NEW YORK, Aug. 4, 2017
/PRNewswire/ -- HRG Group, Inc. ("HRG" or the "Company"; NYSE:
HRG), a holding company that conducts its operations principally
through its operating subsidiaries, today announced its
consolidated results for the third quarter of fiscal 2017 ended on
June 30, 2017 (the "Fiscal 2017 Quarter"). The results include
HRG's two segments:
- Consumer Products, which consists of Spectrum Brands Holdings,
Inc. and its subsidiaries ("Spectrum Brands"; NYSE: SPB); and
- Corporate and Other, which includes the Company's ownership of
Salus Capital Partners, LLC, ("Salus"), which was created for the
purpose of serving as an asset-based lender, 99.5% of NZCH
Corporation ("NZCH"), a public shell company, HGI Funding, LLC
("HGI Funding") and HGI Energy Holdings, LLC ("HGI Energy"), which
are subsidiaries that manage a portion of the Company's available
cash and engage in other activities.
As described further herein, our Insurance Operations, which
consist of Fidelity & Guaranty Life and its subsidiaries
("FGL"; NYSE: FGL) and Front Street Re (Delaware) Ltd. and its subsidiaries ("Front
Street"), are presented as discontinued operations.
As discussed further below, this press release includes
non-GAAP metrics such as organic net sales, Adjusted EBITDA,
Adjusted EBITDA margin and organic Adjusted EBITDA. See the
supplemental information for reconciliation to comparable GAAP
metrics.
Third Quarter Fiscal 2017 Consolidated Highlights:
- As previously disclosed, on May 24,
2017, FGL entered into a definitive agreement and plan of
merger (the "FGL Merger Agreement") with CF Corporation ("CF
Corp"), pursuant to which CF Corp has agreed to acquire FGL for
$31.10 per share (the "FGL Merger").
In addition, also on May 24, 2017,
Front Street entered into a Share Purchase Agreement (the "Front
Street Purchase Agreement") to sell to CF Corp all of the issued
and outstanding shares of (i) Front Street Re (Cayman) Ltd. and
(ii) Front Street Re Ltd. (collectively the "Acquired Companies")
for $65 million, subject to customary
adjustments for transaction expenses (the "Front Street Sale"). See
additional information under "Certain Other Items"
below.
- The Company recorded total revenues of $1.30 billion for the Fiscal 2017 Quarter, a
decrease of $58.8 million, or 4.3%,
as compared to the $1.36 billion in
the third quarter of fiscal 2016 (the "Fiscal 2016 Quarter"). The
decrease was primarily due to lower revenues from our Consumer
Products segment driven by lower sales in global pet supplies and
home and garden products coupled with the negative effect of
foreign exchange rates.
- Operating income of $148.2
million in the Fiscal 2017 Quarter decreased $39.9 million as compared to $188.1 million in the Fiscal 2016 Quarter. The
decrease was primarily driven by lower operating profit at our
Consumer Products segment as a result of lower volumes and the
negative impact of foreign exchange rates, as well as Spectrum
Brands' incremental costs of $24.9
million from the rawhide safety recall and additional
restructuring costs of $15.8
million.
- Results reflect an $8.7 million
decrease in interest expense relative to the Fiscal 2016 Quarter,
which was primarily due to the effect of refinancing activities to
lower interest rates at Spectrum Brands, partially offset by higher
overall debt levels.
- The Company recorded tax expense of $24.8 million, or a 43.6% effective tax rate, in
the Fiscal 2017 Quarter primarily impacted by U.S. pretax losses in
our Corporate and Other segment in the U.S. where the tax benefits
were not more-likely-than-not to be realized, resulting in the
recording of valuation allowance. For the Fiscal 2016 Quarter, the
Company recorded a $2.2 million tax
benefit, or a (2.4)% effective tax rate primarily due to the
expected utilization of a portion of Spectrum Brands' U.S. net
operating loss carryforwards that were previously recorded with
valuation allowance and recognition of a portion of tax benefits on
current year losses from the Corporate and Other segment in the
U.S. that are more-likely-than-not to be realized based on the
expected taxable gain from the sale of FGL, partially offset by
$25.5 million of income tax expense
recognized by Spectrum Brands for a tax contingency reserve for a
tax exposure in Germany.
- Net loss from continuing operations attributable to common
stockholders was $1.5 million, or
$0.01 per common share attributable
to controlling interest during the Fiscal 2017 Quarter, as compared
to a net income from continuing operations attributable to common
stockholders of $54.5 million, or
$0.27 per common share attributable
to controlling interest during the Fiscal 2016 Quarter. The
increase in loss was primarily due to lower operating profits and
higher effective income tax rate during the Fiscal 2017 Quarter,
partially offset by lower interest expense, as discussed
above.
- In the nine months ended June 30,
2017 (the "Fiscal 2017 Nine Months"), HRG received dividends
of $51.1 million from its
subsidiaries, comprised of $41.9
million from Spectrum Brands and $9.2
million from FGL.
Detail on Third Quarter Segment Results:
Consumer Products:
Consumer Products reported consolidated net sales of
$1,303.9 million for the Fiscal 2017
Quarter, a decrease of $57.7 million,
or 4.2%, as compared to the $1,361.6
million reported in the Fiscal 2016 Quarter primarily due to
a decline in global pet supplies and home and garden control
products and a negative impact of foreign exchange rates of
$12.2 million. Pet supplies sales
were also negatively impacted by a rawhide dog chew product recall;
the acceleration of the exit of a pet food tolling agreement;
retail inventory reduction management programs; and soft sales with
pet specialty retailers. Lower third quarter net sales in home and
garden products were predominantly in the repellents category and
were driven by retailer inventory management programs; weather
conditions decreasing seasonal inventory sales; and strong prior
year repellent orders driven by Zika virus concerns.
Gross profit, representing net sales minus cost of goods sold,
decreased $57.4 million from the
Fiscal 2016 Quarter, or 10.8%, to $473.3
million in the Fiscal 2017 Quarter. The decrease was driven
by a reduction in net sales and lower gross profit margin. Gross
profit margin, representing gross profit as a percentage of net
sales, decreased to 36.3% in the Fiscal 2017 Quarter from 39.0% for
the Fiscal 2016 Quarter, which was primarily due to lower volumes,
the negative effect of the rawhide safety recall, increased
restructuring-related activities and temporary operating start-up
inefficiencies, along with the negative impact of foreign
exchange.
Operating income decreased $49.0
million, or 23.7%, to $157.8
million in the Fiscal 2017 Quarter, as compared to the
$206.8 million reported in the Fiscal
2016 Quarter, which was primarily as a result of lower volumes and
the negative impact of foreign exchange, incremental costs of
$24.9 million from Spectrum Brands'
rawhide safety recall, and additional restructuring costs of
$15.8 million.
Net income of our Consumer Products segment was $78.6 million in the Fiscal 2017 Quarter, a
decrease of $23.6 million, or 23.1%,
compared to net income of $102.2 million reported in the
Fiscal 2016 Quarter. The decrease was primarily due to lower
operating profits and higher effective income tax rate during the
Fiscal 2017 Quarter, partially offset by lower interest
expense.
Our Consumer Products segment's adjusted earnings before
interest, taxes, depreciation and amortization ("Adjusted EBITDA -
Consumer Products") decreased by $15.4
million, or 5.5%, to $263.8
million versus the Fiscal 2016 Quarter. The decrease was
primarily driven by a $7.5 million
decrease in the home and garden product categories due to the lower
sales volumes discussed above and incremental investment in
marketing costs for new product launches and channel expansion; a
decrease of $3.5 million in global
auto care product categories attributable to a decrease in sales
volumes, higher marketing costs for new product introductions,
offset by improved product mix; and a decrease of $3.0 million in hardware and home improvements
product categories mainly due to the decrease in sales volumes and
increased operating expenses, excluding restructuring related
costs. A reconciliation of net income to Adjusted EBITDA for our
Consumer Products segment is included elsewhere in this
release.
After the close of the Fiscal 2017 Quarter, on July 25, 2017, Spectrum Brands announced that its
Board of Directors declared a quarterly dividend of $0.42 per share on Spectrum Brands' common stock,
which represents an increase of 10.5% compared to the $0.38 quarterly dividend paid per share in
connection with the comparable period in Fiscal 2016. Over the past
three years, the quarterly dividend that Spectrum Brands has paid
to its common stockholders has increased 40%.
Corporate and Other:
Our Corporate and Other segment's operating loss for the Fiscal
2017 Quarter decreased $9.1 million,
to an operating loss of $9.6 million
from an operating loss of $18.7
million for the Fiscal 2016 Quarter. The decrease in loss
was primarily due to a decrease in stock-based compensation,
payroll and bonus expenses, partially offset by severance costs
related to headcount reduction and an increase in legal expense
related to the exploration and evaluation of strategic alternatives
available to the Company with a view toward enhancing shareholder
value.
Certain Other Items:
Presentation of our Segments:
On August 23, 2016, HGI Energy, a
wholly-owned subsidiary of the Company, completed the sale of its
equity interests in Compass Production Partners, LP and its
subsidiaries ("Compass") to a third party. Following the completion
of the sale, the Company no longer owns, directly or indirectly,
any oil and gas properties. Accordingly, the historical results of
Compass are presented as discontinued operations, and the
operations of HGI Energy are included in the Corporate and Other
segment.
The operations of Salus, Energy & Infrastructure Capital,
LLC ("EIC") and CorAmerica Capital, LLC ("CorAmerica"), each an
asset manager subsidiary of the Company, were historically
presented in the Asset Management segment. During the fourth
quarter of the fiscal year 2016, the Company sold all of its
interest in CorAmerica to a third party. In addition, the
Company has substantially completed the wind down of Salus'
operations. Finally, during the Fiscal 2016 Quarter, the
Company completed the wind down of EIC's operations. As a result of
the foregoing, the Company is presenting the results of Salus, EIC
and CorAmerica within the Corporate and Other segment. All
historical results have been restated to reflect this change.
Discontinued Operations:
Income from discontinued operations, net of tax for the Fiscal
2017 Quarter was $7.7 million and was
entirely attributable to our Insurance Operations. Loss from
discontinued operations, net of tax for the Fiscal 2016 Quarter was
$185.5 million due to a $2.1 million loss related to Compass' operations
and a $183.4 million loss
attributable to our Insurance Operations. The decrease in loss of
$191.1 million attributable to our
Insurance Operations was driven by a $36.1
million write-down of the carrying value of the assets of
business held for sale to fair value less cost to sell for the
Fiscal 2017 Quarter compared to a write-down of $217.2 million for the Fiscal 2016 Quarter;
partially offset by an increase in net income attributable to our
Insurance Operations of $11.1
million.
Additional Information:
As previously disclosed, HRG has initiated a process to explore
strategic alternatives with a view to maximizing shareholder value.
Strategic alternatives may include, but are not limited to, a
merger, sale or other business combination involving the Company
and/or its assets.
HRG has not set a definitive schedule to complete its review of
strategic alternatives and it does not intend to provide any
further updates until such time as it determines in its sole
discretion or as required by law. There can be no assurance that
any such process will result in a transaction, or if a transaction
is undertaken, as to its terms or timing.
As previously disclosed, on May 24,
2017, FGL entered into the FGL Merger Agreement with CF
Corp, FGL US Holdings Inc., an indirect wholly owned subsidiary of
CF Corp ("CF/FGL US"), and FGL Merger Sub Inc., a direct wholly
owned subsidiary of CF/FGL US, pursuant to which CF Corp has agreed
to acquire FGL for $31.10 per
share.
In a separate transaction, on May 24,
2017, Front Street entered the "Front Street Purchase
Agreement pursuant to which, subject to the terms and conditions
set forth therein, Front Street has agreed to sell to CF/FGL US all
of the issued and outstanding shares of the Acquired Companies. The
purchase price is $65.0 million,
subject to customary adjustments for transaction expenses. The
definitive documentation contains customary representations,
warranties and indemnification obligations. HRG has further agreed
to reduce the purchase price, and to indemnify the buyer, for
dividends and other value transfers by the Acquired Companies to
HRG and its affiliates from December 31,
2016 through the closing date of the Front Street Sale. The
closing of the transaction is subject to the satisfaction of
customary closing conditions, including receipt of required
regulatory approvals, as well as the consummation of the FGL
Merger. The closing of the FGL Merger is not conditioned upon the
closing of the Front Street Sale. Prior to the execution of the
Front Street Purchase Agreement, the operations of Front
Street were reported as the Company's Insurance segment.
In addition, on May 24, 2017, HRG,
FS Holdco, CF Corp and CF/FGL US agreed that FS Holdco may, at its
option, cause CF/FGL US and FS Holdco to make a joint election
under Section 338(h)(10) of the Internal Revenue Code of 1986, as
amended, with respect to the FGL Merger and the deemed share
purchases of FGL's subsidiaries. If FS Holdco opts to make such an
election, it will be required to pay CF/FGL US $30.0 million, plus additional specified amounts
determined by reference to FGL's incremental current tax costs
attributable to the election, if any, and CF/FGL US will be
required to pay FS Holdco additional specified amounts determined
by reference to FGL's incremental current tax savings attributable
to the election, if any. The Company is considering the financial
impact of making such election, the effects of which cannot be
reasonably estimated at June 30,
2017.
FGL and Spectrum Brands, each an HRG subsidiary, file reports
with the SEC and make certain information available on their
respective websites. For more information on FGL, which is reported
herein as discontinued operations, including information in
addition to that included in our reports and public announcements,
interested parties should read FGL's announcements and public
filings with the Securities and Exchange Commission, including
FGL's most recent earnings announcement, which may be accessed at
www.fglife.com. For more information on Spectrum Brands, including
information in addition to that included in our reports and public
announcements, interested parties should read Spectrum Brands'
announcements and public filings with the Securities and Exchange
Commission, including Spectrum Brands' most recent earnings
announcement, which may be accessed at www.spectrumbrands.com.
About HRG Group, Inc.:
HRG Group, Inc. is a holding company that conducts its
operations through its operating subsidiaries. As of June 30,
2017, the Company's principal operating subsidiaries were: Spectrum
Brands, a global branded consumer products company; FGL, a life
insurance and annuity products company; and Front Street, a
long-term reinsurance company. HRG is headquartered in New York and traded on the New York Stock
Exchange under the symbol HRG. For more information on HRG, visit:
www.HRGgroup.com.
Forward Looking Statements:
"Safe Harbor" Statement Under the Private Securities
Litigation Reform Act of 1995: This document contains, and certain
oral statements made by our representatives from time to time may
contain, forward-looking statements, including those statements
regarding the evaluation of strategic alternatives by HRG, FGL
Merger and the Front Street Sale and any expected or anticipated
benefits therefrom, as applicable. There can be no assurance that
HRG's evaluation of strategic alternatives will result in a
transaction, or that any transaction, if pursued, will be
consummated. The evaluation of strategic alternatives by HRG may be
terminated at any time with or without notice. In addition, there
can be no assurance that the FGL Merger and/or the Front Street
Sale will result in a consummated transaction. Neither HRG nor any
of its affiliates intends to disclose any developments with respect
to the foregoing until such time that it determines otherwise
in its sole discretion or as required by applicable law.
Forward-looking statements also include information concerning
possible or assumed future distributions from subsidiaries, other
actions, events, results, strategies and expectations and are
identifiable by use of the words "believes," "expects," "intends,"
"anticipates," "plans," "seeks," "estimates," "projects," "may,"
"will," "could," "might," or "continues" or similar expressions.
Such forward-looking statements are subject to risks and
uncertainties that could cause actual results, events and
developments to differ materially from those set forth in or
implied by such statements. These statements are based on the
beliefs and assumptions of HRG's management and the management of
HRG's subsidiaries. Factors that could cause actual results, events
and developments to differ include, without limitation: that the
review of strategic alternatives at HRG will result in a
transaction, or if a transaction is undertaken, as to its terms or
timing; the ability of HRG's subsidiaries to close previously
announced transactions, including statements regarding the closing
of the FGL Merger and the Front Street Sale; the ability of HRG's
subsidiaries to generate sufficient net income and cash flows to
make upstream cash distributions; the decision of the boards of
HRG's subsidiaries to make upstream cash distributions, which is
subject to numerous factors such as restrictions contained in
applicable financing agreements, state and regulatory restrictions
and other relevant considerations as determined by the applicable
board; HRG's liquidity, which may be impacted by a variety of
factors, including the capital needs of HRG's subsidiaries; capital
market conditions; commodity market conditions; foreign exchange
rates; HRG's and its subsidiaries' ability to identify, pursue or
complete any suitable future acquisition or disposition
opportunities, including realizing such transaction's expected
benefits and the timetable for, completing applicable financial
reporting requirements; litigation; potential and contingent
liabilities; management's plans; changes in regulations; taxes; and
the risks identified under the caption "Risk Factors" in HRG's most
recent Annual Report on Form 10-K and subsequent Quarterly Reports
on Form 10-Q, filed with the Securities and Exchange Commission. We
claim the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform
Act of 1995 for all forward-looking statements. All forward-looking
statements described herein are qualified by these cautionary
statements and there can be no assurance that the actual results,
events or developments referenced herein will occur or be realized.
Neither HRG nor any of its affiliates undertake any obligation to
update or revise forward-looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes to
future operation results, except as required by law.
Non-GAAP Measurements:
Spectrum Brands believes that certain non-GAAP financial
measures may be useful in certain instances to provide additional
meaningful comparison between current results and results in prior
operating periods. Spectrum Brands believes that organic net sales
provides for a more complete understanding of underlying business
trends of regional and segment performance by excluding the impact
of currency exchange rate fluctuations and the impact of
acquisitions. In addition, within this release, including the
supplemental information attached hereto, reference is made to
Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA is a
metric used by management to evaluate segment performance and
frequently used by the financial community which provides insight
into an organization's operating trends and facilitates comparison
between peer companies, since interest, taxes, depreciation and
amortization can differ greatly between organizations as a result
of differing capital structures and tax strategies. Adjusted EBITDA
is also one of the measures used for determining Spectrum Brands'
debt covenant compliance. Adjusted EBITDA excludes certain items
that are unusual in nature or not comparable from period to period.
Adjusted EBITDA margin reflects Adjusted EBITDA as a percentage of
net sales of Spectrum Brands. Organic Adjusted EBITDA excludes the
impact of currency exchange rate fluctuations and the impact of
acquisitions. Spectrum Brands provides this information to
investors to assist in comparison of past, present and future
operating results and to assist in highlighting the results of
ongoing operations. While Spectrum Brands believes that non-GAAP
measurements are useful supplemental information, such adjusted
results are not intended to replace Spectrum Brands' GAAP financial
results and should be read in conjunction with those GAAP results.
Other Supplemental Information has been provided to demonstrate
reconciliation of non-GAAP measurements discussed above to most
relevant GAAP financial results.
For further information contact:
HRG Group, Inc.
Investor Relations
Tel: 212.906.8555
Email: investorrelations@HRGgroup.com
(Tables Follow)
HRG GROUP, INC.
AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In
millions)
|
|
|
June 30,
2017
|
|
September 30,
2016
|
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
|
266.2
|
|
|
$
|
465.2
|
|
Receivables,
net
|
661.0
|
|
|
539.1
|
|
Inventories,
net
|
843.7
|
|
|
740.6
|
|
Deferred tax
assets
|
18.3
|
|
|
18.3
|
|
Property, plant and
equipment, net
|
675.9
|
|
|
543.4
|
|
Goodwill
|
2,621.3
|
|
|
2,478.4
|
|
Intangibles,
net
|
2,453.4
|
|
|
2,372.5
|
|
Other
assets
|
144.0
|
|
|
138.3
|
|
Assets of business
held for sale
|
27,811.7
|
|
|
26,284.3
|
|
Total
assets
|
$
|
35,495.5
|
|
|
$
|
33,580.1
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Debt
|
$
|
6,032.5
|
|
|
$
|
5,525.8
|
|
Accounts payable and
other current liabilities
|
941.8
|
|
|
983.2
|
|
Employee benefit
obligations
|
117.1
|
|
|
125.4
|
|
Deferred tax
liabilities
|
596.0
|
|
|
546.0
|
|
Other
liabilities
|
40.5
|
|
|
28.7
|
|
Liabilities of
business held for sale
|
25,870.9
|
|
|
24,553.8
|
|
Total
liabilities
|
33,598.8
|
|
|
31,762.9
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
HRG Group,
Inc. shareholders' equity:
|
|
|
|
Common
stock
|
2.0
|
|
|
2.0
|
|
Additional paid-in
capital
|
1,392.5
|
|
|
1,447.1
|
|
Accumulated
deficit
|
(899.7)
|
|
|
(1,031.9)
|
|
Accumulated other
comprehensive income
|
234.5
|
|
|
220.9
|
|
Total HRG Group, Inc.
shareholders' equity
|
729.3
|
|
|
638.1
|
|
Noncontrolling interest
|
1,167.4
|
|
|
1,179.1
|
|
Total shareholders'
equity
|
1,896.7
|
|
|
1,817.2
|
|
Total liabilities and
equity
|
$
|
35,495.5
|
|
|
$
|
33,580.1
|
|
HRG GROUP, INC.
AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions,
except per share data)
|
|
|
Three months ended
June 30,
|
|
Nine months ended
June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
(Unaudited)
|
|
(Unaudited)
|
Revenues:
|
|
|
|
|
|
|
|
Net sales
|
$
|
1,303.9
|
|
|
$
|
1,361.6
|
|
|
$
|
3,685.6
|
|
|
$
|
3,790.0
|
|
Net investment
income
|
0.1
|
|
|
1.2
|
|
|
1.1
|
|
|
7.9
|
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
0.9
|
|
Total
revenues
|
1,304.0
|
|
|
1,362.8
|
|
|
3,686.7
|
|
|
3,798.8
|
|
Operating costs
and expenses:
|
|
|
|
|
|
|
|
Cost of goods
sold
|
830.6
|
|
|
830.9
|
|
|
2,307.1
|
|
|
2,355.8
|
|
Selling, acquisition,
operating and general expenses
|
325.2
|
|
|
343.8
|
|
|
966.5
|
|
|
1,005.0
|
|
Total operating costs
and expenses
|
1,155.8
|
|
|
1,174.7
|
|
|
3,273.6
|
|
|
3,360.8
|
|
Operating
income
|
148.2
|
|
|
188.1
|
|
|
413.1
|
|
|
438.0
|
|
Interest
expense
|
(89.3)
|
|
|
(98.0)
|
|
|
(269.6)
|
|
|
(289.8)
|
|
Other (expense)
income, net
|
(2.0)
|
|
|
0.2
|
|
|
(2.3)
|
|
|
(0.2)
|
|
Income from
continuing operations before income taxes
|
56.9
|
|
|
90.3
|
|
|
141.2
|
|
|
148.0
|
|
Income tax expense
(benefit)
|
24.8
|
|
|
(2.2)
|
|
|
87.4
|
|
|
(4.5)
|
|
Net income from
continuing operations
|
32.1
|
|
|
92.5
|
|
|
53.8
|
|
|
152.5
|
|
Income (loss) from
discontinued operations, net of tax
|
7.7
|
|
|
(185.5)
|
|
|
195.4
|
|
|
(222.6)
|
|
Net income
(loss)
|
39.8
|
|
|
(93.0)
|
|
|
249.2
|
|
|
(70.1)
|
|
Less: Net income
attributable to noncontrolling interest
|
37.7
|
|
|
39.9
|
|
|
117.0
|
|
|
121.4
|
|
Net income (loss)
attributable to controlling interest
|
$
|
2.1
|
|
|
$
|
(132.9)
|
|
|
$
|
132.2
|
|
|
$
|
(191.5)
|
|
|
|
|
|
|
|
|
|
Amounts attributable
to controlling interest:
|
|
|
|
|
|
|
|
Net (loss) income
from continuing operations
|
$
|
(1.5)
|
|
|
$
|
54.5
|
|
|
$
|
(31.6)
|
|
|
$
|
44.2
|
|
Net income (loss)
from discontinued operations
|
3.6
|
|
|
(187.4)
|
|
|
163.8
|
|
|
(235.7)
|
|
Net income (loss)
attributable to controlling interest
|
$
|
2.1
|
|
|
$
|
(132.9)
|
|
|
$
|
132.2
|
|
|
$
|
(191.5)
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
common share attributable to controlling interest:
|
|
|
|
|
|
|
|
Basic (loss) income
from continuing operations
|
$
|
(0.01)
|
|
|
$
|
0.27
|
|
|
$
|
(0.16)
|
|
|
$
|
0.22
|
|
Basic income (loss)
from discontinued operations
|
0.02
|
|
|
(0.94)
|
|
|
0.82
|
|
|
(1.19)
|
|
Basic
|
$
|
0.01
|
|
|
$
|
(0.67)
|
|
|
$
|
0.66
|
|
|
$
|
(0.97)
|
|
|
|
|
|
|
|
|
|
Diluted (loss) income
from continuing operations
|
$
|
(0.01)
|
|
|
$
|
0.27
|
|
|
$
|
(0.16)
|
|
|
$
|
0.22
|
|
Diluted income (loss)
from discontinued operations
|
0.02
|
|
|
(0.93)
|
|
|
0.82
|
|
|
(1.17)
|
|
Diluted
|
$
|
0.01
|
|
|
$
|
(0.66)
|
|
|
$
|
0.66
|
|
|
$
|
(0.95)
|
|
HRG GROUP, INC.
AND SUBSIDIARIES
RESULTS OF
OPERATIONS BY SEGMENT
(In
millions)
|
|
|
|
Fiscal
Quarter
|
|
Fiscal Nine
Months
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
(Unaudited)
|
|
(Unaudited)
|
Revenues:
|
|
|
|
|
|
|
|
|
Consumer
Products
|
|
$
|
1,303.9
|
|
|
$
|
1,361.6
|
|
|
$
|
3,685.6
|
|
|
$
|
3,790.0
|
|
Corporate and
Other
|
|
0.1
|
|
|
1.2
|
|
|
1.1
|
|
|
8.8
|
|
Total
revenues
|
|
$
|
1,304.0
|
|
|
$
|
1,362.8
|
|
|
$
|
3,686.7
|
|
|
$
|
3,798.8
|
|
|
|
|
|
|
|
|
|
|
Operating
income:
|
|
|
|
|
|
|
|
|
Consumer
Products
|
|
$
|
157.8
|
|
|
$
|
206.8
|
|
|
$
|
453.0
|
|
|
$
|
497.8
|
|
Corporate and
Other
|
|
(9.6)
|
|
|
(18.7)
|
|
|
(39.9)
|
|
|
(59.8)
|
|
Consolidated
operating income
|
|
148.2
|
|
|
188.1
|
|
|
413.1
|
|
|
438.0
|
|
Interest
expense
|
|
(89.3)
|
|
|
(98.0)
|
|
|
(269.6)
|
|
|
(289.8)
|
|
Other (expense)
income, net
|
|
(2.0)
|
|
|
0.2
|
|
|
(2.3)
|
|
|
(0.2)
|
|
Income from
continuing operations before income taxes
|
|
$
|
56.9
|
|
|
$
|
90.3
|
|
|
$
|
141.2
|
|
|
$
|
148.0
|
|
HRG GROUP, INC. AND
SUBSIDIARIES
OTHER SUPPLEMENTAL INFORMATON
(Unaudited)
(In millions)
Sales and Organic Net Sales — Consumer Products
The following is a summary of net sales by product line for the
Fiscal 2017 Nine Months compared to net sales for the nine months
ended June 30, 2016 (the "Fiscal 2016
Nine Months") (unaudited):
|
|
Fiscal
Quarter
|
|
Variance
|
|
Fiscal Nine
Months
|
|
Variance
|
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
Hardware and home
improvement products
|
|
$
|
324.7
|
|
$
|
328.6
|
|
$
|
(3.9)
|
|
(1.2)%
|
|
$
|
927.2
|
|
$
|
912.9
|
|
$
|
14.3
|
|
1.6%
|
Home and garden
control products
|
|
192.5
|
|
212.0
|
|
(19.5)
|
|
(9.2)%
|
|
374.2
|
|
414.7
|
|
(40.5)
|
|
(9.8)%
|
Global pet
supplies
|
|
190.0
|
|
207.1
|
|
(17.1)
|
|
(8.3)%
|
|
576.0
|
|
619.0
|
|
(43.0)
|
|
(6.9)%
|
Consumer
batteries
|
|
184.8
|
|
187.2
|
|
(2.4)
|
|
(1.3)%
|
|
630.5
|
|
618.0
|
|
12.5
|
|
2.0%
|
Global auto
care
|
|
155.7
|
|
159.8
|
|
(4.1)
|
|
(2.6)%
|
|
344.2
|
|
353.1
|
|
(8.9)
|
|
(2.5)%
|
Small
appliances
|
|
145.3
|
|
151.1
|
|
(5.8)
|
|
(3.8)%
|
|
455.3
|
|
479.3
|
|
(24.0)
|
|
(5.0)%
|
Personal care
products
|
|
110.9
|
|
115.8
|
|
(4.9)
|
|
(4.2)%
|
|
378.2
|
|
393.0
|
|
(14.8)
|
|
(3.8)%
|
Total net sales to
external customers
|
|
$
|
1,303.9
|
|
$
|
1,361.6
|
|
$
|
(57.7)
|
|
(4.2)%
|
|
$
|
3,685.6
|
|
$
|
3,790.0
|
|
$
|
(104.4)
|
|
(2.8)%
|
This release contains financial information regarding organic
net sales, which Spectrum Brands defines as net sales excluding the
effect of changes in foreign currency exchange rates and/or impact
from acquisitions (when applicable). Spectrum Brands believes this
non-GAAP measure provides useful information to investors because
it reflects regional and operating performance from Spectrum
Brands' activities without the effect of changes in currency
exchange rate and/or acquisitions. Spectrum Brands uses organic net
sales as one measure to monitor and evaluate their regional and
segment performance. Organic growth is calculated by comparing
organic net sales to net sales in the prior year. The effect of
changes in currency exchange rates is determined by translating the
period's net sales using the currency exchange rates that were in
effect during the prior comparative period. Net sales are
attributed to the geographic regions based on the country of
destination. Spectrum Brands excluded net sales from acquired
businesses in the current year for which there are no comparable
sales in the prior period.
The tables below represent a reconciliation of reported net
sales to organic net sales, by product line for the Fiscal 2017
Quarter compared to net sales for the Fiscal 2016 Quarter
(unaudited):
|
|
Net Sales
Fiscal
2017
Quarter
|
|
Effect of
Changes
in
Currency
|
|
Net Sales
Excluding
Effect of
Changes
in
Currency
|
|
Effect of
Acquisitions
|
|
Organic
Net Sales
Fiscal
2017
Quarter
|
|
Net Sales
Fiscal
2016
Quarter
|
|
Variance
|
|
%
Variance
|
Hardware and home
improvement products
|
|
$
|
324.7
|
|
$
|
0.3
|
|
$
|
325.0
|
|
$
|
—
|
|
$
|
325.0
|
|
$
|
328.6
|
|
$
|
(3.6)
|
|
(1.1)%
|
Global pet
supplies
|
|
190.0
|
|
2.8
|
|
192.8
|
|
(7.2)
|
|
185.6
|
|
207.1
|
|
(21.5)
|
|
(10.4)%
|
Consumer
batteries
|
|
184.8
|
|
2.4
|
|
187.2
|
|
—
|
|
187.2
|
|
187.2
|
|
—
|
|
—%
|
Home and garden
control products
|
|
192.5
|
|
—
|
|
192.5
|
|
—
|
|
192.5
|
|
212.0
|
|
(19.5)
|
|
(9.2)%
|
Small
appliances
|
|
145.3
|
|
3.7
|
|
149.0
|
|
—
|
|
149.0
|
|
151.1
|
|
(2.1)
|
|
(1.4)%
|
Global auto
care
|
|
155.7
|
|
0.7
|
|
156.4
|
|
—
|
|
156.4
|
|
159.8
|
|
(3.4)
|
|
(2.1)%
|
Personal care
products
|
|
110.9
|
|
2.3
|
|
113.2
|
|
—
|
|
113.2
|
|
115.8
|
|
(2.6)
|
|
(2.2)%
|
Total
|
|
$
|
1,303.9
|
|
$
|
12.2
|
|
$
|
1,316.1
|
|
$
|
(7.2)
|
|
$
|
1,308.9
|
|
$
|
1,361.6
|
|
$
|
(52.7)
|
|
(3.9)%
|
The tables below represent a reconciliation of reported net
sales to organic net sales, by product line for the Fiscal 2017
Nine Months compared to net sales for the Fiscal 2016 Nine Months
(unaudited):
|
|
Net Sales
Fiscal
2017 Nine
Months
|
|
Effect of
changes
in
Currency
|
|
Net Sales
Excluding
Effect of
Changes
in
Currency
|
|
Effect of
Acquisitions
|
|
Organic
Net Sales
Fiscal
2017 Nine
Months
|
|
Net Sales
Fiscal
2016 Nine
Months
|
|
Variance
|
|
%
Variance
|
Hardware and home
improvement products
|
|
$
|
927.2
|
|
$
|
(0.8)
|
|
$
|
926.4
|
|
$
|
—
|
|
$
|
926.4
|
|
$
|
912.9
|
|
$
|
13.5
|
|
1.5%
|
Consumer
batteries
|
|
630.5
|
|
9.0
|
|
639.5
|
|
—
|
|
639.5
|
|
618.0
|
|
21.5
|
|
3.5%
|
Global pet
supplies
|
|
576.0
|
|
9.0
|
|
585.0
|
|
(7.2)
|
|
577.8
|
|
619.0
|
|
(41.2)
|
|
(6.7)%
|
Small
appliances
|
|
455.3
|
|
14.6
|
|
469.9
|
|
—
|
|
469.9
|
|
479.3
|
|
(9.4)
|
|
(2.0)%
|
Personal care
products
|
|
378.2
|
|
8.0
|
|
386.2
|
|
—
|
|
386.2
|
|
393.0
|
|
(6.8)
|
|
(1.7)%
|
Home and garden
control products
|
|
374.2
|
|
—
|
|
374.2
|
|
—
|
|
374.2
|
|
414.7
|
|
(40.5)
|
|
(9.8)%
|
Global auto
care
|
|
344.2
|
|
0.8
|
|
345.0
|
|
—
|
|
345.0
|
|
353.1
|
|
(8.1)
|
|
(2.3)%
|
Total
|
|
$
|
3,685.6
|
|
$
|
40.6
|
|
$
|
3,726.2
|
|
$
|
(7.2)
|
|
$
|
3,719.0
|
|
$
|
3,790.0
|
|
$
|
(71.0)
|
|
(1.9)%
|
Adjusted EBITDA
This release contains financial information regarding Adjusted
EBITDA, Adjusted EBITDA Margin, and organic Adjusted EBITDA, which
are non-GAAP earnings. Adjusted EBITDA is a metric used by Spectrum
Brands and this non-GAAP measure provides useful information to
investors because it reflects ongoing operating performance and
trends, excluding certain non-cash based expenses and/or
non-recurring items during each of the comparable periods. It also
facilitates comparisons between peer companies since interest,
taxes, depreciation and amortization can differ greatly between
organizations as a result of differing capital structures and tax
strategies. Adjusted EBITDA is also used for determining compliance
with Spectrum Brands' debt covenant. EBITDA is calculated by
excluding Spectrum Brands' income tax expense, interest expense,
depreciation expense and amortization expense (from intangible
assets) from net income. Adjusted EBITDA further excludes: (1)
stock based compensation expense as it is a non-cash based
compensation cost; (2) acquisition and integration charges that
consist of transaction costs from acquisition transactions during
the period or subsequent integration related project costs directly
associated with the acquired business; (3) restructuring and
related charges, which consist of project costs associated with
restructuring initiatives; (4) non-cash purchase accounting
inventory adjustments recognized in earnings subsequent to an
acquisition (when applicable); (5) non-cash asset impairments or
write-offs realized (when applicable); (6) and other adjustments.
During the Fiscal 2017 Quarter and Fiscal 2017 Nine Months, other
adjustments consisted of estimated costs for a non-recurring
voluntary recall of rawhide products and professional fees
associated with non-acquisition based strategic initiatives of
Spectrum Brands. During the Fiscal 2016 Quarter and Fiscal 2016
Nine Months, other adjustments consisted of costs associated with
the onboarding of a key executive and the involuntary transfer of
inventory.
The table below shows a reconciliation of net income to Adjusted
EBITDA for the Consumer Products segment (unaudited):
|
|
Fiscal
Quarter
|
|
Fiscal Nine
Months
|
Reconciliation to
reported net income:
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Reported net income -
Consumer Products segment
|
|
$
|
78.6
|
|
|
$
|
102.2
|
|
|
$
|
202.5
|
|
|
$
|
268.6
|
|
Interest
expense
|
|
52.4
|
|
|
59.9
|
|
|
158.8
|
|
|
175.8
|
|
Income tax
expense
|
|
24.7
|
|
|
42.5
|
|
|
88.8
|
|
|
46.9
|
|
Depreciation of
properties
|
|
25.6
|
|
|
21.8
|
|
|
72.2
|
|
|
66.2
|
|
Amortization of
intangibles
|
|
23.8
|
|
|
23.5
|
|
|
70.9
|
|
|
70.5
|
|
EBITDA - Consumer
Products segment
|
|
205.1
|
|
|
249.9
|
|
|
593.2
|
|
|
628.0
|
|
Stock-based
compensation
|
|
5.4
|
|
|
15.8
|
|
|
28.4
|
|
|
47.4
|
|
Acquisition and
integration related charges
|
|
5.8
|
|
|
8.0
|
|
|
15.0
|
|
|
31.2
|
|
Restructuring and
related charges
|
|
21.2
|
|
|
5.4
|
|
|
32.7
|
|
|
8.2
|
|
Pet Safety
Recall
|
|
24.9
|
|
|
—
|
|
|
24.9
|
|
|
—
|
|
Inventory acquisition
step-up
|
|
0.8
|
|
|
—
|
|
|
0.8
|
|
|
—
|
|
Other
|
|
0.6
|
|
|
0.1
|
|
|
3.2
|
|
|
1.1
|
|
Adjusted EBITDA -
Consumer Products segment
|
|
$
|
263.8
|
|
|
$
|
279.2
|
|
|
$
|
698.2
|
|
|
$
|
715.9
|
|
View original
content:http://www.prnewswire.com/news-releases/hrg-group-inc-reports-fiscal-2017-third-quarter-results-300499972.html
SOURCE HRG Group, Inc.