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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
Commission File No. 001-35210
vate-20220630_g1.jpg
INNOVATE CORP.
(Exact name of registrant as specified in its charter)
Delaware   54-1708481
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
295 Madison Avenue, 12th Floor, New York, NY
 10017
(Address of principal executive offices) (Zip Code)
(212) 235-2690
(Registrant’s telephone number, including area code)
_____________________________________________________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, par value $0.001 per share VATE New York Stock Exchange
Preferred Stock Purchase Rights
 N/A New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No   ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.:
Large accelerated filer  ☐ Accelerated filer
☒
Non-accelerated filer  ☐ Smaller reporting company
☒
Emerging growth company
 ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ☐    No  ý

As of August 1, 2022, 78,440,287 shares of common stock, par value $0.001, were outstanding.




INNOVATE CORP.
INDEX TO FORM 10-Q
Item 1.
2
2
3
4
5
7
8
8
9
Item 2.
Item 3.
Item 4.
PART II. OTHER INFORMATION
Item 1.
Item 6.


1
INNOVATE CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in millions, except per share amounts)
PART I: FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
  Three Months Ended June 30, Six Months Ended June 30,
  2022 2021 2022 2021
Revenue $ 392.2  $ 243.8  $ 805.0  $ 415.6 
Cost of revenue 341.9  207.4  704.9  348.7 
Gross profit 50.3  36.4  100.1  66.9 
Operating expenses:
Selling, general and administrative 42.1  39.5  84.7  76.6 
Depreciation and amortization 6.9  4.8  13.8  8.7 
Other operating loss (income) 1.7  (0.2) 1.3  0.2 
(Loss) income from operations (0.4) (7.7) 0.3  (18.6)
Other (expense) income:
Interest expense (12.5) (12.4) (25.1) (33.8)
Loss on early extinguishment or restructuring of debt —  (1.6) —  (12.4)
(Loss) income from equity investees (0.5) 0.2  (1.0) (1.9)
Other income, net 1.5  0.4  1.4  3.8 
Loss from continuing operations before income taxes (11.9) (21.1) (24.4) (62.9)
Income tax expense (2.0) (2.6) (3.6) (3.7)
Loss from continuing operations (13.9) (23.7) (28.0) (66.6)
(Loss) income from discontinued operations (including gain on disposal of $40.4 million for the six months ended June 30, 2021)
 —  (1.5) —  50.4 
Net loss (13.9) (25.2) (28.0) (16.2)
Net loss attributable to noncontrolling interest and redeemable noncontrolling interest 1.5  1.7  3.2  5.3 
Net loss attributable to INNOVATE Corp. (12.4) (23.5) (24.8) (10.9)
Less: Preferred dividends and deemed dividends from conversions 1.2  0.2  2.4  0.6 
Net loss attributable to common stock and participating preferred stockholders $ (13.6) $ (23.7) $ (27.2) $ (11.5)
Loss per common share - continuing operations
Basic $ (0.18) $ (0.29) $ (0.35) $ (0.82)
Diluted $ (0.18) $ (0.29) $ (0.35) $ (0.82)
(Loss) income per common share - discontinued operations
Basic $ —  $ (0.02) $ —  $ 0.67 
Diluted $ —  $ (0.02) $ —  $ 0.67 
Loss per share - Net loss attributable to common stock and participating preferred stockholders
Basic $ (0.18) $ (0.31) $ (0.35) $ (0.15)
Diluted $ (0.18) $ (0.31) $ (0.35) $ (0.15)
Weighted average common shares outstanding:
Basic 77.5  77.0  77.4  77.1 
Diluted 77.5  77.0  77.4  77.1 
See notes to Condensed Consolidated Financial Statements
2
INNOVATE CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited, in millions)
  Three Months Ended June 30, Six Months Ended June 30,
  2022 2021 2022 2021
Net loss $ (13.9) $ (25.2) $ (28.0) $ (16.2)
Other comprehensive (loss) income
Foreign currency translation adjustment, net of tax (2.5) (0.4) (1.8) (1.2)
Unrealized income (loss) on available-for-sale securities, net of tax —  123.5  —  (57.7)
Other comprehensive (loss) income (2.5) 123.1  (1.8) (58.9)
Comprehensive (loss) income (16.4) 97.9  (29.8) (75.1)
Comprehensive loss attributable to noncontrolling interests and redeemable noncontrolling interests 1.7  1.7  3.3  5.4 
Comprehensive (loss) income attributable to INNOVATE Corp. $ (14.7) $ 99.6  $ (26.5) $ (69.7)






















See notes to Condensed Consolidated Financial Statements
3
INNOVATE CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in millions, except share amounts)
June 30,
2022		 December 31,
2021
Assets
Current assets
Cash and cash equivalents $ 24.9  $ 45.5 
Accounts receivable, net 271.1  247.1 
Contract assets 152.7  118.6 
Inventory 20.1  17.0 
Restricted cash 1.0  2.0 
Assets held for sale 1.4  1.5 
Other current assets 11.1  10.9 
Total current assets 482.3  442.6 
Investments 58.9  56.0 
Deferred tax asset 2.8  3.0 
Property, plant and equipment, net 164.5  169.9 
Goodwill 127.1  127.4 
Intangibles, net 198.4  208.4 
Other assets 72.4  73.3 
Total assets $ 1,106.4  $ 1,080.6 
Liabilities, temporary equity and stockholders’ deficit
Current liabilities
Accounts payable $ 182.4  $ 179.2 
Accrued liabilities 93.3  93.4 
Current portion of debt obligations 73.0  69.5 
Contract liabilities 93.3  79.1 
 Other current liabilities 19.7  18.3 
Total current liabilities 461.7  439.5 
Deferred tax liability 9.9  9.1 
Debt obligations 594.1  556.8 
Other liabilities 59.8  63.3 
Total liabilities 1,125.5  1,068.7 
Commitments and contingencies
Temporary equity
Preferred stock 18.2  18.8 
Redeemable noncontrolling interest 46.8  49.3 
Total temporary equity 65.0  68.1 
Stockholders’ deficit
Common stock, $0.001 par value
 0.1  0.1 
Shares authorized: 160,000,000 at both June 30, 2022 and December 31, 2021
Shares issued: 79,829,503 and 79,225,964 at June 30, 2022 and December 31, 2021, respectively
Shares outstanding: 78,440,287 and 77,836,748 at June 30, 2022 and December 31, 2021, respectively
Additional paid-in capital 330.7  330.6 
Treasury stock, at cost: 1,389,216 shares at both June 30, 2022 and December 31, 2021
 (5.2) (5.2)
Accumulated deficit (441.0) (416.2)
Accumulated other comprehensive income 4.7  6.4 
Total INNOVATE Corp. stockholders’ deficit (110.7) (84.3)
Noncontrolling interest 26.6  28.1 
Total stockholders’ deficit (84.1) (56.2)
Total liabilities, temporary equity and stockholders’ deficit $ 1,106.4  $ 1,080.6 
See notes to Condensed Consolidated Financial Statements
4
INNOVATE CORP.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
(Unaudited, in millions)

Common Stock Additional
Paid-In
Capital		 Treasury
Stock		 Accumulated Deficit Accumulated Other Comprehensive Income (Loss) (a) Total INNOVATE Stockholders' Equity (Deficit) Non-
controlling
Interest		 Total Stockholders’ Equity (Deficit) Temporary Equity
Shares Amount
Balance as of March 31, 2022 78.4  $ 0.1  $ 330.8  $ (5.2) $ (428.6) $ 7.0  $ (95.9) $ 26.6  $ (69.3) $ 66.2 
Share-based compensation —  —  0.5  —  —  —  0.5  —  0.5  — 
Fair value adjustment of redeemable noncontrolling interest —  —  0.1  —  —  —  0.1  —  0.1  (0.1)
Preferred stock dividend —  —  —  —  —  —  —  —  —  (0.3)
Issuance of preferred stock —  —  (0.9) —  —  —  (0.9) —  (0.9) 0.9 
Other —  —  0.2  —  —  —  0.2  —  0.2  — 
Net loss —  —  —  —  (12.4) —  (12.4) 0.2  (12.2) (1.7)
Other comprehensive loss —  —  —  —  —  (2.3) (2.3) (0.2) (2.5) — 
Balance as of June 30, 2022 78.4  $ 0.1  $ 330.7  $ (5.2) $ (441.0) $ 4.7  $ (110.7) $ 26.6  $ (84.1) $ 65.0 
Common Stock Additional
Paid-In
Capital		 Treasury
Stock		 Accumulated Deficit Accumulated Other Comprehensive Income (Loss) (a) Total INNOVATE Stockholders' Equity (Deficit) Non-
controlling
Interest		 Total Stockholders’ Equity (Deficit) Temporary Equity
Shares Amount
Balance as of December 31, 2021 77.8  $ 0.1  $ 330.6  $ (5.2) $ (416.2) $ 6.4  $ (84.3) $ 28.1  $ (56.2) $ 68.1 
Share-based compensation —  —  1.3  —  —  —  1.3  —  1.3  — 
Fair value adjustment of redeemable noncontrolling interest —  —  0.1  —  —  —  0.1  —  0.1  (0.1)
Preferred stock dividend —  —  (0.8) —  —  —  (0.8) (1.3) (2.1) (0.6)
Issuance of common stock 0.6  —  —  —  —  —  —  —  —  — 
Issuance of preferred stock —  —  (0.9) —  —  —  (0.9) —  (0.9) 0.9 
Transactions with noncontrolling interests —  —  0.1  —  —  —  0.1  (0.2) (0.1) 0.1 
Other —  —  0.3  —  —  —  0.3  —  0.3  — 
Net loss —  —  —  —  (24.8) —  (24.8) 0.2  (24.6) (3.4)
Other comprehensive loss —  —  —  —  —  (1.7) (1.7) (0.2) (1.9) — 
Balance as of June 30, 2022 78.4  $ 0.1  $ 330.7  $ (5.2) $ (441.0) $ 4.7  $ (110.7) $ 26.6  $ (84.1) $ 65.0 




5
INNOVATE CORP.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
(Unaudited, in millions)
Common Stock Additional
Paid-In
Capital		 Treasury
Stock		 Accumulated Deficit Accumulated Other Comprehensive Income (Loss) (a) Total INNOVATE Stockholders' Equity (Deficit) Non-
controlling
Interest		 Total Stockholders’ Equity (Deficit) Temporary Equity
Shares Amount
Balance as of March 31, 2021 77.6  $ 0.1  $ 355.7  $ (5.2) $ (176.1) $ 215.1  $ 389.6  $ 23.9  $ 413.5  $ 18.0 
Share-based compensation —  —  0.6  —  —  —  0.6  —  0.6  — 
Fair value adjustment of redeemable noncontrolling interest —  —  (0.1) —  —  —  (0.1) —  (0.1) 0.1 
Preferred stock dividend —  —  (0.1) —  —  —  (0.1) —  (0.1) — 
Issuance of common stock 0.2  —  0.5  —  —  —  0.5  —  0.5  — 
Purchase of preferred stock by subsidiary —  —  (0.2) —  —  —  (0.2) —  (0.2) — 
Redemption of preferred shares —  —  —  —  —  —  —  —  —  (10.4)
Transactions with noncontrolling interests —  —  (1.6) —  —  —  (1.6) (0.5) (2.1) — 
Net loss —  —  —  —  (23.5) —  (23.5) (0.2) (23.7) (1.5)
Other comprehensive income —  —  —  —  —  123.1  123.1  —  123.1  — 
Balance as of June 30, 2021 77.8  $ 0.1  $ 354.8  $ (5.2) $ (199.6) $ 338.2  $ 488.3  $ 23.2  $ 511.5  $ 6.2 
Common Stock Additional
Paid-In
Capital		 Treasury
Stock		 Accumulated Deficit Accumulated Other Comprehensive Income (Loss) (a) Total INNOVATE Stockholders' Equity (Deficit) Non-
controlling
Interest		 Total Stockholders’ Equity (Deficit) Temporary Equity
Shares Amount
Balance as of December 31, 2020 76.7  $ 0.1  $ 355.7  $ (4.2) $ (188.7) $ 396.9  $ 559.8  $ 40.4  $ 600.2  $ 15.7 
Share-based compensation —  —  1.3  —  —  —  1.3  —  1.3  — 
Fair value adjustment of redeemable noncontrolling interest —  —  (0.3) —  —  —  (0.3) —  (0.3) 0.3 
Taxes paid in lieu of shares issued for share-based compensation —  —  —  (1.0) —  —  (1.0) —  (1.0) — 
Preferred stock dividend —  —  (0.3) —  —  —  (0.3) —  (0.3) — 
Issuance of common stock 1.1  —  0.7  —  —  —  0.7  —  0.7  — 
Purchase of preferred stock by subsidiary —  —  (0.2) —  —  —  (0.2) —  (0.2) — 
Redemption of preferred shares —  —  —  —  —  —  —  —  —  (10.4)
Transactions with noncontrolling interests —  —  0.8  —  —  —  0.8  (15.0) (14.2) 3.8 
Other —  —  (2.9) —  —  —  (2.9) —  (2.9) — 
Net loss —  —  —  —  (10.9) —  (10.9) (2.1) (13.0) (3.2)
Other comprehensive loss —  —  —  —  —  (58.7) (58.7) (0.1) (58.8) — 
Balance as of June 30, 2021 77.8  $ 0.1  $ 354.8  $ (5.2) $ (199.6) $ 338.2  $ 488.3  $ 23.2  $ 511.5  $ 6.2 



See notes to Condensed Consolidated Financial Statements
6
INNOVATE CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)


Six Months Ended June 30,
2022 2021
Cash flows from operating activities
Net loss $ (28.0) $ (16.2)
Less: Income from discontinued operations, net of tax —  50.4 
(28.0) (66.6)
Adjustments to reconcile net loss to cash provided by (used in) operating activities
Share-based compensation expense 1.3  1.3 
Depreciation and amortization 21.1  13.8 
Amortization of deferred financing costs and debt discount 2.2  8.3 
Loss on extinguishment of debt —  12.4 
Loss from equity investees 1.0  1.9 
Asset impairment expense 1.9  2.2 
Deferred income taxes 0.8  1.3 
Other operating activities (1.3) (4.6)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable (21.3) (24.4)
Contract assets (34.1) (25.7)
Other current assets (3.0) 0.5 
Other assets 9.0  5.5 
Accounts payable 1.7  24.6 
Accrued liabilities 0.3  25.3 
Contract liabilities 14.2  15.7 
Other current liabilities (5.7) (26.0)
Other liabilities (2.8) (0.2)
Cash used in continuing operating activities (42.7) (34.7)
Cash provided by discontinued operating activities —  34.3 
Cash used in operating activities (42.7) (0.4)
Cash flows from investing activities
Purchase of property, plant and equipment (8.8) (8.0)
Proceeds from disposal of property, plant and equipment 1.8  1.1 
Loan to equity method investee (4.5) — 
Cash received from dispositions, net of cash disposed —  71.2 
Cash paid for acquisitions, net of cash acquired —  (128.5)
Other investing activities —  1.4 
Cash used in continuing investing activities (11.5) (62.8)
Cash provided by discontinued investing activities —  31.6 
Cash used in investing activities (11.5) (31.2)
Cash flows from financing activities
Proceeds from debt obligations 57.6  528.2 
Principal payments on debt obligations (19.2) (446.1)
Redemption of preferred stock —  (10.4)
Cash received by subsidiary to issue preferred stock —  10.0 
Transactions with noncontrolling interests —  (6.9)
Other financing activities (3.6) (1.2)
Cash provided by continuing financing activities 34.8  73.6 
Cash used in discontinued financing activities —  (7.6)
Cash provided by financing activities 34.8  66.0 
Effects of exchange rate changes on cash, cash equivalents and restricted cash (1.4) (0.7)
Net (decrease) increase in cash and cash equivalents, including restricted cash and cash classified within assets held for sale (20.8) 33.7 
Less: Net increase in cash and cash equivalents from discontinued operations —  58.3 
Net change in cash, cash equivalents and restricted cash (20.8) (24.6)
Cash, cash equivalents and restricted cash, beginning of period 47.5  45.3 
Cash, cash equivalents and restricted cash, end of period $ 26.7  $ 20.7 





See notes to Condensed Consolidated Financial Statements
7

INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Organization and Business

INNOVATE Corp. ("INNOVATE" and, together with its consolidated subsidiaries, the "Company", "we" and "our") is a diversified holding company that has a portfolio of subsidiaries in a variety of operating segments. We seek to grow these businesses so that they can generate long-term sustainable free cash flow and attractive returns in order to maximize value for all stakeholders. 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 noncontrolling equity interest positions or debt instruments. The Company’s shares of common stock trade on the NYSE under the symbol "VATE".

The Company currently has three reportable segments, plus our Other segment, based on management’s organization of the enterprise: Infrastructure, Life Sciences, Spectrum, and Other which includes businesses that do not meet the separately reportable segment thresholds.

1.Our Infrastructure segment is comprised of DBM Global Inc. ("DBMG") and its wholly-owned subsidiaries. DBMG is a fully integrated industrial construction, structural steel and facility maintenance provider that provides fabrication and erection of structural steel and heavy steel plate services and also fabricates trusses and girders and specializes in the fabrication and erection of large-diameter water pipe and water storage tanks, as well as 3-D Building Information Modeling (“BIM”) and detailing. DBMG provides these services on commercial, industrial, and infrastructure construction projects such as high- and low-rise buildings and office complexes, hotels and casinos, convention centers, sports arenas and stadiums, shopping malls, hospitals, dams, bridges, mines, metal processing, refineries, pulp and paper mills and power plants. Through GrayWolf Industrial Inc.("GrayWolf"), DBMG provides integrated solutions for digital engineering, modeling and detailing, construction, heavy equipment installation and facility services including maintenance, repair, and installation to a diverse range of end markets. Through Aitken Manufacturing, Inc., DBMG manufactures pollution control scrubbers, tunnel liners, pressure vessels, strainers, filters, separators and a variety of customized products. Through Banker Steel Holdco, LLC ("Banker Steel"), DBMG provides full-service fabricated structural steel and erection services primarily for the East Coast and Southeast commercial and industrial construction market, in addition to full design-assist services. The Company maintains an approximately 91% controlling interest in DBMG.

2.Our Life Sciences segment is comprised of Pansend Life Sciences, LLC ("Pansend"), its subsidiaries and equity method investments. Pansend maintains controlling interests of approximately 80% in Genovel Orthopedics, Inc. ("Genovel"), which seeks to develop products to treat early osteoarthritis of the knee and approximately 56% in R2 Technologies, Inc. ("R2"), which develops aesthetic and medical technologies for the skin. Pansend also invests in other early stage or developmental stage healthcare companies including an approximately 47% interest in MediBeacon Inc. ("MediBeacon"), a medical technology company specializing in the advances of fluorescent tracer agents and transdermal measurement, potentially enabling real-time, direct monitoring of kidney function, and an approximately 26% interest in Triple Ring Technologies, Inc ("Triple Ring"), a science and technology co-development company.

3.Our Spectrum segment is comprised of HC2 Broadcasting Holdings Inc. ("Broadcasting") and its subsidiaries. Broadcasting strategically acquires and operates over-the-air broadcasting stations across the United States. In addition, Broadcasting, through its wholly-owned subsidiary, HC2 Network Inc. ("Network"), operates Azteca America, a Spanish-language broadcast network offering high quality Hispanic content to a diverse demographic across the United States. The Company maintains a 98% controlling interest in Broadcasting and maintains a controlling interest of approximately 77%, inclusive of approximately 10% proxy and voting rights from minority holders of DTV America Corporation ("DTV").

4.Our Other segment represents all other businesses or investments that do not meet the definition of a segment individually or in the aggregate. Included in the Other segment is the former Marine Services segment, which includes its holding company, Global Marine Holdings, LLC ("GMH"), in which the Company maintains approximately 73% controlling interest. GMH results include the current and prior year equity investment in HMN Technologies Co., Ltd. (“HMN”), its 19% equity method investment, and the discontinued operations of Global Marine Systems Limited ("GMSL"). Also included in the Other segment is the discontinued operations of Beyond6, Inc. ("Beyond6"), and Continental Insurance Group ("CIG").
8
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
2. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of the Company, its wholly owned subsidiaries and all other subsidiaries over which the Company exerts control. All intercompany profits, transactions and balances have been eliminated in consolidation. For the three and six months ended June 30, 2022, the results of DBMG, Pansend, Genovel, R2, 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.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of the Company included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of such information. All such adjustments are of a normal recurring nature. Certain information and note disclosures, including a description of significant accounting policies normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), have been condensed or omitted in these interim financial statements pursuant to such rules and regulations. 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 audited Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 9, 2022. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results for any subsequent periods or the entire fiscal year ending December 31, 2022.

Use of Estimates and Assumptions

The preparation of the Company’s Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions used.

Liquidity

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 available cash and distributions from our subsidiaries. The ability of INNOVATE’s subsidiaries to make distributions to INNOVATE is subject to numerous factors, including restrictions contained in each subsidiary’s financing agreements, availability of sufficient funds at each subsidiary and the approval of such payment by each subsidiary’s board of directors, which must consider various factors, including general economic and business conditions, tax considerations, strategic plans, financial results and condition, expansion plans, any contractual, legal or regulatory restrictions on the payment of dividends, and such other factors each subsidiary’s board of directors considers relevant. Although the Company believes, to the extent needed, that it will be able to raise additional equity capital, refinance indebtedness or preferred stock, enter into other financing arrangements or engage in asset sales and sales of certain investments sufficient to fund any cash needs that we are not able to satisfy with the funds on hand or expected to be provided by our subsidiaries, there can be no assurance that it will be able to do so on terms satisfactory to the Company, if at all. Such financing options, if pursued, may also ultimately have the effect of negatively impacting our liquidity profile and prospects over the long-term. Our ability to sell assets and certain of our investments to meet our existing financing needs may also be limited by our existing financing instruments. In addition, the sale of assets or the Company’s investments may also make the Company less attractive to potential investors or future financing partners.

COVID-19

There are many uncertainties regarding the current coronavirus ("COVID-19") pandemic, and the Company continues to closely monitor the impact of the COVID-19 pandemic, including the effectiveness of the vaccine programs, on all aspects of its business, including how it will impact its customers, employees, suppliers, vendors, business partners and distribution channels and any potential prolonging or worsening of the pandemic due to COVID-19 variants. We are unable to predict the impact that COVID-19 will have on the Company's 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.

9
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
COVID-19 has continued to cause supply chain challenges related to labor shortages and supply chain disruptions, which may create significant delays in our ability to complete projects or deliver products. The receipt of material from impacted areas has been slowed or disrupted and our suppliers are expected to face similar challenges in fulfilling orders. In addition, reductions in the number of ocean carrier voyages, ocean freight capacity issues, congestion at major international gateways and other economic factors continue to persist worldwide due to COVID-19 and worldwide supply impacts as there is much greater demand for shipping and reduced capacity and equipment, which has resulted in recent price increases per shipping container. In addition, in the United States, trucking costs have risen dramatically due to driver shortages and increased labor costs, as well as new federal and state safety, environmental and labor regulations. These changes, as well as COVID-19 related state and local restrictions on domestic trucking and the operation of distribution centers, may disrupt our supply chain, which may result in a delay in the completion of our projects and cause us to incur significant additional costs. Although we may attempt to pass on certain of these increased costs to our customers, we may not be able to pass all of these cost increases on to our customers. As a result, our margins may be adversely impacted by such cost increases. These supply chain disruptions and transportation challenges could have a material adverse effect on our results of operations or financial condition.

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

Supplemental Cash Flow Information

The following table provides 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):
June 30,
2022 2021
Cash and cash equivalents, beginning of period $ 45.5  $ 43.8 
Restricted cash included in restricted cash 2.0  1.5 
Total cash and cash equivalents and restricted cash $ 47.5  $ 45.3 
Cash and cash equivalents, end of period $ 24.9  $ 18.1 
Restricted cash included in restricted cash and other non-current assets 1.8  2.6 
Total cash and cash equivalents and restricted cash $ 26.7  $ 20.7 
Cash and cash equivalents classified in Assets held for sale, beginning of period $ —  $ 195.2 
Restricted cash classified in Assets held for sale —  0.2 
Total cash and cash equivalents and restricted cash classified in Assets held for sale $ —  $ 195.4 
Cash and cash equivalents classified in Assets held for sale, end of period $ —  $ 253.7 
Restricted cash classified in Assets held for sale —  — 
Total cash and cash equivalents and restricted cash classified in Assets held for sale $ —  $ 253.7 
Supplemental cash flow information:
Cash paid for interest $ 20.5  $ 12.3 
Cash paid for taxes, net of refunds $ 1.9  $ 2.6 
Non-cash investing and financing activities:
Property, plant and equipment included in accounts payable $ 0.4  $ 2.1 
Extinguishment of convertible note in exchange $ —  $ 51.8 
Issuance of convertible note in exchange $ —  $ (51.8)
Debt assumed in acquisitions $ —  $ 6.3 

Accounting Pronouncements Adopted in the Current Year

There were no new accounting pronouncements adopted during the six months ended June 30, 2022.
10
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)

Accounting Pronouncements to be Adopted in 2023

Credit Loss Standard

ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"), was issued by FASB in June 2016. This new standard and its related amendments change the impairment model for most financial assets that are measured at amortized cost and certain other instruments, including trade receivables and contract assets, from an incurred loss model to an expected loss model and adds certain new required disclosures. Under the expected loss model, entities will recognize estimated credit losses over the entire contractual term of the instrument rather than delaying recognition of credit losses until it is probable the loss has been incurred. The Company is required to adopt Topic 326 on January 1, 2023. The Company is currently evaluating the application of the new standard and does not expect the adoption to have a significant impact on the Company's financial statements.

Subsequent Events

ASC 855, Subsequent Events requires the Company to evaluate events that occur after the balance sheet date as of which the financial statements are issued, and to determine whether adjustments to or additional disclosures in the financial statements are necessary. See Note 19. Subsequent Events for the summary of the subsequent events.

3. Discontinued Operations

The results of Beyond6 and CIG and the related expenses directly attributable to the entities were reported as discontinued operations. Summarized operating results of the discontinued operations are as follows (in millions):

Three Months Ended June 30, Six Months Ended June 30,
  2022 2021 2022 2021
Revenue $ —  $ —  $ —  $ 1.7 
Life, accident and health earned premiums, net —  27.3  —  55.7 
Net investment income —  48.5  —  92.4 
Realized/unrealized (losses) gains on investments —  (4.4) —  5.1 
Total revenue —  71.4  —  154.9 
Cost of revenue —  —  —  0.8 
Policy benefits, changes in reserves, and commissions —  69.9  —  126.0 
Selling, general and administrative —  8.7  —  21.1 
Depreciation and amortization —  (5.1) —  (11.0)
(Loss) income from operations —  (2.1) —  18.0 
Interest expense —  (0.1) —  (0.5)
Gain on sale and liquidation of subsidiaries —  —  —  40.4 
Other loss —  —  —  (3.1)
Pre-tax (loss) income from discontinued operations —  (2.2) —  54.8 
Income tax benefit (expense) —  0.7  —  (4.4)
(Loss) income from discontinued operations $ —  $ (1.5) $ —  $ 50.4 

Sale of CIG

The sale of CIG closed on July 1, 2021 to Continental General Holdings LLC ("Continental"), an entity controlled by Michael Gorzynski, a former director of the Company who also serves as executive chairman of Continental since October 2020. Our previous segment incorporating CIG (the "Insurance segment"), which primarily consisted of a closed block of long-term care insurance, had a book value, inclusive of intercompany eliminations, at the time of the sale of $544.0 million, inclusive of $344.0 million of Accumulated other comprehensive income ("AOCI"). The carrying value of the Insurance segment at the time of sale excluded cash of $62.5 million and investments of $26.7 million which were distributed to the Company through an extraordinary dividend immediately prior to the sale. The extraordinary dividend was approved by our domestic regulator in connection with the approval of the sale. The amount included in AOCI was reversed from equity at the time of the sale and offset the loss recognized.

While several factors impacted the fair value of the Insurance segment at the end of 2019, following discussions with our domestic regulator, changes in the asset management fee arrangement and expectations of future dividends primarily and ultimately resulted in the full impairment of the goodwill associated with the Insurance segment during the year ended December 31, 2019. While these factors did not have a major impact on the operations of the stand-alone business, they did have a significant impact on the economic benefit that could be realized by the Company.

As a result of the factors described above, combined with the risks associated with the long-term care insurance industry, the Company exited the Insurance segment and sold the business resulting in a $200.8 million loss on the sale of CIG in the third quarter of 2021.
11
INNOVATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)

Sale of Beyond6

On December 31, 2020, the Company announced a plan to sell Beyond6 to an affiliate of Mercuria Investments US, Inc., pursuant to an Agreement and Plan of Merger (the "Merger Agreement") among Beyond6, Greenfill, Inc., a Delaware corporation ("Parent"), Greenfill Merger Inc., a newly-formed Delaware corporation and wholly-owned subsidiary of Parent, and an affiliate of INNOVATE as the Stockholder Representative for the Beyond6 stockholders. The sale closed on January 15, 2021. During the first quarter of 2021, the Company recognized a $39.2 million gain on the sale. During the third quarter of 2021, as a result of releases of related escrows and hold backs, the Company recognized an additional $0.5 million gain on the sale.

A portion of the proceeds from the sale of Beyond6 were used to repay $15.0 million of the then outstanding balance under the 6.75% line of credit with MSD PCOF Partners IX, LLC ("Revolving Credit Agreement") and repay $27.9 million of the Company's 2021 Senior Secured Notes.

Assets Held for Sale

As of June 30, 2022 and December 31, 2021, the Company had approximately $1.4 million and $1.5 million of other current assets related to discontinued operations which are classified in Assets held for sale on the Condensed Consolidated Balance Sheets, respectively.

4. Revenue

Revenue from contracts with customers consist of the following (in millions):
Three Months Ended June 30, Six Months Ended June 30,
  2022 2021 2022 2021
Revenue
Infrastructure
 $ 382.1  $ 232.0  $ 784.3  $ 393.3 
Life Sciences 1.0  1.2  1.8  1.2 
Spectrum 9.1  10.6  18.9  21.1 
Total revenue $ 392.2  $ 243.8  $ 805.0  $ 415.6 

Accounts receivables, net, from contracts with customers consist of the following (in millions):
June 30,
2022		 December 31,
2021
 
Accounts receivables with customers
Infrastructure
 $ 252.3  $ 226.8 
Life Sciences 0.8  0.3 
Spectrum 8.3  9.4 
Total accounts receivables with customers $ 261.4  $ 236.5 

Infrastructure Segment

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

Three Months Ended June 30, Six Months Ended June 30,
  2022 2021 2022 2021
Commercial $ 218.4  $ 84.8  $ 456.6  $ 134.3 
Industrial 85.0  79.0  174.2  119.2 
Healthcare 31.2  11.1  57.3  20.0 
Convention 22.1  18.8  41.7  28.2 
Transportation 7.9  10.8  17.9  24.7 
Leisure 5.6  4.7  9.8  12.2 
Government 9.1  17.2  16.5  38.5 
Other 2.8  5.6  10.0  16.2 
Total revenue from contracts with customers 382.1  232.0  784.0  393.3 
Other revenue —  —  0.3  — 
Total Infrastructure segment revenue $ 382.1  $ 232.0  $ 784.3  $ 393.3 

12
INNOVATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
Contract assets and contract liabilities consisted of the following (in millions):
June 30,
2022		 December 31,
2021
 
Cost in excess of billings $ 78.5  $ 68.3 
Conditional retainage 74.2  50.3 
Contract assets $ 152.7  $ 118.6 
Billings in excess of costs $ (147.7) $ (137.6)
Conditional retainage 54.4  58.5 
Contract liabilities $ (93.3) $ (79.1)

The change in contract assets is a result of the recording of $135.8 million of contract assets driven by new commercial projects, offset by $101.7 million of contract assets transferred to receivables from contract assets recognized at the beginning of the period.

The change in contract liabilities is a result of periodic contract liabilities of $90.5 million driven largely by new commercial projects, offset by revenue recognized that was included in the contract liability balance at the beginning of the period in the amount of $76.3 million.

Transaction Price Allocated to Remaining Unsatisfied Performance Obligations

The transaction price allocated to remaining unsatisfied performance obligations consisted of the following (in millions):
  Within one year Within five years Total
Commercial $ 484.2  $ 179.6  $ 663.8 
Industrial 277.1  3.2  280.3 
Transportation 103.1  58.1  161.2 
Government 19.0  —  19.0 
Leisure 13.8  —  13.8 
Healthcare 189.9  10.0  199.9 
Convention 113.9  13.7  127.6 
Other 4.7  —  4.7 
Remaining unsatisfied performance obligations $ 1,205.7  $ 264.6  $ 1,470.3 

DBMG's remaining unsatisfied performance obligations increase with awards of new contracts and decrease as it performs work and recognizes revenue on existing contracts. DBMG includes a project within its remaining unsatisfied performance obligations at such time the project is awarded and agreement on contract terms has been reached. DBMG's remaining unsatisfied performance obligations include amounts related to contracts for which a fixed price contract value is not assigned when a reasonable estimate of total transaction price can be made. DBMG expects to recognize this revenue over the next thirty-six months.

Remaining unsatisfied performance obligations include unrecognized revenues to be realized from uncompleted construction contracts. Although many of DBMG's contracts are subject to cancellation at the election of its customers, in accordance with industry practice, DBMG does not limit the amount of unrecognized revenue included within its remaining unsatisfied performance obligations due to the inherent substantial economic penalty that would be incurred by its customers upon cancellation.

Life Sciences Segment

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

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Systems and consumables revenue $ 1.0  $ 1.2  $ 1.8  $ 1.2 
Total Life Sciences segment revenue $ 1.0  $ 1.2  $ 1.8  $ 1.2 

13
INNOVATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
Spectrum Segment

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

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Broadcast station $ 4.7  $ 4.5  $ 9.5  $ 8.9 
Network advertising 3.3  4.8  7.3  9.5 
Network distribution 0.8  0.7  1.4  1.6 
Other 0.3  0.6  0.7  1.1 
Total Spectrum segment revenue $ 9.1  $ 10.6  $ 18.9  $ 21.1 

The transaction price allocated to remaining unsatisfied performance obligations consisted of $4.3 million of broadcast station revenues, $0.1 million of network advertising and $0.1 million of other revenues, of which $3.3 million is expected to be recognized within one year and $1.2 million is expected to be recognized within five years.

5. Acquisitions, Dispositions, and Deconsolidations

Infrastructure Segment

Banker Steel Acquisition

On March 15, 2021, the Company announced that DBMG entered into an agreement to acquire 100% of Banker Steel Holdco LLC ("Banker Steel") for $145.0 million, which closed on May 27, 2021. The acquisition was financed with $64.1 million from a partial draw on a new $110.0 million revolving credit facility, $49.6 million of sellers' notes, $6.3 million of assumed debt of Banker Steel, and $25.0 million in cash received from INNOVATE in the settlement of certain intercompany balances.

Banker Steel provides full-service fabricated structural steel and erection services primarily for the East Coast and Southeast commercial and industrial construction market, in addition to full design-assist services. Banker Steel consists of six operating companies: Banker Steel Co., LLC; NYC Constructors, LLC; Memco LLC; Derr & Isbell Construction LLC; Innovative Detailing and Engineering Solutions; and Lynchburg Freight and Specialty LLC.

Pro Forma Adjusted Summary

The following schedule presents unaudited consolidated pro forma results of operations data as if the acquisition of Banker Steel had occurred at the beginning of the prior period. This information does not purport to be indicative of the actual results that would have occurred if the acquisitions had actually been completed on the date indicated, nor is it necessarily indicative of the future operating results or the financial position of the combined company (in millions):

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021
Revenue $ 326.1  $ 613.1 
Income (loss) from operations $ 1.5  $ (7.1)
Net loss attributable to INNOVATE $ (15.7) $ (2.6)

Other Segment

Sale of GMSL

On January 30, 2020, the Company announced that, through its indirect subsidiary, GMH, in which the Company holds an approximately 73% controlling interest, the Company entered into a definitive agreement to sell 100% of the shares of GMSL to Trafalgar AcquisitionCo, Ltd. and an affiliate of J.F. Lehman & Company, LLC. The total base consideration was $250.0 million, subject to customary purchase price adjustments, working capital adjustments, and a potential earn-out of up to $12.5 million at such time, if any, if J.F. Lehman & Company, LLC and its investment affiliates achieve a specified multiple of their invested capital.

The purchase price is subject to customary potential downward or upward post-closing adjustments based on net working capital, cash, unpaid transaction expenses, indebtedness and certain of the Company’s pre-closing paid capital expenditures. The Share Purchase Agreement contained customary representations, warranties and covenants for a transaction of this nature.

14
INNOVATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
The transaction closed on February 28, 2020. 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. INNOVATE received net proceeds of approximately $100.8 million. In connection with the closing of the transaction, the purchaser deposited (i) $1.25 million of the base price into an escrow fund for the purpose of securing certain indemnification obligations for losses payable in the first twelve months after closing and (ii) $1.91 million of the base price into an escrow fund for the purpose of securing a purchase price adjustment, if any, in favor of purchaser. Following the closing, the purchaser paid an amount equal to $2.4 million on the earlier of December 31, 2020 and the date on which a cash collateralized bonding facility was released.

In the first quarter of 2020, the Company recorded a $39.3 million loss on the sale and recognized a $31.3 million of Accumulated other comprehensive loss, which was comprised of $17.2 million of actuarial losses on pension and $14.1 million of currency translation adjustments. During the fourth quarter of 2020, the Company recognized a gain on sale of $2.4 million as a result of the cash collateralized bonding facility release. During the first quarter of 2021, the Company recognized a gain of $1.2 million as a result of indemnity release.

Sale of Beyond6

On December 31, 2020, the Company announced a plan to sell Beyond6 to an affiliate of Mercuria Investments US, Inc., pursuant to an Agreement and Plan of Merger (the "Merger Agreement") among Beyond6, Greenfill, Inc., a Delaware Corporation ("Parent"), Greenfill Merger Inc., a newly-formed Delaware corporation and wholly-owned subsidiary of the Parent, and an affiliate of INNOVATE as the Stockholder Representative for the Beyond6 stockholders, for a total purchase price, net of Beyond6's debt and transaction expenses, customary purchase price adjustments and escrow arrangements, of approximately $106.5 million. Net proceeds received by INNOVATE at closing was cash consideration of approximately $70.0 million. The sale closed on January 15, 2021. During the first quarter of 2021, the Company recognized a $39.2 million gain on the sale. During the third quarter of 2021, as a result of releases of related escrows and hold backs, the Company recognized an additional $0.5 million gain on the sale.

Sale of CIG

The sale of CIG closed on July 1, 2021 to Continental General Holdings LLC, an entity controlled by Michael Gorzynski, a former director of the Company who also serves as executive chairman of Continental since October 2020. The Insurance segment, which primarily consisted of a closed block of long-term care insurance, had a book value, inclusive of intercompany eliminations, at the time of the sale of $544.0 million, inclusive of $344.0 million of Accumulated other comprehensive income ("AOCI"). The carrying value of the Insurance segment at the time of sale excluded cash of $62.5 million and investments of $26.7 million which were distributed to the Company through an extraordinary dividend immediately prior to the sale. The extraordinary dividend was approved by our domestic regulator in connection with the approval of the sale. The amount included in AOCI was reversed from equity at the time of the sale and offset the loss recognized.

While several factors impacted the fair value of the Insurance segment at the end of 2019, following discussions with our domestic regulator, changes in the asset management fee arrangement and expectations of future dividends primarily and ultimately resulted in the full impairment of the goodwill associated with the Insurance segment during the year ended December 31, 2019. While these factors did not have a major impact on the operations of the stand-alone business, they did have a significant impact on the economic benefit that could be realized by the Company.

As a result of the factors described above, combined with the risks associated with the long-term care insurance industry, the Company exited the segment and sold the business resulting in a $200.8 million loss on the sale of CIG in the third quarter of 2021.

See Note 3. Discontinued Operations for further details.

6. Accounts Receivable, net

Accounts receivable, net consist of the following (in millions):
June 30,
2022		 December 31,
2021
 
Contracts in progress $ 252.4  $ 226.8 
Unbilled retentions 0.5  0.4 
Trade receivables 8.9  9.9 
Other receivables 9.7  10.6 
Allowance for doubtful accounts (0.4) (0.6)
Total $ 271.1  $ 247.1 

15
INNOVATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
7. Property, Plant and Equipment, net

Property, plant and equipment, net consists of the following (in millions):
June 30,
2022		 December 31,
2021
 
Equipment, furniture and fixtures, and software $ 185.3  $ 180.7 
Building and leasehold improvements 42.1  43.0 
Land 23.8  24.1 
Construction in progress 11.8  8.9 
Plant and transportation equipment 8.2  8.3 
271.2  265.0 
Less: Accumulated depreciation 106.7  95.1 
Total $ 164.5  $ 169.9 

Depreciation expense was $6.3 million and $5.3 million for the three months ended June 30, 2022 and 2021, respectively. These amounts included $3.6 million and $2.8 million of depreciation expense recognized within cost of revenue for the three months ended June 30, 2022 and 2021, respectively.

Depreciation expense was $12.7 million and $10.0 million for the six months ended June 30, 2022 and 2021, respectively. These amounts included $7.3 million and $5.0 million of depreciation expense recognized within cost of revenue for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022 and December 31, 2021, the total net book value of equipment under capital leases consisted of $0.6 million and $0.2 million, respectively.

8. Goodwill and Intangibles, net

Goodwill

The carrying amount of goodwill by segment was as follows (in millions):
 
Infrastructure
 Spectrum Total
Balance at December 31, 2021 $ 106.0  $ 21.4  $ 127.4 
Translation (0.3) —  (0.3)
Balance at June 30, 2022 $ 105.7  $ 21.4  $ 127.1 

Indefinite-lived Intangible Assets

The carrying amount of indefinite-lived intangible assets was as follows (in millions):
June 30, 2022 December 31, 2021
FCC licenses $ 106.4  $ 106.5 
Total $ 106.4  $ 106.5 

For the six months ended June 30, 2022 and 2021, the Company recorded impairment charges of $0.1 million and $2.1 million, respectively, in Other operating loss (income) related to non-core FCC licenses which were sold or expired in order to bring their carrying value equal to the agreed upon sales price prior to the execution of the sale.
16
INNOVATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)

Definite Lived Intangible Assets

The gross carrying amount and accumulated amortization of definite lived intangible assets by major intangible asset class were as follows (in millions):
Weighted-Average Original Useful Life June 30, 2022 December 31, 2021
Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net
Trade names 14 years $ 25.4  $ (7.1) $ 18.3  $ 25.4  $ (6.3) $ 19.1 
Customer relationships and contracts 11 years 87.6  (28.4) 59.2  87.7  (21.6) 66.1 
Channel sharing arrangements 35 years 12.6  (1.3) 11.3  12.6  (1.1) 11.5 
Other 12 years 4.1  (0.9) 3.2  8.5  (3.3) 5.2 
Total $ 129.7  $ (37.7) $ 92.0  $ 134.2  $ (32.3) $ 101.9 

For the three and six months ended June 30, 2022, the Company recorded impairment charges to definite lived intangible assets of $1.5 million in Other operating loss (income) related to the impairment of the HC2 Network Program License Agreement ("PLA") due to a decline in performance.

Amortization expense for definite lived intangible assets was $4.2 million and $2.3 million for the three months ended June 30, 2022 and 2021, respectively, and was included in Depreciation and amortization in our Condensed Consolidated Statements of Operations.

Amortization expense for definite lived intangible assets was $8.4 million and $3.8 million for the six months ended June 30, 2022 and 2021, respectively, and was included in Depreciation and amortization in our Condensed Consolidated Statements of Operations.

Amortization

The Company estimates the annual amortization expense of amortizable intangible assets for the next five fiscal years will be as follows (in millions):
Estimated Amortization
2022 $ 11.9 
2023 7.4 
2024 7.4 
2025 7.3 
2026 6.8 
Thereafter 51.2 
Total $ 92.0 

17
INNOVATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
9. Debt Obligations

Debt obligations consist of the following (in millions):
June 30,
2022		 December 31,
2021
Infrastructure
3.25% Note due 2026
 102.5  107.2 
PRIME minus 1.10% Line of Credit due 2024
 87.7  30.4 
4.00% Note due 2024
 20.0  25.0 
8.00% Note due 2024
 19.6  19.6 
11.00% Note due 2024
 —  6.3 
Obligations under finance leases 0.6  0.1 
Spectrum
8.50% Note due 2022
 19.3  19.3 
10.50% Note due 2022
 32.9  32.9 
Life Sciences
12.00% Note due 2022
 0.5  — 
Non-Operating Corporate
   8.50% Senior Secured Notes, due 2026
 330.0  330.0 
7.50% Convertible Senior Notes, due 2022
 —  3.2 
7.50% Convertible Senior Notes, due 2026
 51.8  51.8 
LIBOR plus 5.75% Line of Credit due 2024
 5.0  5.0 
669.9  630.8 
Unamortized issuance discount, issuance premium, and deferred financing costs (2.8) (4.5)
Less: current portion of debt obligations (73.0) (69.5)
Debt obligations $ 594.1  $ 556.8 

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

Finance Leases Debt Total
2022 $ 0.1  $ 84.4  $ 84.5 
2023 0.2  58.8  59.0 
2024 0.2  158.4  158.6 
2025 0.1  41.8  41.9 
2026 —  471.3  471.3 
Thereafter —  0.1  0.1 
Total minimum principal and interest payments 0.6  814.8  815.4 
Less: Amount representing interest —  (145.5) (145.5)
Total aggregate finance lease and debt payments $ 0.6  $ 669.3  $ 669.9 

The interest rates on the finance leases range from approximately 2.0% to 5.6%.

Infrastructure

In May 2021, DBMG repaid its LIBOR plus 1.50% revolving line of credit (the "Revolving Line") under the Credit and Security Agreement with Wells Fargo Bank and its term loan due 2023 (the "TCW Loan") under a financing agreement with TCW Asset Management Company LLC. In addition, DBMG entered into a new credit facility with UMB Bank ("UMB"). Under the terms of the agreement, UMB agreed to a $110.0 million term loan ("UMB Term Loan") and $110.0 million revolving credit agreement ("UMB Revolving Line"). The UMB Term loan expires in 2026 and will bear interest at a rate of 3.25% with an effective interest rate of 3.25%. The UMB Revolving Line expires in 2024 and will bear interest at a rate of Prime Rate minus 1.10%. The proceeds were used to fully repay DBMG's existing debt obligations, fund a portion of the Banker Steel acquisition, and provide additional working capital capacity to DBMG.

The 2021 extinguishment of the Revolving Line and the TCW Loan yielded a loss on extinguishment of $1.6 million included in Loss on early extinguishment or restructuring of debt in the Condensed Consolidated Statement of Operations.

18
INNOVATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
The UMB Revolving Line associated with our Infrastructure segment contains customary restrictive and financial covenants related to debt levels and performance, including a Fixed Coverage Ratio covenant, as defined in the agreement. During the quarter ended June 30, 2022, anticipating that DBMG might not be in compliance with this covenant, DBMG began negotiating an amendment to its UMB Revolving Line which included modifying the Fixed Coverage Ratio, and an increase in the UMB Revolving Line commitment from $110.0 million to $135.0 million, among other things. As of June 30, 2022, the amendment was not yet finalized and as a result, the Company was out of compliance with the Fixed Coverage Ratio covenant. DBMG finalized the amended agreement with UMB on August 2, 2022, which included a retrospective change to the terms of the Fixed Coverage Ratio covenant, including the calculation thereof, and as a result the Company is in compliance with its covenants.

Spectrum

On October 24, 2019, Spectrum issued $78.7 million 364-day secured notes (the "2020 Notes"). The 2020 Notes were comprised of a $36.2 million, 8.50% tranche funded by an affiliate of MSD Partners, L.P. (the “8.50% Note”). The remaining $42.5 million, 10.50% tranche (the “10.50% Note”) was a modification of the existing Secured Note, with certain institutional investors. The 2020 Notes had an original maturity date of October 2020, and were amended multiple times during 2020 as further described below. The net proceeds from the financing were used to retire Broadcasting’s existing debt, as well as fund pending acquisitions, working capital and general corporate purposes. In connection with the issuance of the 10.50% Note due 2020, Spectrum issued warrants to the same institutional investors to purchase 50,000 shares of common stock at $176.4 per share for a total purchase price of $8.8 million, or net settled, if exercised as of the issuance date, and as may be adjusted at any future exercise of the warrant pursuant to its terms. The warrant has a five-year term and is immediately exercisable.

In February 2020, Spectrum amended its agreement governing its 8.50% 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 8.50% Note and 10.50% Note to October 2021. In September 2020, Spectrum further amended its agreement governing its 8.50% Note, 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. In November 2020, Spectrum paid down $2.9 million of its 8.50% Note and $3.0 million on other various notes. In December 2020, Spectrum paid down $21.0 million and $9.6 million of its 8.50% Note and 10.50% Note, respectively from the proceeds from the sale of stations. On August 30, 2021, Broadcasting repurchased $1.0 million of DTV's outstanding notes payable, inclusive of accrued interest, to certain institutional investors. Also on August 30, 2021, DTV extended its remaining outstanding notes by 60 days.

On October 21, 2021, Broadcasting entered into the Fifth Omnibus Amendment to Secured Notes, Consent and Second Amendment to Asset Sale Under Secured Notes and Intercreditor Agreement (the “Amendment”), which, among other things, extended $52.2 million of its Senior Secured Notes, due October 21, 2021, through November 30, 2022. Concurrently, Broadcasting completed the last of a series of repurchases of all the outstanding secured notes, inclusive of accrued interest, of DTV America Corporation (“DTV”) for a total consideration of $6.2 million using a combination of cash on hand and proceeds from the sales on non-core assets.

On October 26, 2021, Broadcasting repurchased the outstanding convertible promissory notes of DTV for a total consideration of $0.7 million using proceeds from the sales of non-core assets. Subsequent to these acquisitions, DTV’s debt is held by Broadcasting and eliminated in consolidation.

Life Sciences

On June 27, 2022, R2 Technologies issued a $0.5 million short-term 90-day 12.0% bridge financing loan with Lancer Capital, LLC, a related party, an entity controlled by Avram A. Glazer, the Chairman of the Board of Directors.

Non-Operating Corporate

On February 1, 2021, INNOVATE repaid its 2021 Senior Secured Notes and issued $330.0 million aggregate principal amount of 8.50% senior secured notes due 2026 (the "2026 Senior Secured Notes"). In addition, the Company entered into exchange agreements with certain holders of approximately $51.8 million aggregate principal amount of its existing $55.0 million 7.50% convertible senior notes due 2022 (the "2022 Convertible Notes"), pursuant to which the Company exchanged such holders' 2022 Convertible Notes for newly issued 7.50% convertible notes due 2026 (the "2026 Convertible Notes"). The 2026 Senior Secured Notes were issued in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

The Company accounted for the transactions under the debt extinguishment model as the present value of cash flows under the terms of the 2026 Senior Secured Notes and 2026 Convertible Notes was at least 10% different from the present value of the remaining cash flows under the 2021 Senior Secured Notes and the 2022 Convertible Notes.

The extinguishment of the 2021 Senior Secured Notes yielded a loss on extinguishment of $4.5 million. The extinguishment of the $51.8 million of 2022 Convertible Notes yielded a loss on extinguishment of $5.5 million, an acceleration of the amortization of discount of $5.3 million, and extinguishment of the bifurcated conversion option classified as equity of $7.7 million.

19
INNOVATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
2026 Senior Secured Notes

The 2026 Senior Secured Notes were issued under an indenture dated February 1, 2021, by and among the Company, the guarantors party thereto and U.S. Bank National Association, a national banking association ("U.S. Bank"), as trustee (the "Secured Indenture"). The 2026 Senior Secured Notes were issued at 100% of par, with a stated interest rate of 8.50% and an effective interest rate of 9.26%, which reflects $2.7 million of deferred financing fees. For the six months ended June 30, 2022 and 2021, interest expense recognized for the period relating to both the contractual interest coupon and amortization of the deferred financing fees was $15.1 million and $12.3 million, respectively.

2022 Convertible Notes

On June 1, 2022, the 2022 Convertible Notes of $3.2 million matured, and the Company repaid the principal and accrued interest upon maturity. For the six months ended June 30, 2022 and 2021, interest expense recognized for the period relating to both the contractual interest coupon and amortization of the discount on the Convertible Notes was $0.2 million.

2026 Convertible Notes

At June 30, 2022, the 2026 Convertible Notes had a net carrying value of $60.2 million and an unamortized premium of $9.3 million. Based on the closing price of our common stock of $1.73 on June 30, 2022, the if-converted value of the 2026 Convertible Notes did not exceed its principal value. For the six months ended June 30, 2022 and 2021, interest expense recognized for the period relating to both the contractual interest coupon and amortization of discount net of premium was $1.0 million and $0.8 million, respectively.

Line of Credit
On February 23, 2021, the Company entered into a third amendment (the "Amendment") of the 6.75% line of credit with MSD PCOF Partners IX, LLC ("Revolving Credit Agreement"). Among other things, the Amendment (i) increases the aggregate principal amount of the Revolving Credit Agreement to $20.0 million, (ii) extends the maturity date of the Revolving Credit Amendment to February 23, 2024, (iii) updates the affirmative and negative covenants contained in the Amended Credit Agreement so that they are substantially consistent with the affirmative and negative covenants contained in the indenture that governs the 2026 Senior Secured Notes and (iv) reduces the interest rate margin applicable to loans borrowed under the Amended Credit Agreement to 5.75% from the 6.75% described above. Except as modified by the Amendment, the terms of the Revolving Credit Agreement remain in effect. In May 2021, INNOVATE drew $5.0 million under the Revolving Credit Agreement. Subsequent to quarter end, the Company drew an additional $15.0 million under the Revolving Credit Agreement. Refer to Note 19. Subsequent Events for additional information.

INNOVATE is in compliance with its debt covenants as of June 30, 2022.

10. Supplementary Financial Information

Contracts in Progress

Contract assets and contract liabilities and recognized earnings consist of the following (in millions):

June 30,
2022		 December 31,
2021
Costs incurred on contracts in progress $ 2,660.0  $ 2,161.5 
Estimated earnings