity for fiscal year 2020.

The Company expects to continue to assess the evolving impact of the COVID-19 pandemic.

Other Income (Loss)

The following table provides information related to Other income (loss) (in millions):

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three Months Ended June 30, Six Months Ended June 30,

Other Income (Loss)

The following table provides information related to Other income (loss) (in millions):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

5 unchanged sentences

The following table provides supplemental cash flow information and a reconciliation of cash and cash equivalents and restricted cash to amounts reported within the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Cash Flows (in millions):

September 30,

Cash and cash equivalents, beginning of period $ 228.8 $ 315.9

9 unchanged sentences

Property, plant and equipment included in accounts payable $ 3.1 $ 3.0

Investments included in accounts receivable $ 20.0 $ 9.7

Investments included in accounts payable $ 10.1 $ 14.6

1 unchanged sentence

Certain previous year amounts have been reclassified to conform with current year presentations, including:

• The reclassification of GMSL's results to discontinued operations.

• The recasting of GMSL's results to discontinued operations.

Further, the reclassification of prior period assets and liabilities have been classified as held for sale.

3 unchanged sentences

Operating Segment and Related Information for further information;

• The restatement of prior year Earnings per share as a result of the discontinued operations noted above.

• The recasting of prior year Earnings per share as a result of the discontinued operations noted above.

This includes presenting EPS for Net (loss) income from continuing operations, Net (loss) income from discontinuing operations, and Net (loss) income.

Basic and Diluted Income Per Common Share for further details.

Basic and Diluted (Loss) Income Per Common Share for further details.

Accounting Pronouncements Adopted in the Current Year

1 unchanged sentence

The Company does not believe that there are any new accounting pronouncements issued since the filing of its 2019 Form 10-K that will have a material impact on its financial condition, results of operations or liquidity.

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Accounting Pronouncements to be Adopted Subsequent to December 31, 2020

4 unchanged sentences

Currently, the Company continues to focus on developing models and procedures, with testing and refinement of models occurring in 2020 and 2021 with parallel testing to be performed in 2022.

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Available for sale fixed maturity securities are not in scope of the new credit loss model, but will undergo targeted improvements to the current reporting model including the establishment of a valuation allowance for credit losses versus the current direct write down approach.

11 unchanged sentences

• Disclosures will be required to include information around how the credit loss allowance was developed, further details on information currently disclosed about credit quality of financing receivables and net investments in leases, and a rollforward of the allowance for credit losses for available for sale fixed maturity securities as well as an aging analysis for securities that are past due.

The Company anticipates a significant impact on the systems, processes and controls.

The Company anticipates a significant impact on its systems, processes and controls.

While the requirements of the new guidance represent a material change from existing GAAP, the underlying economics of items in scope and related cash flows are unchanged.

9 unchanged sentences

The Company does not currently expect to early adopt this standard and is currently evaluating the impact of this new accounting guidance on its Condensed Consolidated Financial Statements.

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Outlined below are key areas of change, although there are other changes not noted below:

5 unchanged sentences

Current accounting policy allows the use of an expected investment yield (which is not required to be observable in the market) to discount the liability projections.

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

• Deferred acquisition costs for long-duration contracts are to be amortized in proportion to premiums, gross profits, or gross margins and those balances must be amortized on a constant-level basis over the expected life of the contract.

9 unchanged sentences

The FASB has voted to delay the effective date of ASU 2018-12 to January 1, 2024 for smaller reporting companies with a revised ASU in the fourth quarter of 2019.

On September 30, 2020, the FASB approved a one year deferral of the effective date.

Currently, the Company plans to focus on developing models and procedures through 2021, with testing and refinement of models occurring in 2022 and parallel testing performed in 2023.

12 unchanged sentences

Subsequent Events for the summary of the subsequent events.

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUE

Discontinued Operations

2 unchanged sentences

Summarized operating results of the discontinued operations are as follows (in millions):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

11 unchanged sentences

Income tax benefit (expense) — 0.1 ( 0.1 ) —

Loss from discontinued operations $ — $ ( 7.7 ) $ ( 60.0 ) $ ( 14.3 )

Income (loss) from discontinued operations $ — $ 0.6 $ ( 60.0 ) $ ( 13.7 )

The Company recorded a $ 39.3 million loss on the sale, inclusive of recognizing a $ 31.3 million loss from the realization of AOCI.

The net proceeds from the sale of GMSL were used to repay HC2’s $ 15.0 million under the 2019 Revolving Credit Agreement (as defined below) and redeem $ 76.9 million aggregate principal amount of Senior Secured Notes, plus accrued and unpaid interest since December 1, 2019 (the last regularly scheduled interest payment date).

As a result of the repayment of $ 15.0 million 2019 Revolving Credit Agreement, the Company allocated the following interest and the amortization of deferred financing costs for the three and six months ended June 30, 2020 and 2019 associated with the principal prepayment from continuing operations to discontinued operations on the Company’s Condensed Consolidated Statement of Operations:

Three Months Ended June 30, Six Months Ended June 30,

The net proceeds from the sale of GMSL were used to repay $ 15.0 million under the 2019 Revolving Credit Agreement (as defined below) and redeem $ 76.9 million aggregate principal amount of Senior Secured Notes, plus accrued and unpaid interest since December 1, 2019 (the last regularly scheduled interest payment date).

As a result of the repayment of $ 15.0 million 2019 Revolving Credit Agreement, the Company allocated the following interest and the amortization of deferred financing costs for the three and nine months ended September 30, 2020 and 2019 associated with the principal prepayment from continuing operations to discontinued operations on the Company’s Condensed Consolidated Statement of Operations:

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

1 unchanged sentence

Amortization of deferred financing costs and original issuance discount $ — $ 0.1 $ 0.1 $ 0.2

As a result of the mandatory redemption of $ 76.9 million on the Senior Secured Notes, the Company allocated the following pro-rata interest and amortization of deferred financing costs and original issuance discount for the three and six months ended June 30, 2020 and 2019, from continuing operations to discontinued operations on the Company’s Condensed Consolidated Statements of Operations:

Three Months Ended June 30, Six Months Ended June 30,

As a result of the mandatory redemption of $ 76.9 million on the Senior Secured Notes, the Company allocated the following pro-rata interest and amortization of deferred financing costs and original issuance discount for the three and nine months ended September 30, 2020 and 2019, from continuing operations to discontinued operations on the Company’s Condensed Consolidated Statements of Operations:

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

1 unchanged sentence

Amortization of deferred financing costs and original issuance discount $ — $ 0.2 $ 0.2 $ 0.7

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUE

Summarized assets and liabilities of the discontinued operations are as follows (in millions):

15 unchanged sentences

Revenue from contracts with customers consist of the following (in millions):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Construction $ 172.3 $ 195.7 $ 348.8 $ 387.8

Energy 10.3 5.5 20.7 10.6

Infrastructure $ 160.8 $ 168.4 $ 509.6 $ 556.2

Clean Energy 10.3 8.7 31.0 19.3

Telecommunications 136.4 162.2 430.1 507.0

Broadcasting 9.5 10.0 19.6 19.8

Spectrum 9.7 10.0 29.3 29.8

Total revenue $ 317.2 $ 349.3 $ 1,000.0 $ 1,112.3

1 unchanged sentence

Accounts receivables, net from contracts with customers consist of the following (in millions):

June 30, December 31,

September 30, December 31,

Accounts receivables with customers

Construction $ 176.1 $ 199.2

Energy 12.1 31.1

Infrastructure $ 170.4 $ 199.2

Clean Energy 15.0 31.1

Telecommunications 50.7 51.9

Broadcasting 7.1 8.5

Spectrum 6.8 8.5

Total accounts receivables with customers $ 242.9 $ 290.7

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Construction Segment

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUE

Infrastructure Segment

The following table disaggregates DBMG's revenue by market (in millions):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

8 unchanged sentences

Other revenue 0.1 0.2 0.7 0.4

Total Construction segment revenue $ 172.3 $ 195.7 $ 348.8 $ 387.8

Total Infrastructure segment revenue $ 160.8 $ 168.4 $ 509.6 $ 556.2

Contract assets and contract liabilities consisted of the following (in millions):

June 30, December 31,

September 30, December 31,

Contract assets $ 48.2 $ 50.6

15 unchanged sentences

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Energy Segment

The following table disaggregates ANG's revenue by type (in millions):

Three Months Ended June 30, Six Months Ended June 30,

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUE

Clean Energy Segment

The following table disaggregates Beyond6's revenue by type (in millions):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

2 unchanged sentences

Total revenue from contracts with customers 8.7 8.5 25.7 18.6

RNG incentives 0.1 0.1 0.2 0.4

Clean Energy incentives 0.4 0.1 0.6 0.5

Alternative fuel tax credit 1.2 — 3.9 —

Other revenue — 0.1 0.8 0.2

Total Energy segment revenue $ 10.3 $ 5.5 $ 20.7 $ 10.6

Total Clean Energy segment revenue $ 10.3 $ 8.7 $ 31.0 $ 19.3

Telecommunications Segment

ICS's revenues are predominantly derived from wholesale of international long distance minutes (in millions):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

3 unchanged sentences

Total Telecommunications segment revenue $ 136.4 $ 162.2 $ 430.1 $ 507.0

Broadcasting Segment

The following table disaggregates the Broadcasting segment's revenue by type (in millions):

Three Months Ended June 30, Six Months Ended June 30,

Spectrum Segment

The following table disaggregates the Spectrum segment's revenue by type (in millions):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

5 unchanged sentences

Other revenue — — — —

Total Broadcasting segment revenue $ 9.5 $ 10.0 $ 19.6 $ 19.8

Total Spectrum segment revenue $ 9.7 $ 10.0 $ 29.3 $ 29.8

The transaction price allocated to remaining unsatisfied performance obligations consisted of $ 3.2 million, $ 7.0 million, and $ 0.2 million of network advertising, broadcasting station revenues, and other revenues, respectively, of which $ 5.4 million is expected to be recognized within one year and an additional $ 5.0 million is expected to be recognized within five years.

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUE

Acquisitions, Dispositions, and Deconsolidations

11 unchanged sentences

GMH received approximately $ 144.0 million of net proceeds from the sale, of which $ 36.8 million and $ 5.5 million were paid to noncontrolling interest holders and redeemable noncontrolling interest holders, respectively.

In addition, GMH held $ 3.1 million as reserves for transaction related costs and HC2 received net proceeds of approximately $ 98.6 million.

HC2 received net proceeds of approximately $ 100.8 million.

The Company recorded a $ 39.3 million loss on the sale, inclusive of recognizing a $ 31.3 million loss from the realization of AOCI.

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On October 30, 2019, the Company announced the sale of its stake in HMN, its 49 % joint venture with Huawei Technologies Co., Ltd., to Hengtong Optic-Electric Co Ltd.

The sale of GMSL's interest values HMN at $ 285 million, and GMH's 49 % stake at approximately $ 140 million.

The sale valued HMN at $ 285 million, and GMH's 49 % stake, through New Saxon, at approximately $ 140 million.

Under the terms of the Sale and Purchase Agreement, the sale of New Saxon’s 49 % interest in HMN will be affected in two tranches.

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In addition, the Company recorded a $ 7.2 million tax expense related to a foreign tax payment when the first tranche closed.

Energy Segment

On June 14, 2019, ANG acquired ampCNG's 20 natural gas fueling stations, located primarily in the Southeastern U.S.

Clean Energy Segment

On June 14, 2019, Beyond6 acquired ampCNG's 20 natural gas fueling stations, located primarily in the Southeastern U.S.

and Texas, for cash consideration of $ 41.2 million.

ANG’s network reach expanded to over 60 stations, making it one of the largest owners and operators of compressed natural gas stations in the country.

Beyond6’s network reach expanded to over 60 stations, making it one of the largest owners and operators of compressed natural gas stations in the country.

Transaction was accounted for as asset acquisition.

To finance the acquisition, ANG entered into a term loan with M&T bank for $ 28.0 million and issued preferred stock and ten year warrants for common stock for $ 14.0 million.

To finance the acquisition, Beyond6 entered into a term loan with M&T bank for $ 28.0 million and issued preferred stock and ten year warrants for common stock for $ 14.0 million.

The preferred stock bears a 14 % coupon and is mandatorily redeemable in four years.

The warrants are exercisable at $ 0.001 per share of common stock and will represent 6 % of ANG when exercised.

ANG received $ 5.0 million of proceeds from CGI.

The warrants are exercisable at $ 0.001 per share of common stock and will represent 6 % of Beyond6 when exercised.

Beyond6 received $ 5.0 million of proceeds from CGI.

Consequently, related preferred stock and warrants are eliminated in consolidation.

Mandatorily redeemable preferred stock and warrants are recorded within Other liabilities.

Broadcasting Segment

HC2 HOLDINGS, INC.

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Spectrum Segment

During the year ended December 31, 2019, HC2 Broadcasting acquired a series of licenses for a total consideration of $ 71.4 million.

All transactions were accounted for as asset acquisitions.

HC2 HOLDINGS, INC.

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Fixed Maturity Securities

The following tables provide information relating to investments in fixed maturity securities (in millions):

June 30, 2020 Amortized

September 30, 2020 Amortized

Gains Unrealized

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Total fixed maturity securities $ 3,745.3 $ 317.0 $ ( 33.4 ) $ 4,028.9

The amortized cost and fair value of fixed maturity securities available-for-sale as of June 30, 2020 are shown by contractual maturity in the table below (in millions).

The amortized cost and fair value of fixed maturity securities available-for-sale as of September 30, 2020 are shown by contractual maturity in the table below (in millions).

Actual maturities can differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Asset and mortgage-backed securities are shown separately in the table below, as they are not due at a single maturity date:

HC2 HOLDINGS, INC.

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Corporate, Municipal, U.S.

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The tables below show the major industry types of the Company’s corporate and other fixed maturity securities (in millions):

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Total Amortized

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The Company recognized the following (in millions):

HC2 HOLDINGS, INC.

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Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

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Total other-than-temporary impairments $ 4.9 $ — $ 5.9 $ —

The following table presents the total unrealized losses for the 201 and 139 fixed maturity securities held by the Company as of June 30, 2020 and December 31, 2019, respectively, where the estimated fair value had declined and remained below amortized cost by the indicated amount (in millions):

June 30, 2020 December 31, 2019

The following table presents the total unrealized losses for the 185 and 139 fixed maturity securities held by the Company as of September 30, 2020 and December 31, 2019, respectively, where the estimated fair value had declined and remained below amortized cost by the indicated amount (in millions):

September 30, 2020 December 31, 2019

Fixed maturity securities Unrealized Losses % of

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Management estimates expected future cash flows based upon its knowledge of the MBS market, cash flow projections (which reflect loan-to-collateral values, subordination, vintage and geographic concentration) received from independent sources, implied cash flows inherent in security ratings and analysis of historical payment data.

HC2 HOLDINGS, INC.

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The Company believes it will recover its cost basis in the non-impaired securities with unrealized losses and that the Company has the ability to hold the securities until they recover in value.

The Company neither intends to sell nor does it expect to be required to sell the securities with unrealized losses as of June 30, 2020.

The Company neither intends to sell nor does it expect to be required to sell the securities with unrealized losses as of September 30, 2020.

However, unforeseen facts and circumstances may cause the Company to sell fixed maturity and equity securities in the ordinary course of managing its portfolio to meet certain diversification, credit quality and liquidity guidelines.

The following tables present the estimated fair values and gross unrealized losses for the 201 and 139 fixed maturity securities held by the Company that have estimated fair values below amortized cost as of each of June 30, 2020 and December 31, 2019, respectively.

The following tables present the estimated fair values and gross unrealized losses for the 185 and 139 fixed maturity securities held by the Company that have estimated fair values below amortized cost as of each of September 30, 2020 and December 31, 2019, respectively.

The Company does not have any OTTI losses reported in AOCI.

These investments are presented by investment category and the length of time the related fair value has remained below amortized cost (in millions):

June 30, 2020 Less than 12 months 12 months or greater Total

September 30, 2020 Less than 12 months 12 months or greater Total

Value Unrealized

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Total fixed maturity securities $ 731.3 $ ( 56.7 ) $ 272.7 $ ( 49.4 ) $ 1,004.0 $ ( 106.1 )

HC2 HOLDINGS, INC.

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December 31, 2019 Less than 12 months 12 months of greater Total

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Total fixed maturity securities $ 358.8 $ ( 5.8 ) $ 441.6 $ ( 27.6 ) $ 800.4 $ ( 33.4 )

As of June 30, 2020, investment grade fixed maturity securities (as determined by nationally recognized rating agencies) represented approximately 68.4 % of the gross unrealized loss and 84.8 % of the fair value.

As of September 30, 2020, investment grade fixed maturity securities (as determined by nationally recognized rating agencies) represented approximately 68.6 % of the gross unrealized loss and 86.7 % of the fair value.

As of December 31, 2019, investment grade fixed maturity securities represented approximately 68.3 % of the gross unrealized loss and 81.8 % of the fair value.

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The following tables provide information relating to investments in equity securities measured at fair value (in millions):

June 30, December 31,

September 30, December 31,

Equity securities 2020 2019

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Total equity securities $ 74.2 $ 92.5

HC2 HOLDINGS, INC.

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Net investment income

The major sources of net investment income were as follows (in millions):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

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The major sources of net realized and unrealized gains and losses on investments were as follows (in millions):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

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Net realized and unrealized gains (losses) $ 0.8 $ ( 1.9 ) $ ( 18.8 ) $ 2.1

HC2 HOLDINGS, INC.

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Fair Value of Financial Instruments

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Assets and liabilities measured at fair value on a recurring basis are summarized below (in millions):

June 30, 2020 Fair Value Measurement Using:

September 30, 2020 Fair Value Measurement Using:

Total Level 1 Level 2 Level 3

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Total liabilities accounted for at fair value $ 6.9 $ — $ — $ 6.9

HC2 HOLDINGS, INC.

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December 31, 2019 Fair Value Measurement Using:

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Availability of secondary market activity and consistency of pricing from third-party sources impacts the Company's ability to classify securities as Level 2 or Level 3.

The Company’s assessment resulted in a net transfer into Level 3 of $ 54.1 million during the six months ended June 30, 2020.

The Company’s assessment resulted in a net transfer into Level 3 of $ 73.7 million during the six months ended June 30, 2019.

HC2 HOLDINGS, INC.

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The Company’s assessment resulted in a net transfer into Level 3 of $ 76.7 million during the nine months ended September 30, 2020.

The Company’s assessment resulted in a net transfer out of Level 3 of $ 41.6 million during the nine months ended September 30, 2019.

The methods and assumptions the Company uses to estimate the fair value of assets and liabilities measured at fair value on a recurring basis are summarized below:

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collateral type, payment terms of the underlying assets, payment priority within the tranche, structure of the security, deal performance and vintage of loans.

HC2 HOLDINGS, INC.

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When observable inputs are not available, the market standard valuation techniques for determining the estimated fair value of certain types of securities that trade infrequently, and therefore have little or no price transparency, rely on inputs that are significant to the estimated fair value but that are not observable in the market or cannot be derived principally from or corroborated by observable market data.

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Various time deposits carried as cash equivalents are not measured at estimated fair value and, therefore, are excluded from the tables presented.

HC2 HOLDINGS, INC.

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Level 3 Measurements and Transfers

The following tables summarize changes to the Company’s financial instruments carried at fair value and classified within Level 3 of the fair value hierarchy for the three and six months ended June 30, 2020 and 2019 (in millions):

The following tables summarize changes to the Company’s financial instruments carried at fair value and classified within Level 3 of the fair value hierarchy for the three and nine months ended September 30, 2020 and 2019 (in millions):

Total realized/unrealized gains (losses) included in

March 31, 2020 Net earnings (loss) Other comp.

Balance at June 30, 2020 Net earnings (loss) Other comp.

income (loss) Purchases and issuances Sales and

settlements Transfer to Level 3 Transfer out of Level 3 Balance at June 30, 2020

settlements Transfer to Level 3 Transfer out of Level 3 Balance at September 30, 2020

Fixed maturity securities

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Total realized/unrealized (gains) losses included in

Balance at March 31, 2020 Net earnings (loss) Other comp.

income (loss) Purchases and issuances Sales and settlements Transfer to Level 3 Transfer out of Level 3 Balance at June 30, 2020

Balance at June 30, 2020 Net earnings (loss) Other comp.

income (loss) Purchases and issuances Sales and settlements Transfer to Level 3 Transfer out of Level 3 Balance at September 30, 2020

Embedded derivative $ 8.7 $ ( 6.5 ) $ — $ — $ — $ — $ — $ 2.2

1 unchanged sentence

Total financial liabilities $ 12.6 $ ( 5.7 ) $ — $ — $ — $ — $ — $ 6.9

HC2 HOLDINGS, INC.

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Total realized/unrealized gains (losses) included in

6 unchanged sentences

Level 3 Balance at

June 30, 2020

September 30, 2020

Fixed maturity securities

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Total financial assets $ 763.0 $ ( 12.6 ) $ ( 37.5 ) $ 125.3 $ ( 144.4 ) $ 316.9 $ ( 240.2 ) $ 770.5

HC2 HOLDINGS, INC.

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Total realized/unrealized (gains) losses included in

6 unchanged sentences

Level 3 Balance at

June 30, 2020

September 30, 2020

Embedded derivative $ 3.0 $ ( 0.8 ) $ — $ — $ — $ — $ — $ 2.2

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Total realized/unrealized gains (losses) included in

Balance at March 31, 2019 Net earnings (loss) Other comp.

income (loss) Purchases and issuances Sales and settlements Transfer to Level 3 Transfer out of Level 3 Balance at June 30, 2019

Balance at June 30, 2019 Net earnings (loss) Other comp.

income (loss) Purchases and issuances Sales and settlements Transfer to Level 3 Transfer out of Level 3 Balance at September 30, 2019

Fixed maturity securities

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Total financial assets $ 715.3 $ ( 1.4 ) $ ( 4.2 ) $ 16.7 $ ( 59.5 ) $ 14.2 $ ( 129.5 ) $ 551.6

HC2 HOLDINGS, INC.

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Total realized/unrealized (gains) losses included in

Balance at March 31, 2019 Net earnings (loss) Other comp.

income (loss) Purchases and issuances Sales and settlements Transfer to Level 3 Transfer out of Level 3 Balance at June 30, 2019

Balance at June 30, 2019 Net earnings (loss) Other comp.

income (loss) Purchases and issuances Sales and settlements Transfer to Level 3 Transfer out of Level 3 Balance at September 30, 2019

Embedded derivatives $ 2.9 $ 1.6 $ — $ — $ — $ — $ — $ 4.5

1 unchanged sentence

Total financial liabilities $ 8.3 $ 1.6 $ — $ — $ — $ — $ — $ 9.9

HC2 HOLDINGS, INC.

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Total realized/unrealized gains (losses) included in

6 unchanged sentences

Level 3 Balance at

June 30, 2019

September 30, 2019

Fixed maturity securities

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Level 3 Balance at

June 30, 2020

September 30, 2020

Embedded derivatives $ 8.4 $ ( 3.9 ) $ — $ — $ — $ — $ — $ 4.5

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Any justifiable changes in unobservable inputs used to determine internally developed fair values would not have a material impact on the Company’s financial position.

HC2 HOLDINGS, INC.

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Fair Value of Financial Instruments Not Measured at Fair Value

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The table excludes carrying amounts for cash and cash equivalents, accounts receivable, accounts payable and other current liabilities, and other assets and liabilities approximate fair value due to relatively short periods to maturity (in millions):

June 30, 2020 Fair Value Measurement Using:

September 30, 2020 Fair Value Measurement Using:

Carrying Value Estimated Fair Value Level 1 Level 2 Level 3

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Total liabilities not accounted for at fair value $ 875.6 $ 872.1 $ — $ 643.7 $ 228.4

HC2 HOLDINGS, INC.

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December 31, 2019 Fair Value Measurement Using:

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Accounts receivable, net consist of the following (in millions):

June 30, December 31,

September 30, December 31,

Contracts in progress $ 121.8 $ 177.8

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Total accounts receivable, net $ 252.3 $ 311.8

HC2 HOLDINGS, INC.

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Recoverable from Reinsurers

Recoverable from reinsurers consists of the following (in millions):

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Reinsurer A.M.

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Total $ 961.4 100.0 % $ 953.7 100.0 %

HC2 HOLDINGS, INC.

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Property, Plant and Equipment, net

Property, plant and equipment consists of the following (in millions):

June 30, December 31,

September 30, December 31,

Equipment, furniture and fixtures, and software $ 221.0 $ 212.8

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Total $ 213.8 $ 223.7

Depreciation expense was $ 7.0 million and $ 6.6 million for the three months ended June 30, 2020 and 2019, respectively.

These amounts included $ 2.3 million and $ 2.3 million of depreciation expense recognized within cost of revenue for the three months ended June 30, 2020 and 2019, respectively.

Depreciation expense was $ 13.8 million and $ 12.6 million for the six months ended June 30, 2020 and 2019, respectively.

These amounts included $ 4.6 million and $ 4.5 million of depreciation expense recognized within cost of revenue for the six months ended June 30, 2020 and 2019, respectively.

Depreciation expense was $ 7.2 million and $ 7.3 million for the three months ended September 30, 2020 and 2019, respectively.

These amounts included $ 2.3 million and $ 2.2 million of depreciation expense recognized within cost of revenue for the three months ended September 30, 2020 and 2019, respectively.

Depreciation expense was $ 21.0 million and $ 19.9 million for the nine months ended September 30, 2020 and 2019, respectively.

These amounts included $ 6.9 million and $ 6.7 million of depreciation expense recognized within cost of revenue for the nine months ended September 30, 2020 and 2019, respectively.

Goodwill and Intangibles, net

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Further, the Company assessed the current market capitalization, forecasts and the amount of headroom in the 2019 impairment test.

As a result of this assessment, the Company determined that a “triggering event” had occurred relative to its Broadcasting segment in the first quarter of 2020 and, as required, performed a quantitative analysis, with the assistance of a third-party valuation firm, of the value of the Broadcasting reporting unit and its indefinite-lived intangible assets.

Based on the analysis, the Company determined that the fair value of the Broadcasting reporting unit and the related indefinite-lived intangible assets continue to exceed their carrying values and were not impaired as of March 31, 2020.

Determining the fair value of the Broadcasting reporting unit and indefinite-lived intangible assets requires significant judgment and estimates by management, utilizing the income-approach, which utilizes several key inputs, including future cash flows consistent with management’s strategic plans, sales growth rates and a discount rate, amongst others.

As a result of this assessment, the Company determined that a “triggering event” had occurred relative to its Spectrum segment in the first quarter of 2020 and, as required, performed a quantitative analysis, with the assistance of a third-party valuation firm, of the value of the Spectrum reporting unit and its indefinite-lived intangible assets.

Based on the analysis, the Company determined that the fair value of the Spectrum reporting unit and the related indefinite-lived intangible assets continue to exceed their carrying values and were not impaired as of March 31, 2020.

Determining the fair value of the Spectrum reporting unit and indefinite-lived intangible assets requires significant judgment and estimates by management, utilizing the income-approach, which utilizes several key inputs, including future cash flows consistent with management’s strategic plans, sales growth rates and a discount rate, amongst others.

Estimating sales growth rates requires significant judgment by management in areas such as future economic conditions, growth rates, pricing, and consumer tastes and preferences.

Given the inherent uncertainties in estimating the future impacts of the COVID-19 pandemic on global macroeconomic conditions and interest rates in general and on the Broadcasting business, actual results may differ from management’s current estimates and could have an adverse impact on one or more of the assumptions used in our quantitative models related to the Broadcasting reporting unit, resulting in potential impairment charges in subsequent periods.

As of March 31, 2020, while the fair value of the Broadcasting reporting unit declined, the fair value of the Broadcasting reporting unit continued to exceed its carrying value.

The Company reviewed qualitative factors of potential impairment for Goodwill and Intangible assets in the second quarter of 2020, and noted there were no triggering events which would indicate impairment may have occurred.

Given the inherent uncertainties in estimating the future impacts of the COVID-19 pandemic on global macroeconomic conditions and interest rates in general and on the Spectrum business, actual results may differ from management’s current estimates and could have an adverse impact on one or more of the assumptions used in our quantitative models related to the Spectrum reporting unit, resulting in potential impairment charges in subsequent periods.

At March 31, 2020, while the fair value of the Spectrum reporting unit declined, the fair value of the Spectrum reporting unit continued to exceed its carrying value.

The Company reviewed qualitative factors of potential impairment for Goodwill in the third quarter of 2020, and noted there were no triggering events which would indicate impairment may have occurred.

HC2 HOLDINGS, INC.

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The COVID-19 pandemic or other events could cause a further and sustained decline in the value of our reporting units or other triggering event that could cause the Company to perform a goodwill impairment test and result in an impairment charge being recorded in a future period.

The carrying amount of goodwill by segment was as follows (in millions):

Construction Energy Broadcasting Total

Infrastructure Clean Energy Spectrum Total

Balance at December 31, 2019 $ 89.0 $ 2.1 $ 21.4 $ 112.5

Translation 0.2 — — 0.2

Balance at June 30, 2020 $ 89.1 $ 2.1 $ 21.4 $ 112.6

HC2 HOLDINGS, INC.

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Balance at September 30, 2020 $ 89.2 $ 2.1 $ 21.4 $ 112.7

Indefinite-lived Intangible Assets

The carrying amount of indefinite-lived intangible assets were as follows (in millions):

June 30, December 31,

September 30, December 31,

FCC licenses $ 129.3 $ 136.2

1 unchanged sentence

Total $ 131.8 $ 138.7

During the nine months ended September 30, 2020, FCC licenses decreased $ 6.9 million primarily due to reclassifications to held-for-sale as a result of our Spectrum segment's execution of an Asset Purchase Agreement of an FCC license.

Definite Lived Intangible Assets

The gross carrying amount and accumulated amortization of amortizable intangible assets by major intangible asset class were as follows (in millions):

Weighted-Average Original Useful Life June 30, 2020 December 31, 2019

Weighted-Average Original Useful Life September 30, 2020 December 31, 2019

Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net

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Total $ 99.0 $ ( 28.6 ) $ 70.4 $ 105.5 $ ( 22.5 ) $ 83.0

Amortization expense for definite lived intangible assets was $ 2.0 million and $ 2.9 million for the three months ended June 30, 2020 and 2019, respectively, and $ 4.0 million and $ 6.0 million for the six months ended June 30, 2020 and 2019, respectively.

Amortization expense for definite lived intangible assets was $ 2.0 million and $ 2.9 million for the three months ended September 30, 2020 and 2019, respectively, and $ 6.0 million and $ 8.9 million for the nine months ended September 30, 2020 and 2019, respectively.

Amortization expense was included in Depreciation and amortization in our Condensed Consolidated Statements of Operations.

During the three and nine months ended September 30, 2020, the Spectrum segment recorded an impairment of certain channel sharing arrangements of $ 6.9 million as a result of management's decision to sell certain non-core assets.

Excluding the impact of any future acquisitions, dispositions or change in foreign currency, the Company estimates the annual amortization expense of amortizable intangible assets for the next five fiscal years will be as follows (in millions):

1 unchanged sentence

HC2 HOLDINGS, INC.

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Life, Accident and Health Reserves

Life, accident and health reserves consist of the following (in millions):

June 30, December 31,

September 30, December 31,

Long-term care insurance reserves $ 4,262.2 $ 4,201.6

3 unchanged sentences

The following table sets forth changes in the liability for claims for the portion of our long-term care insurance reserves (in millions):

Six Months Ended June 30,

Nine Months Ended September 30,

Beginning balance $ 761.3 $ 738.5

14 unchanged sentences

Ending balance $ 788.3 $ 744.9

The Insurance segment experienced a favorable claims reserve development of $ 11.3 million and $ 41.2 million for the six months ended June 30, 2020 and 2019, respectively.

There was favorable development with claim terminations and care transitions for claims incurred prior to 2020 that created the sufficiency within the six months ended June 30, 2020.

Due to favorable development in the estimates for benefits remaining during the six months ended June 30, 2019, experience in the first half of 2020 has been less favorable than in 2019, but it is too early to determine if this trend will be persistent or is the result of normal volatility in claims activity from period to period.

The Insurance segment experienced favorable claims reserve developments of $ 34.2 million and $ 46.9 million for the nine months ended September 30, 2020 and 2019, respectively.

There was favorable development with claim terminations and care transitions for claims incurred prior to 2020 that created the sufficiency within the nine months ended September 30, 2020.

Due to favorable development in the estimates for benefits remaining during the nine months ended September 30, 2019, experience in the first three quarters of 2020 has been less favorable than in 2019, but it is too early to determine if this trend will be persistent or is the result of normal volatility in claims activity from period to period.

Accounts Payable and Other Current Liabilities

Accounts payable and other current liabilities consist of the following (in millions):

June 30, December 31,

September 30, December 31,

Accounts payable $ 97.7 $ 134.6

6 unchanged sentences

HC2 HOLDINGS, INC.

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Debt Obligations

Debt obligations consist of the following (in millions):

June 30, December 31,

September 30, December 31,

Infrastructure

LIBOR plus 5.85 % Note, due 2023

5 unchanged sentences

4.50 % Note due in 2022

5.00 % Term Loan due in 2024

Other, various maturity dates 0.4 2.4

10 unchanged sentences

Total debt obligations $ 646.4 $ 773.6

(1) On August 6, 2020 the Energy segment entered into a new credit facility M&T bank.

Proceeds from the loan and cash on hand were used to pay down the existing credit facilities with M&T and Pioneer as well as redeem its outstanding $ 14.0 million preferred stock, which carried a 14 % interest rate.

The new credit facility is comprised of a $ 57.0 millionterm loan facility, a $ 2.5 million revolving line of credit and an $ 8.0 million delayed draw term loan ear-marked for new station build, as well as a $ 10.0 million accordion feature.

Aggregate finance lease and debt payments, including interest, are as follows (in millions):

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The interest rates on the finance leases range from approximately 2.0 % to 11.5 %.

In February 2020, Broadcasting amended its agreement governing its privately placed note funded by MSD Partners, L.P., increasing the principal balance to $ 39.3 million.

In August 2020, Clean Energy entered into a new credit facility with M&T bank.

Proceeds from the loan and cash on hand were used to pay down the existing credit facilities with M&T and Pioneer as well as redeem its outstanding $ 14.0 million mandatorily redeemable preferred stock, included within Other liabilities on the Balance Sheets.

The new credit facility is comprised of a $ 57.0 million term loan facility, a $ 2.5 million revolving line of credit and an $ 8.0 million delayed draw term loan ear-marked for new station builds, as well as a $ 10.0 million accordion feature.

Clean Energy recognized $ 2.4 million and $ 1.8 million in extinguishment losses related to the pay down of the existing credit facilities with M&T and the redemption of its mandatorily redeemable preferred stock, respectively, which is included in Loss on early extinguishment or restructuring of debt in our Condensed Consolidated Statement of Operations.

HC2 HOLDINGS, INC.

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In February 2020, Spectrum amended its agreement governing its privately placed note funded by MSD Partners, L.P., increasing the principal balance to $ 39.3 million.

The proceeds were used to repay principal and interest on existing debt.

In August 2020, Spectrum modified its agreement with MSD Partners, L.P.

and Great American Life Insurance Company to extend the maturity on its privately placed notes to October 2021.

In September 2020, Spectrum amended its agreement governing its privately placed note funded by MSD Partners, L.P., increasing the principal balance by $ 4.0 million to $ 43.3 million.

The proceeds were used to repay principal and interest on existing debt and for general business purposes.

Non-Operating Corporate

In March 2020, with the cash proceeds from the sale of GMSL, HC2 fully repaid its $ 15.0 million secured revolving line of credit with MSD PCOF Partners IX, LLC (the "2019 Revolving Credit Agreement").

HC2 recognized $ 0.4 million in extinguishment loss related to the repayment of the 2019 Revolving Credit Agreement, which is included in Loss on early extinguishment or restructuring of debt in our Condensed Consolidated Statements of Operations.

HC2 HOLDINGS, INC.

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In March 2020, HC2 entered into a new $ 15.0 million secured revolving credit agreement (the “2020 Revolving Credit Agreement”).

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In March 2020, with the cash proceeds from the sale of GMSL, HC2 redeemed $ 76.9 million of its 11.50 % senior secured notes due 2021 (the "Senior Secured Notes") at a price equal to 104.5 % of the principal amount plus accrued interest through the redemption date.

HC2 recognized $ 5.4 million in extinguishment loss related to the redemption of its Senior Secured Notes, which is included in Loss on early extinguishment or restructuring of debt in our Condensed Consolidated Statements of Operations.

In June 2020, with the cash proceeds from the partial sale of New Saxon's interest in HMN, HC2 redeemed $ 50.6 million of its Senior Secured Notes at a price equal to 104.5 % of the principal amount plus accrued interest through the redemption date.

HC2 recognized $ 3.4 million in extinguishment loss related to the this redemption, which is included in Loss on early extinguishment or restructuring of debt in our Condensed Consolidated Statements of Operations.

HC2 is in compliance with our debt covenants as of June 30, 2020.

HC2 is in compliance with our debt covenants as of September 30, 2020.

Income Tax Expense

The Company used the Annual Effective Tax Rate ("ETR") approach of ASC 740-270, Interim Reporting, to calculate its 2020 interim tax provision.

Income tax expense was $ 15.4 million and $ 1.1 million for the three months ended June 30, 2020 and 2019, respectively.

The income tax expense recorded for the three months ended June 30, 2020 primarily relates to tax expense incurred in China from the partial sale of HMN and projected expense as calculated under ASC 740 for tax paying entities, primarily the Insurance segment, which is no longer in a valuation allowance.

Income tax expense was $ 1.6 million and $ 1.1 million for the three months ended September 30, 2020 and 2019, respectively.

The income tax expense recorded for the three months ended September 30, 2020 relates to the projected expense as calculated under ASC 740 for taxpaying entities, primarily the Insurance segment, which is no longer in a valuation allowance.

Additionally, the tax benefits associated with losses generated by the HC2 Holdings, Inc.

consolidated income tax return and certain other businesses have been reduced by a full valuation allowance as we do not believe it is more-likely-than-not that the losses will be utilized prior to expiration.

The income tax expense recorded for the three months ended June 30, 2019 relates to the projected expense as calculated under ASC 740 for taxpaying entities offset by a benefit from the release of the valuation allowance of the Insurance segment due to an increase in current year income.

Income tax expense was $ 2.8 million and $ 5.1 million for the six months ended June 30, 2020 and 2019, respectively.

The income tax expense recorded for the six months ended June 30, 2020 primarily relates to tax expense incurred in China from the partial sale of HMN and projected expense as calculated under ASC 740 for tax paying entities, primarily the Insurance segment, which is no longer in a valuation allowance, which was mostly offset by a tax benefit from the carryback of net operating losses at the Insurance segment as a result of the enactment of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

The income tax expense recorded for the three months ended September 30, 2019 relates to the projected expense as calculated under ASC 740 for taxpaying entities offset by a benefit from the release of the valuation allowance of the Insurance segment due to an increase in current year income.

Income tax expense was $ 4.4 million and $ 6.2 million for the nine months ended September 30, 2020 and 2019, respectively.

The income tax expense recorded for the nine months ended September 30, 2020 primarily relates to tax expense incurred in China from the partial sale of HMN and projected expense as calculated under ASC 740 for taxpaying entities, primarily the Insurance segment, offset by a discrete tax benefit from the carryback of net operating losses at the Insurance segment as a result of the enactment of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) in the first quarter of 2020.

Additionally, the tax benefits associated with losses generated by the HC2 Holdings, Inc.

The income tax expense recorded for the six months ended June 30, 2019 relates to the projected expense as calculated under ASC 740 for taxpaying entities offset by a benefit from the release of the valuation allowance of the Insurance segment due to an increase in current year income.

The income tax expense recorded for the nine months ended September 30, 2019 relates to the projected expense as calculated under ASC 740 for taxpaying entities offset by a benefit from the release of the valuation allowance of the Insurance segment due to an increase in current year income.

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUE

Net Operating Losses

At December 31, 2019, the Company had gross U.S.

net operating loss carryforwards available to reduce future taxable income in the amount of $ 147.5 million, of which a portion is subject to annual limitation under IRC Sec.

Based on estimates as of September 30, 2020, the Company expects that approximately $ 115.8 million of the gross U.S.

net operating loss carryforwards would be available to offset taxable income in 2020.

This estimate may change based on changes to the quarterly forecasts and actual results reported on the 2020 U.S.

Unrecognized Tax Benefits

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HC2 HOLDINGS, INC.

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Commitments and Contingencies

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(the "HMRC") indicating that it was required to pay certain Value-Added Taxes ("VAT") for the 2015 and 2016 tax years.

ICS disagrees with HMRC’s assessments on technical and factual grounds and intends to dispute the assessed liabilities and vigorously defend its interests.

PTGI-ICS, LTd.

disagrees with HMRC’s assessments on technical and factual grounds and intends to dispute the assessed liabilities and vigorously defend its interests.

We do not believe the assessment to be probable and expect to prevail based on the facts and merits of our existing VAT position.

HC2 HOLDINGS, INC.

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DBMG Class Action

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Stockholders Litigation) and appointed lead plaintiff and counsel.

The currently operative complaint is the Complaint filed by Mark Jacobs.

The Complaint alleges, among other things, that in connection with the tender offer, the individual members of the DBMG Board of Directors and HC2, the now-controlling stockholder of DBMG, breached their fiduciary duties to members of the plaintiff class.

The Complaint also purports to challenge a potential short-form merger based upon plaintiff’s expectation that the Company would cash out the remaining public stockholders of DBMG following the completion of the tender offer.

The Complaint seeks rescission of the tender offer and/or compensatory damages, as well as attorney’s fees and other relief.

The initially operative complaint filed by Mark Jacobs alleged, among other things, that in connection with the tender offer, the individual members of the DBMG Board of Directors and HC2, the now-controlling stockholder of DBMG, breached their fiduciary duties to members of the plaintiff class.

The Complaint also challenged a potential short-form merger based upon plaintiff’s expectation that the Company would cash out the remaining public stockholders of DBMG following the completion of the tender offer.

The Complaint sought rescission of the tender offer and/or compensatory damages, as well as attorney’s fees and other relief.

The defendants filed answers to the Complaint on July 30, 2015.

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On January 14, 2020, plaintiff filed an amended complaint restating and elaborating on the claims raised in the Complaint (the "Amended Complaint").

The Amended Complaint seeks compensatory and rescissory damages, as well as attorney’s fees and other relief.

On February 13, 2020, the Court held a settlement hearing to consider the proposed settlement and certain objections filed by two current DBMG stockholders.

The Amended Complaint sought compensatory and rescissory damages, as well as attorney’s fees and other relief.

On February 13, 2020, the Court held a settlement hearing to consider a proposed settlement and certain objections filed by two current DBMG stockholders.

The Court expressed concerns about certain terms of the proposed settlement and the parties requested additional time to evaluate potential modifications to the proposed settlement.

On May 8, 2020, the parties filed with the Court a revised settlement agreement for all claims relating to the Amended Complaint (the “Revised Settlement Framework”).

The Revised Settlement Framework provides for a settlement payment of $ 35.95 per share to a fund for the benefit of the former DBMG stockholders who tendered their shares in the 2014 tender offer other than stockholders who were defendants in the action or their immediate family members, officers of DBMG, or directors or officers of HC2 (the “Tendered Stockholders”).

After the filing of the revised settlement papers on May 8, 2020, HC2 determined that the Tendered Stockholders subclass includes approximately 300 more shares than previously reported due to additional detail HC2 received regarding the number of shares excluded from the subclass.

This adjustment increases the settlement payment to the Tendered Stockholders by approximately eleven thousand dollars.

In total, the proposed settlement payment to the Tendered Stockholders applies to approximately 568,850 shares and totals approximately $ 20.4 million.

The Revised Settlement Framework provides that the amount received by the Tendered Stockholders will be reduced by the per share amount of any fee award to lead plaintiff’s counsel.

HC2’s D&O insurers have agreed to contribute approximately $ 12.34 million of this approximately $ 20.4 million settlement payment, and DBMG has agreed to fund the remaining approximately $ 8.06 million either through cash on hand or borrowing from a third-party lender.

The Revised Settlement Framework also provides that HC2 will fund two types of payments to the current owners of the 289,902 shares of DBMG common stock not owned by HC2 or its affiliates (the “public DBMG stockholders”).

The first payment of $ 2.51 per share, or approximately $ 0.7 million total, is intended to offset the indirect burden that the public DBMG stockholders arguably bear (by virtue of their approximately 7.52 % ownership of DBMG) from DBMG’s funding of the approximately $ 8.1 million portion of the settlement payment to the Tendered Stockholders.

The second payment of $ 1.00 per share, or approximately $ 0.3 million total, represents consideration for a full release of claims from the public DBMG stockholders related to the action and the implementation of the Revised Settlement Framework.

In sum, the Revised Settlement Framework provides that HC2 would fund payments of $ 3.51 per share, or approximately $ 1.0 million total, to the public DBMG stockholders.

The two DBMG stockholders that objected to the settlement presented at the February 13, 2020 settlement hearing have informed the Court that they are not objecting to the Revised Settlement Framework.

To date, no DBMG stockholders have filed objections to the Revised Settlement Framework, and the deadline for such objections has passed.

If approved, the Revised Settlement Framework would result in a global settlement of the action and the certification of a non-opt-out plaintiff class consisting of any and all record and beneficial owners of outstanding shares of DBMG common stock who held such stock at any time during May 12, 2014 through and including the close of business on May 8, 2020, and including, among others, their successors.

The Revised Settlement Framework also provides for a release of claims by the plaintiff class in favor of a broad group of released defendant parties relating to, among other things, the action, the 2014 tender offer, all claims relating to HC2’s decision not to close a short-form merger shortly after the 2014 tender offer, and the implementation and funding of the Revised Settlement Framework.

Although the parties are seeking approval of Revised Settlement Framework, there can be no assurance that the Delaware Courts will approve the revised or any other settlement proposed by the parties.

If a settlement cannot be reached, the Company believes it has meritorious defenses and intends to vigorously defend this matter.

The Revised Settlement Framework provided for a settlement payment of $ 35.95 per share to a fund for the benefit of the former DBMG stockholders who tendered their shares in the 2014 tender offer other than stockholders who were defendants in the action or their immediate family members, officers of DBMG, or directors or officers of HC2 (the “Tendered Stockholders”).

In total, the proposed settlement payment to the Tendered Stockholders applied to approximately 568,850 shares and totaled approximately $ 20.45 million.The Revised Settlement Framework provided that the amount received by the Tendered Stockholders would be reduced by the per share amount of any fee award to lead plaintiff’s counsel.

HC2’s D&O insurers agreed to contribute approximately $ 12.38 million of this approximately $ 20.45 million settlement payment, and DBMG has agreed to fund the remaining approximately $ 8.07 million either through cash on hand or borrowing from a third-party lender.

The Revised Settlement Framework also provided that HC2 would fund two types of payments to the owners of the 289,902 902 shares of DBMG common stock not owned by HC2 or its affiliates (the “public DBMG stockholders”).

The first payment of $ 2.51 per share, or approximately $ 0.7 million total, was intended to offset the indirect burden that the public DBMG stockholders arguably would bear (by virtue of their approximately 7.52 % ownership of DBMG) from DBMG’s funding of the approximately $ 8.07 million portion of the settlement payment to the Tendered Stockholders.

The second payment of $ 1.00 per share, or approximately $ 0.3 million total, represented consideration for a full release of claims from the public DBMG stockholders related to the action and the implementation of the Revised Settlement Framework.

The Revised Settlement Framework provides that HC2 would fund payments of $ 3.51 per share, or approximately $ 1.0 million total, to the public DBMG stockholders.

On August 14, 2020, the Court entered a Final Order approving the Revised Settlement Framework, awarding plaintiff’s counsel fees and expenses totaling $ 5,795,886 out of the funds payable to the Tendered Stockholders, and awarding one of the objector’s counsel fees and expenses totaling $ 50,000 out of the fee and expense award to plaintiff’s counsel.

The settlement of the action became final, and the settlement releases became effective, upon the expiration of the appeal period for the Final Order on September 14, 2020.

As of October 12, 2020, the settlement distribution agents had distributed the settlement funds to the eligible former and present record holders of DBMG stock.

Fair Value Investments Litigation

On October 1, 2020, Fair Value Investments Incorporated (“FVI”) filed a putative stockholder class action and derivative complaint in the Delaware Court of Chancery against HC2 and certain of DMBG’s current and former officers and directors, including current and former HC2 officers and directors AJ Stahl, Kenneth S.

Courtis, Robert V.

Leffler, Jr., Philip A.

Falcone, Michael J.

Sena, and Paul Voigt (together with HC2, the “HC2 Defendants”) styled Fair Value Investments Incorporated v.

Roach, et al., C.A.

2020-0847-JTL (Del.

Ch.) (the “FVI Action”).

In the FVI Action, FVI alleges that HC2, in its capacity as DBMG’s controlling stockholder, and DBMG’s current and former officers and directors breached their fiduciary duties to DBMG and DBMG’s minority stockholders by approving certain transactions that allegedly provide disproportionate benefits to HC2.

FVI challenges the following transactions:

(i) DBMG’s payments to HC2 from 2016–present pursuant to a Tax Sharing Agreement between DBMG and HC2;

(ii) DBMG acting as a guarantor or providing collateral for loans taken on by HC2;

(iii) DBMG’s issuance of dividends to its common and preferred stockholders in 2017–2020;

(iv) DBMG’s issuance of preferred stock to HC2 to finance DBMG’s 2018 acquisition of GrayWolf Industrial;

and (v) HC2’s appointment of directors to DBMG’s board of directors by written consent in lieu of holding an annual stockholder meeting.

HC2 believes the allegations in the FVI complaint are without merit, and HC2 intends to vigorously defend this litigation.

HC2 HOLDINGS, INC.

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Non-Operating Corporate

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On May 6, 2020, the plaintiff filed a motion for an order awarding attorneys’ fees and expenses, requesting a $ 2.5 million fee.

The plaintiff alleges that the redemption provisions in the Certificates of Designations constitute so-called proxy puts and that defendants used the proxy puts to undermine stockholders’ franchise rights.

Briefing on the plaintiff’s motion is complete, and the Delaware Court of Chancery has scheduled oral argument for August 11, 2020.

However, the parties may be able to resolve the fee application via a negotiated resolution.

On August 12, 2020, the parties informed the court that they had reached a resolution.

That same day, the court entered an order closing the case.

OSHA Complaint

On November 4, 2020, the Company received notice that a complaint was filed on August 27, 2020, with the U.S.

Department of Labor (OSHA Complaint Number 2-4173-20-156), by a former employee of Continental Insurance Group Ltd.

alleging retaliatory employment practices in violation of the whistleblower provisions of the Sarbanes-Oxley Act.

The Company has yet to submit a statement of position to the DOL but denies the material allegations in the complaint.

The DOL has not issued a determination.

Currently, the Canada Revenue Agency ("CRA") is auditing a subsidiary previously held by the Company.

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To date, CRA has not proposed any specific adjustments and the audit is ongoing.

HC2 HOLDINGS, INC.

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Share-based Compensation

The Company granted zero options during the three and six ended June 30, 2020 and 2019, respectively.

Total share-based compensation expense recognized by HC2 and its subsidiaries under all equity compensation arrangements was $ 0.3 million and $ 1.7 million for the three months ended June 30, 2020 and 2019, respectively.

Total share-based compensation expense recognized by HC2 and its subsidiaries under all equity compensation arrangements was $ 1.8 million and $ 3.0 million for the six months ended June 30, 2020 and 2019, respectively.

The Company granted 143,096 options during the three and nine ended September 30, 2020.

The weighted average fair value at date of grant for options granted during the nine months ended September 30, 2020 was $ 1.47 per option.

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions shown as a weighted average for the year:

Nine Months Ended September 30,

Expected option life 4.27 years

Risk-free interest rate 23.96 %

Expected volatility 62.23 %

Dividend yield — %

Total share-based compensation expense recognized by HC2 and its subsidiaries under all equity compensation arrangements was $ 0.8 million and $ 1.6 million for the three months ended September 30, 2020 and 2019, respectively.

Total share-based compensation expense recognized by HC2 and its subsidiaries under all equity compensation arrangements was $ 2.5 million and $ 4.6 million for the nine months ended September 30, 2020 and 2019, respectively.

All grants are time based and vest either immediately or over a period established at grant.

The Company recognizes compensation expense for equity awards, reduced by actual forfeitures, using the straight-line basis.

HC2 HOLDINGS, INC.

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Restricted Stock

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Forfeited ( 478,639 ) $ 5.87

Unvested - June 30, 2020 588,638 $ 4.55

At June 30, 2020, the total unrecognized stock-based compensation expense related to unvested restricted stock was $ 1.1 million.

The unrecognized compensation cost is expected to be recognized over the remaining weighted average period of 1.0 year.

Unvested - September 30, 2020 741,016 $ 4.24

At September 30, 2020, the total unrecognized stock-based compensation expense related to unvested restricted stock was $ 1.2 million.

The unrecognized compensation cost is expected to be recognized over the remaining weighted average period of 1.3 years.

Stock Options

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Expired ( 51,745 ) $ 5.48

Outstanding - June 30, 2020 6,873,344 $ 6.55

Outstanding - September 30, 2020 7,016,440 $ 6.47

Eligible for exercise 6,974,235 $ 6.48

At June 30, 2020, the intrinsic value and average remaining life of the Company's outstanding options were zero and approximately 2.75 years, and intrinsic value and average remaining life of the Company's exercisable options were zero and approximately 2.8 years.

At June 30, 2020, total unrecognized stock-based compensation expense related to unvested stock options was $ 0.1 million.

At September 30, 2020, the intrinsic value and average remaining life of the Company's outstanding options were zero and approximately 2.6 years, and intrinsic value and average remaining life of the Company's exercisable options were zero and approximately 2.6 years.

At September 30, 2020, total unrecognized stock-based compensation expense related to unvested stock options was $ 0.03 million.

The unrecognized compensation cost is expected to be recognized over the remaining weighted average period of 0.6 years.

There are 39,505 unvested stock options expected to vest, with a weighted average remaining life of 4.04 years, a weighted average exercise price of $ 5.45 , and an intrinsic value of zero .

Series A Preferred Stock and Series A-2 Preferred Stock

There are 42,205

HC2 HOLDINGS, INC.

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unvested stock options expected to vest, with a weighted average remaining life of 4.1 years, a weighted average exercise price of $ 5.27 , and an intrinsic value of zero .

Rights Offering

On September 9, 2020, HC2 announced its intention to commence a rights offering (the “Rights Offering”), pursuant to which each holder of its outstanding common stock and participating preferred stock would receive transferable subscription rights entitling such stockholder to purchase shares of HC2’s common stock at a subscription price equal to $ 2.27 per share based on last sale price for our common stock on the trading day prior to September 9, 2020.

On the same date, HC2 entered into an investment agreement (the "Investment Agreement") with Lancer Capital LLC ("Lancer Capital"), an investment fund led by Avram Glazer, the Chairman of our Board of Directors, pursuant to which Lancer Capital agreed to purchase up to $ 35.0 million of Series B Preferred Stock (as defined below) in connection with the Rights Offering based on subscription participation of common shareholders (the "Backstop Commitment").

The Investment Agreement provides for an advance of up to $ 10.0 million of the Backstop Commitment at the option of the Company.

The Investment Agreement provides that, to the extent that Lancer Capital is precluded by applicable rules and regulations (including those of the NYSE, the Texas Department of Insurance and any other applicable regulators) from purchasing common stock by exercising rights received in the Rights Offering, Lancer Capital will purchase additional shares of Series B Preferred Stock (in excess of any Initial Funding amount) equivalent to its allocable participation right.

The Investment Agreement also restricts Lancer Capital from purchasing or otherwise acquiring any other rights we issue in the Rights Offering.

Lancer Capital did not receive any compensation or other consideration for entering into or consummating the Investment Agreement.

The Backstop Commitment is defined as a financial instrument and measurable at fair value on each reporting period.

HC2 used both market observable inputs and unobservable data to derive the fair value as of the reporting date.

The Backstop Commitment is classified as Level 3.

Fair value for the Backstop Commitment as of September 30, 2020, was zero .

The Backstop Commitment will cease upon the consummation of the Rights Offering.

Series A Preferred Stock, Series A-2 Preferred Stock, and Series B Preferred Stock

The Company’s preferred shares authorized, issued and outstanding consisted of the following:

June 30, December 31,

September 30, December 31,

Preferred shares authorized, $ 0.001 par value

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Series A-2 shares issued and outstanding 4,000 4,000

Preferred Share Activity

Series B shares issued and outstanding 5,560 —

Issuance of Series B Shares

On September 9, 2020, HC2 issued a Certificate of Designation for 35,000 Series B Non-Voting participating Convertible Preferred Shares (the "Series B Preferred Stock") of HC2.

The certificate of designation authorized the existing 20,000,000 shares of preferred stock, par value $ 0.001 to apply to this series.

The Series B Preferred Stock is intended to be the economic equivalent of common stock, participating on an as-converted basis in all dividends, distributions, merger consideration and all other consideration receivable by holders of common stock, and a means through which the Backstop Arrangement can be effected prior to the completion of the stockholder vote and the satisfaction of any other regulatory requirements.

The issued Series B Prefered Stock was classified as temporary equity as it is not mandatorily redeemable due to the presence of substantive conversion features, and will become mandatorily redeemable on the sixth anniversary of initial issuance if not previously converted.

The Series B Prefered Stock issued was recognized at fair value upon issuance.

As the Series B was contingently redeemable, subsequent accretion to redemption value will occur once the contingency is resolved and the redemption becomes probable (i.e., Rights Offering and Stockholder Approval is no longer reasonably possible).

On September 17, 2020 Lancer Capital funded $ 5.56 million of the Backstop Commitment, and the Company issued Lancer Capital 5,560 shares of Series B Preferred Stock (the "Initial Funding").

HC2 HOLDINGS, INC.

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On January 11, 2019, CGI purchased 10,000 shares of Series A-2 Preferred Stock, which are convertible into a total of 1,426,534 shares of the Company's common stock, for a total consideration of $ 8.3 million.

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The shares were purchased at a discount of $ 1.7 million, which was recorded within the Preferred dividends, deemed dividends, and repurchase gains line item of the Condensed Consolidated Statements of Operations as a deemed dividend.

HC2 HOLDINGS, INC.

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Luxor and Corrib Conversions

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("Corrib"), then a holder of 1,000 shares of Series A Preferred Stock, and certain investment entities managed by Luxor Capital Group, LP ( "Luxor"), that together then held 9,000 shares of Series A-1 Preferred Stock.

In conjunction with the conversions, the Company agreed to provide the following two forms of additional consideration for as long as the Preferred Stock remained entitled to receive dividend payments (the "Additional Share Consideration"):

In conjunction with the conversions, the Company agreed to provide the following two forms of additional consideration for as long as the Series A Preferred Stock and Series A-2 Preferred Stock remained entitled to receive dividend payments (the "Additional Share Consideration"):

• The Company agreed that in the event that Corrib and Luxor would have been entitled to any Participating Dividends payable, had they not converted the Preferred Stock (as defined in the respective Series A and Series A-1 Certificate of Designation), after the date of their Preferred Share conversion, then the Company will issue to Corrib and Luxor, on the date such Participating Dividends become payable by the Company, in a transaction exempt from the registration requirements of the Securities Act the number of shares of common stock equal to (a) the value of the Participating Dividends Corrib or Luxor would have received pursuant to Sections (2)(c) and (2)(d) of the respective Series A and Series A-1 Certificate of Designation, divided by (b) the Thirty Day VWAP (as defined in the respective Series A and Series A-1 Certificate of Designation) for the period ending two business days prior to the underlying event or transaction that would have entitled Corrib or Luxor to such Participating Dividend had Corrib’s or Luxor’s Preferred Stock remain unconverted.

• The Company agreed that it will issue to Corrib and Luxor, on each quarterly anniversary commencing May 29, 2017 (or, if later, the date on which the corresponding dividend payment is made to the holders of the outstanding Preferred Stock), through and until the Maturity Date (as defined in the respective Series A and Series A-1 Certificate of Designation), in a transaction exempt from the registration requirements of the Securities Act the number of shares of common stock equal to (a) 1.875 % the Accrued Value (as defined in the respective Series A and Series A-1 Certificate of Designation) of Corrib’s or Luxor’s Preferred Stock as of the Closing Date (as defined in applicable Voluntary Conversion Agreements) divided by (b) the Thirty Day VWAP (as defined in the respective Series A and Series A-1 Certificate of Designation) for the period ending two business days prior to the applicable Dividend Payment Date (as defined in the respective Series A and Series A-1 Certificate of Designation).

For the six months ended June 30, 2020, 159,400 and 17,933 shares of the Company's common stock have been issued to Luxor and Corrib, respectively, in conjunction with the Conversion agreement.

For the nine months ended September 30, 2020, 209,467 and 23,566 shares of the Company's common stock have been issued to Luxor and Corrib, respectively, in conjunction with the Conversion agreement.

The fair value of the Additional Share Consideration was valued by the Company at $ 0.6 million on the date of issuance and was recorded within Preferred stock and deemed dividends from conversion line item of the Condensed Consolidated Statements of Operations as a deemed dividend.

Preferred Share Dividends

During the six months ended June 30, 2020 and 2019, HC2's Board of Directors declared cash dividends with respect to HC2’s issued and outstanding Preferred Stock, excluding Preferred Stock owned by CGI which is eliminated in consolidation, as presented in the following table (in millions):

Declaration Date March 31, 2020 June 30, 2020

Holders of Record Date March 31, 2020 June 30, 2020

Payment Date April 15, 2020 July 15, 2020

During the nine months ended September 30, 2020 and 2019, HC2's Board of Directors declared cash dividends with respect to HC2’s issued and outstanding Preferred Stock, excluding Preferred Stock owned by CGI which is eliminated in consolidation, as presented in the following table (in millions):

Declaration Date March 31, 2020 June 30, 2020 September 30, 2020

Holders of Record Date March 31, 2020 June 30, 2020 September 30, 2020

Payment Date April 15, 2020 July 15, 2020 October 15, 2020

Total Dividend $ 0.2 $ 0.2 $ 0.2

Declaration Date March 31, 2019 June 30, 2019

Holders of Record Date March 31, 2019 June 30, 2019

Payment Date April 15, 2019 July 15, 2019

Declaration Date March 31, 2019 June 30, 2019 September 30, 2019

Holders of Record Date March 31, 2019 June 30, 2019 September 30, 2019

Payment Date April 15, 2019 July 15, 2019 October 15, 2019

Total Dividend $ 0.2 $ 0.2 $ 0.2

HC2 HOLDINGS, INC.

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Related Parties

In January 2015, the Company entered into a services agreement (the "Services Agreement") with Harbinger Capital Partners ("HCP"), a related party of the Company, with respect to the provision of services that may include providing office space and operational support and each party making available their respective employees to provide services as reasonably requested by the other party, subject to any limitations contained in applicable employment agreements and the terms of the Services Agreement.

The Company recognized expenses of $ 0.8 million and $ 0.9 million, and income of $ 0.1 million and zero for the three months ended June 30, 2020 and 2019, respectively.

The Company recognized expenses of $ 1.5 million and $ 1.9 million and income of $ 0.1 million and $ 0.1 million for the six months ended June 30, 2020 and 2019, respectively.

Three Months Ended June 30,

Series B Preferred Stock

As detailed in Note 18.

Equity , HC2 entered into the Investment Agreement with Lancer Capital, an investment fund led by Avram Glazer, the Chairman of our Board of Directors, pursuant to which Lancer Capital agreed to the Backstop Commitment to purchase up to $ 35.0 million of Series B Preferred Stock in connection with the Rights Offering, based on subscription participation of common shareholders, of which $ 10.0 million may be funded in advance.

On September 17, 2020, Lancer Capital funded $ 5.56 million, receiving 5,560 shares of Series B Preferred stock.

Please see Note 18.

Equity for further details.

HCP Services Agreement

In January 2015, the Company entered into a services agreement (the "Services Agreement") with Harbinger Capital Partners ("HCP"), which was a related party of the Company, with respect to the provision of services that may include providing office space and operational support and each party making available their respective employees to provide services as reasonably requested by the other party, subject to any limitations contained in applicable employment agreements and the terms of the Services Agreement.

The Company recognized expenses of $ 0.2 million and $ 0.6 million, and income of $ 0.0 million and $ 0.1 million for the three months ended September 30, 2020 and 2019, respectively.

The Company recognized expenses of $ 1.7 million and $ 2.5 million and income of $ 0.1 million and $ 0.2 million for the nine months ended September 30, 2020 and 2019, respectively.

Three Months Ended September 30,

Corporate Other (1)

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Net related party activity $ 0.2 $ — $ 0.2 $ 0.3 $ 0.2 $ 0.5

Six Months Ended June 30,

Nine Months Ended September 30,

Corporate Other (1)

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Net related party activity $ 1.1 $ 0.5 $ 1.6 $ 1.5 $ 0.8 $ 2.3

(1) Other in the above table represent certain entities within our Broadcasting, Life Sciences and Insurance segments.

With the announcement of the departure of Phillip Falcone, the former CEO and Chairman of the Company, on June 11, 2020, HCP will no longer be considered a related party.

On August 2, 2020, the Company issued a notice of termination, effectively ending the Services Agreement with HCP, a former related party.

(1) Other in the above table represent certain entities within our Spectrum, Life Sciences and Insurance segments.

HC2 HOLDINGS, INC.

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With the announcement of the departure of Phillip Falcone, the former CEO and Chairman of the Company, on June 11, 2020, HCP is no longer considered a related party.

On August 2, 2020, the Company issued a notice of termination, effectively ending the Services Agreement with HCP, a former related party.

GMH's subsidiary, GMSL, prior to its sale in February 2020, had transactions with several of its equity method investees.

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Discontinued Operations for further information:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

2 unchanged sentences

Interest expense $ — $ 0.3 $ 0.1 $ 0.8

June 30, December 31,

Dividend $ — $ 1.9 $ — $ 3.0

September 30, December 31,

Accounts receivable $ — $ 1.2

5 unchanged sentences

("Triple Ring").

Various subsidiaries of HC2 utilize the services of Triple Ring, incurring $ 0.3 million and $ 0.7 million in services for the three months ended June 30, 2020 and 2019, and $ 1.0 million and $ 0.8 million in services for the six months ended June 30, 2020 and 2019.

Various subsidiaries of HC2 utilize the services of Triple Ring, incurring zero and $ 0.5 million in services for the three months ended September 30, 2020 and 2019, and $ 1.0 million and $ 1.3 million in services for the nine months ended September 30, 2020 and 2019.

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUE

Operating Segment and Related Information

The Company currently has one primary reportable geographic segments - United States.

The Company has seven reportable operating segments based on management’s organization of the enterprise - Construction, Energy, Telecommunications, Insurance, Life Sciences, Broadcasting, Other, and a Non-operating Corporate segment.

The Company currently has one primary reportable geographic segment - United States.

The Company has seven reportable operating segments based on management’s organization of the enterprise - Infrastructure, Clean Energy, Telecommunications, Insurance, Life Sciences, Spectrum, Other, and a Non-operating Corporate segment.

All inter-segment revenues are eliminated.

While the names of certain segments have changed as detailed in Note 1.

Organization and Business, other than noted below, the Company's organizational structure has not changed during the nine months ended September 30, 2020.

As a result of the sale of GMSL, and in accordance with ASC 280, the Company no longer considers the Results of Operations and Balance Sheets of GMH and its subsidiaries as a separate segment.

Formerly the Marine Services segment, these entities and the investment in HMN have been reclassified to the Other segment.

In addition, as GMSL is a discontinued operation as of June 30, 2020, all operating results of GMSL have been reclassified to Discontinued operations.

In addition, GMSL is a discontinued operation all operating results of GMSL have been reclassified to Discontinued operations.

This has been reflected in the tables below for both the current and historical periods presented.

The Company's revenue concentrations of 10% and greater are as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

Segment 2020 2019 2020 2019

Customer A Telecommunications * * * 10.7 %

Customer B Telecommunications * 10.0 % * *

* Less than 10% revenue concentration

Summary information with respect to the Company’s operating segments is as follows (in millions):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Construction $ 172.3 $ 195.7 $ 348.8 $ 387.8

Energy 10.3 5.5 20.7 10.6

Infrastructure $ 160.8 $ 168.4 $ 509.6 $ 556.2

Clean Energy 10.3 8.7 31.0 19.3

Telecommunications 136.4 162.2 430.1 507.0

Insurance 78.9 80.4 223.2 251.3

Broadcasting 9.5 10.0 19.6 19.8

Spectrum 9.7 10.0 29.3 29.8

Eliminations (*)

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Total net revenue $ 393.3 $ 427.5 $ 1,215.1 $ 1,355.7

(*) The Insurance segment revenues are inclusive of realized and unrealized gains and net investment income for the three and six months ended June 30, 2020 and 2019, inclusive of transactions between entities under common control, which are eliminated or are reclassified in consolidation.

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three Months Ended June 30, Six Months Ended June 30,

(*) The Insurance segment revenues are inclusive of realized and unrealized gains and net investment income for the three and nine months ended September 30, 2020 and 2019, inclusive of transactions between entities under common control, which are eliminated or are reclassified in consolidation.

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Income (loss) from operations

Construction $ 4.5 $ 16.2 $ 7.1 $ 21.9

Energy 2.2 ( 0.3 ) 3.9 ( 0.7 )

Infrastructure $ 6.0 $ 12.4 $ 13.1 $ 34.3

Clean Energy 1.5 0.4 5.4 ( 0.3 )

Telecommunications 0.3 ( 0.4 ) 0.6 0.4

1 unchanged sentence

Life Sciences ( 4.7 ) ( 3.0 ) ( 11.4 ) ( 6.6 )

Broadcasting ( 1.2 ) ( 1.7 ) ( 4.1 ) ( 5.0 )

Spectrum ( 11.7 ) ( 3.8 ) ( 15.8 ) ( 8.8 )

Other ( 0.5 ) 0.1 ( 2.1 ) —

3 unchanged sentences

Total income (loss) from operations $ ( 2.1 ) $ 7.5 $ ( 24.0 ) $ 66.7

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUE

A reconciliation of the Company's consolidated segment operating income to consolidated earnings before income taxes is as follows (in millions):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Income (loss) from operations $ 4.9 $ 33.6 $ ( 21.9 ) $ 59.2

(Loss) income from operations $ ( 2.1 ) $ 7.5 $ ( 24.0 ) $ 66.7

Interest expense ( 19.7 ) ( 20.1 ) ( 62.4 ) ( 58.0 )

Loss on early extinguishment or restructuring of debt ( 4.2 ) — ( 13.4 ) —

(Loss) income from equity investees ( 0.2 ) 7.2 ( 2.7 ) 1.3

Loss from equity investees ( 1.3 ) ( 1.3 ) ( 4.0 ) —

Gain on bargain purchase — — — 1.1

Other income (loss) 7.3 6.1 74.1 4.7

Income (loss) from continuing operations 43.9 18.0 ( 9.7 ) 22.3

(Loss) income from continuing operations ( 20.0 ) ( 7.8 ) ( 29.7 ) 14.5

Income tax expense ( 1.6 ) ( 1.1 ) ( 4.4 ) ( 6.2 )

Income (loss) from continuing operations 28.5 16.9 ( 12.5 ) 17.2

Loss from discontinued operations (including loss on disposal of $39.3 million) — ( 7.7 ) ( 60.0 ) ( 14.3 )

Net income (loss) 28.5 9.2 ( 72.5 ) 2.9

Net (income) loss attributable to noncontrolling interest and redeemable noncontrolling interest ( 15.4 ) 0.2 2.5 3.7

Net income (loss) attributable to HC2 Holdings, Inc.

(Loss) income from continuing operations ( 21.6 ) ( 8.9 ) ( 34.1 ) 8.3

Income (loss) from discontinued operations (including loss on disposal of $ 39.3 million)

— 0.6 ( 60.0 ) ( 13.7 )

Net loss ( 21.6 ) ( 8.3 ) ( 94.1 ) ( 5.4 )

Net loss attributable to noncontrolling interest and redeemable noncontrolling interest 4.3 1.2 6.8 4.9

Net loss attributable to HC2 Holdings, Inc.

( 17.3 ) ( 7.1 ) ( 87.3 ) ( 0.5 )

Preferred dividends, deemed dividends and repurchase gains 0.4 0.4 1.2 ( 0.4 )

Net income (loss) attributable to common stock and participating preferred stockholders $ 12.7 $ 9.0 $ ( 70.8 ) $ 7.4

Three Months Ended June 30, Six Months Ended June 30,

Net loss attributable to common stock and participating preferred stockholders $ ( 17.7 ) $ ( 7.5 ) $ ( 88.5 ) $ ( 0.1 )

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Depreciation and Amortization

Construction $ 2.7 $ 4.0 $ 5.3 $ 7.9

Energy 2.0 1.5 4.1 2.9

Infrastructure $ 2.7 $ 3.9 $ 8.0 $ 11.8

Clean Energy 2.2 2.0 6.3 4.9

Telecommunications 0.1 0.1 0.3 0.3

2 unchanged sentences

Life Sciences — — 0.1 0.1

Broadcasting 1.7 1.5 3.4 2.9

Spectrum 1.7 1.8 5.1 4.7

Other — — — —

Non-operating Corporate 0.1 0.1 0.1 0.1

Total $ 2.4 $ 2.2 $ 4.1 $ 3.7

(*) Balance includes amortization of negative VOBA, which increases net income.

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Capital Expenditures (*)

Construction $ 1.1 $ 2.8 $ 3.4 $ 5.4

Energy 0.6 0.2 1.6 0.3

Infrastructure $ 1.4 $ 1.4 $ 4.8 $ 6.8

Clean Energy 0.4 0.1 2.0 0.4

Insurance — 0.4 0.1 0.6

Life Sciences — 0.1 0.1 0.1

Broadcasting 3.7 4.7 6.4 5.1

Spectrum 3.2 3.5 9.6 8.6

Other — — 0.1 —

1 unchanged sentence

(*) The above capital expenditures exclude assets acquired under terms of capital lease and vendor financing obligations.

June 30, December 31,

Construction $ 0.9 $ 0.9

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUE

September 30, December 31,

Infrastructure $ 0.9 $ 0.9

Insurance 4,616.0 4,423.0

3 unchanged sentences

Total $ 4,569.4 $ 4,392.1

June 30, December 31,

Construction $ 523.0 $ 530.4

Energy 137.4 142.8

September 30, December 31,

Infrastructure $ 506.4 $ 530.4

Clean Energy 130.5 142.8

Telecommunications 75.5 89.3

1 unchanged sentence

Life Sciences 27.1 28.4

Broadcasting 256.6 257.9

Spectrum 248.1 257.9

Other 32.8 366.3

2 unchanged sentences

Total $ 6,688.4 $ 6,958.3

Basic and Diluted Income Per Common Share

Basic and Diluted (Loss) Income Per Common 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.

2 unchanged sentences

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 following potential weighted common shares were excluded from diluted EPS for the three months ended June 30, 2020 due to the antidilutive impact to diluted EPS:

2,168,454 for outstanding warrants to purchase the Company's stock, 2,094,585 for convertible preferred stock, and 12,557,078 for convertible debt.

The Company had zero dilutive common share equivalents during the six months ended June 30, 2020 due to the results being a loss from continuing operations and discontinued operations, net of tax.

The following potential weighted common shares were excluded from diluted EPS for the three months ended June 30, 2019 due to the antidilutive impact to diluted EPS:

2,168,454 for outstanding warrants to purchase the Company's stock, 2,088,567 for convertible preferred stock, and 582,422 of unvested restricted stock.

The following potential weighted common shares were excluded from diluted EPS for the six months ended June 30, 2019 due to the antidilutive impact to diluted EPS:

2,168,454 for outstanding warrants to purchase the Company's stock, and 486,627 of unvested restricted stock.

The following table presents a reconciliation of net income (loss) used in basic and diluted EPS calculations (in millions, except per share amounts):

The following potential weighted common shares were excluded from diluted EPS for the nine months ended September 30, 2019 due to the antidilutive impact to diluted EPS:

2,168,454 for outstanding warrants to purchase the Company's stock, 2,088,568 for Series A Peferred Stock and Series A-2 Prefered Stock.

The Company had zero dilutive common share equivalents during the three and nine months ended September 30, 2020, and three and nine months ended September 30, 2019 due to the results being a loss from continuing operations and discontinued operations, net of tax.

The Company had no dilutive common shares equivalents during the three and nine months ended September 30, 2019 and the three and nine months ended September 30, 2019 due to the results of operations being a loss from continuing operations.

The following table presents a reconciliation of net (loss) income used in basic and diluted EPS calculations (in millions, except per share amounts):

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three Months Ended June 30, Six Months Ended June 30,

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUE

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Income (loss) from continuing operations $ 28.5 $ 16.9 $ ( 12.5 ) $ 17.2

(Loss) income from continuing operations $ ( 21.6 ) $ ( 8.9 ) $ ( 34.1 ) $ 8.3

Income (loss) attributable to noncontrolling interest and redeemable noncontrolling interest 4.3 1.6 ( 8.5 ) 3.8

Income (loss) from continuing operations attributable to the Company 13.1 16.7 ( 25.3 ) 19.4

(Loss) income from continuing operations attributable to the Company ( 17.3 ) ( 7.3 ) ( 42.6 ) 12.1

Preferred dividends, deemed dividends and repurchase gains 0.4 0.4 1.2 ( 0.4 )

Income (loss) from continuing operations attributable to HC2 common stockholders 12.7 16.3 ( 26.1 ) 20.2

Loss from discontinued operations (including loss on disposal of $ 39.3 million)

(Loss) income from continuing operations attributable to HC2 common stockholders ( 17.7 ) ( 7.7 ) ( 43.8 ) 12.5

Income (loss) from discontinued operations (including loss on disposal of $ 39.3 million)

— 0.6 ( 60.0 ) ( 13.7 )

Net income attributable to noncontrolling interest and redeemable noncontrolling interest — 0.4 15.3 1.5

Loss from discontinued operations, net of tax and noncontrolling interest — ( 7.3 ) ( 44.7 ) ( 12.8 )

Net income (loss) attributable to common stock and participating preferred stockholders $ 12.7 $ 9.0 $ ( 70.8 ) $ 7.4

(Loss) income attributable to noncontrolling interest and redeemable noncontrolling interest — ( 0.4 ) 15.3 1.1

Income (loss) from discontinued operations, net of tax and noncontrolling interest — 0.2 ( 44.7 ) ( 12.6 )

Net (loss) income attributable to common stock and participating preferred stockholders $ ( 17.7 ) $ ( 7.5 ) $ ( 88.5 ) $ ( 0.1 )

Earnings allocable to common shares:

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Net income (loss) from continuing operations attributable to common stock, basic $ ( 17.6 ) $ ( 7.7 ) $ ( 43.7 ) $ 12.5

Net loss from discontinued operations attributable to common stock, basic and diluted $ — $ ( 6.9 ) $ ( 44.7 ) $ ( 12.1 )

Net income (loss) from discontinued operations attributable to common stock, basic and diluted $ — $ 0.2 $ ( 44.7 ) $ ( 12.6 )

Net income (loss) attributable to common stock and participating preferred stockholders, basic and diluted $ ( 17.6 ) $ ( 7.5 ) $ ( 88.3 ) $ ( 0.1 )

1 unchanged sentence

Numerator for earnings per share, diluted

Effect of assumed shares under treasury stock method for stock options and restricted shares and if-converted method for convertible instruments $ — $ ( 1.4 ) $ — $ ( 2.4 )

Effect of assumed shares for stock options, restricted shares and convertible instruments $ — $ — $ — $ 1.6

Net income (loss) from continuing operations attributable to common stock, diluted $ ( 17.6 ) $ ( 7.7 ) $ ( 43.7 ) $ 14.1

Net loss from discontinued operations attributable to common stock, diluted $ — $ ( 6.9 ) $ ( 44.7 ) $ ( 12.1 )

Net income (loss) from discontinued operations attributable to common stock, diluted $ — $ 0.2 $ ( 44.7 ) $ ( 12.6 )

Net income (loss) attributable to common stock and participating preferred stockholders, diluted $ ( 17.6 ) $ ( 7.5 ) $ ( 88.3 ) $ 1.5

3 unchanged sentences

Weighted average common shares outstanding - diluted 46.9 45.7 46.7 60.1

Income (loss) per share - continuing operations

(Loss) income per share - continuing operations

$ ( 0.38 ) $ ( 0.16 ) $ ( 0.94 ) $ 0.28

3 unchanged sentences

$ — $ — $ ( 0.95 ) $ ( 0.21 )

Income (loss) per share - Net income (loss) attributable to participating security holders

(Loss) income per share - Net (loss) income attributable to participating security holders

$ ( 0.38 ) $ ( 0.16 ) $ ( 1.89 ) $ —

1 unchanged sentence

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUE

Subsequent Events

On August 2, 2020, the Company issued a notice of termination, effectively ending the Services Agreement with HCP, a former related party.

On August 6, 2020 the Construction segment paid a cash dividend of $ 5.0 million, or $ 1.30 per share.

HC2 received approximately $ 4.5 million of the total dividend payout.

On August 6, 2020 the Energy segment entered into a new credit facility M&T bank.

The new credit facility is comprised of a $ 57.0 million term loan facility, a $ 2.5 million revolving line of credit and an $ 8.0 million delayed draw term loan ear-marked for new station build, as well as a $ 10.0 million accordion feature.

On August 10, 2020 the Company and MSD PCOF Partners IX, LLC agreed to extend maturity of the 2020 Revolving Credit Agreement to September 1, 2021.

On October 2, 2020 a subsidiary of the Company entered into a stock purchase agreement with TransWorld Holdings Inc, formerly GoIP Global Inc, to sell 100 % of ICS and its subsidiary.

As of September 30, 2020, the ICS entity did not meet the criteria for held-for-sale under ASC 360, as approval from the Board of Directors was sought by management, and obtained subsequent to September 30, 2020.

The transaction closed on October 31, 2020.

On October 7, 2020, the Company publicly filed a prospectus supplement to the prospectus dated September 9, 2020 in connection with the Rights Offering, detailing the rights for voting shareholders to purchase up to 28,634,361 shares of common stock.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements