NEW YORK, Nov. 20, 2015
/PRNewswire/ -- HRG Group, Inc. ("HRG" or the "Company"; NYSE:
HRG), a diversified holding company focused on owning businesses
that it believes can, in the long term, generate sustainable free
cash flow or attractive returns on investment, today announced its
consolidated results for the fourth quarter of Fiscal 2015 ended on
September 30, 2015 (the "Fiscal 2015 Quarter") as well as the
results for the full fiscal year ended on September 30, 2015
(the "Fiscal 2015"). The results include HRG's four
segments:
- Consumer Products, which consists of Spectrum Brands Holdings,
Inc. ("Spectrum Brands"; NYSE: SPB);
- Insurance, which consists of Fidelity & Guaranty Life
("FGL"; NYSE: FGL) and Front Street Re, Ltd. ("Front
Street");
- Energy, which consists of Compass Production Partners, LP
("Compass"), a subsidiary of HGI Energy Holdings, LLC ("HGI
Energy") engaged in the operation, acquisition and development of
conventional oil and natural gas assets in the U.S.; and
- Asset Management, which consists of Salus Capital Partners, LLC
("Salus"), Energy & Infrastructure Capital ("EIC") and
CorAmerica Capital, LLC ("CorAmerica").
"In 2015, we achieved record revenue, Adjusted EBITDA and free
cash flow in our largest segment, Consumer Products, which we
accomplished through a combination of strong execution in the core
business, the successful integration of recent accretive
acquisitions and the mitigation of the persistently unfavorable
foreign exchange headwinds," said Omar
Asali, President and Chief Executive Officer of HRG.
"We will continue to look for opportunities to grow this important
segment in 2016 through both organic sources and attractive
M&A.
"In Energy, the recent agreement to sell properties in
East Texas and Northern Louisiana reflects the high quality
of Compass' assets. We expect this accretive transaction will
provide proceeds for reducing leverage and increasing flexibility
at the segment, as we move forward with a plan to preserve value by
continuing to focus on leverage and liquidity. Looking at the
operations, our focus on addressing the severe contractions in oil
and gas pricing through strong cost controls has helped keep the
business profitable on an Adjusted EBITDA basis in both the quarter
and the year.
"Finally, we are pleased with the recently announced FGL
transaction, which will allow us to sell our stake and capture a
substantial return on our original investment in a tax-efficient
manner. We believe FGL and Anbang will be a strong competitor
in the market and we look forward to working with the regulators to
close the transaction by the second quarter of calendar year
2016. While it is premature at this point for us to discuss
any specific plans, we remain committed to deleveraging at the HRG
level, balanced against the opportunities available to us to
reinvest in the business at the time we receive the proceeds."
Fiscal 2015 Consolidated Highlights:
- HRG recorded total Revenues of $5.8
billion for Fiscal 2015, a decrease of $147.1 million, or 2.5%, from the year
ended September 30, 2014 ("Fiscal 2014"), driven primarily by
lower investment gains in the Insurance segment and the impact of
unfavorable foreign exchange in Consumer Products. Revenue
excluding the impact of both items increased 10.5% and was driven
primarily by higher Consumer Products revenues.
- Consolidated Operating loss of $227.8
million in Fiscal 2015 decreased $797.3 million as compared to the $569.5 million in reported Operating income in
Fiscal 2014, driven primarily by the previously-disclosed
impairments and bad debt expense recorded in the Insurance, Energy
and Asset Management segments. Excluding the impact of
impairments and bad debt expense, Operating income of $447.5 million in Fiscal 2015 decreased
$205.9 million, or 31.5%, due
primarily to lower operating income in Insurance, in connection
with an increase in embedded derivatives liability for future index
credits.
- Net loss attributable to common and participating preferred
stockholders was $556.8 million, or
$2.81 per common share attributable
to controlling interest, as compared to a net loss attributable to
common and participating preferred stockholders of $83.9 million, or $0.51 per common share attributable to
controlling interest, in Fiscal 2014. The decline was due
primarily to the same factors that negatively affected Operating
income.
- HRG ended Fiscal 2015 with corporate cash and investments of
approximately $331.3 million
(primarily held at HRG and HGI Funding LLC), a decrease of
$62.4 million from the comparable
balance of $393.7 million held as of
June 30, 2015 due primarily to the
payment of interest on the Company's notes in July.
- In Fiscal 2015, HRG received dividends of $65.7 million from its subsidiaries, including
$41.2 million, $12.2 million, $10.0
million, $2.3 million from the
Consumer Products, Insurance, Energy and Asset Management segments,
respectively, which does not give effect to the net impact from
$9 million of interest payments made
by HRG on behalf of HGI Energy with respect to certain intercompany
notes issued by HGI Energy to other HRG subsidiaries.
Fourth Quarter Fiscal 2015 Consolidated Highlights:
- HRG recorded total Revenues of $1.5
billion for the Fiscal 2015 Quarter, a decrease of
$59.9 million, or 4.0%, as compared
to the fourth quarter of fiscal 2014 (the "Fiscal 2014 Quarter"),
driven primarily by lower net investment gains as compared to the
Fiscal 2014 Quarter as well as the ongoing impact of unfavorable
foreign exchange in Consumer Products. Revenue excluding the
impact of both items increased 13.5% and was driven primarily by
higher Consumer Products revenues.
- In May, Spectrum acquired Armored AutoGroup, the leader in the
US automotive aftermarket appearance category, for $1.4 billion. The transaction contributed
$96.1 million and $160.5 million of revenue in the Fiscal 2015
Quarter and Fiscal 2015, respectively. Excluding these
amounts, HRG's consolidated currency-consistent revenues, excluding
the impact of net investment gains, increased 7.0% and 7.6% in the
Fiscal 2015 Quarter and Fiscal 2015, respectively.
- Consolidated Operating income of $54.7
million in the Fiscal 2015 Quarter declined $90.2 million as compared to the $144.9 million of Operating income reported in
the Fiscal 2014 Quarter. The decrease was due primarily to
the impact of lower investment gains in Insurance as well as the
recognition of $45.7 million and
$15.7 million of impairments in the
Energy and Asset Management segments, respectively, as described
below in the Additional Items section.
- Results reflect a $26.8 million
increase in interest expense relative to the Fiscal 2014 Quarter
from higher overall debt levels, due primarily to the financing
activity for accretive acquisitions made in Fiscal 2015 which were
only partially offset by refinancing activities to lower interest
rate debt at HRG and its subsidiaries.
- HRG incurred a tax expense of $57.1
million in the Fiscal 2015 Quarter and a (81.6)% effective
tax rate as compared to a $32.8
million expense in the Fiscal 2014 Quarter and a 65.1%
effective tax rate. The increase in tax expense in the
current quarter was due primarily to higher income from continuing
operations at certain segments and an increase in the deferred tax
valuation allowance.
- Net loss attributable to common and participating preferred
stockholders of $143.1 million, or
$0.73 per common share attributable
to controlling interest during the Fiscal 2015 Quarter, compared to
a Net loss attributable to common and participating preferred
stockholders of $6.3 million, or
$0.03 per common share attributable
to controlling interest during the Fiscal 2014 Quarter. The
loss increased primarily due to the lower Operating income in the
current period as well as higher consolidated interest expense in
connection with the higher overall debt levels.
Additional Items:
FGL Transaction
After the close of the Fiscal 2015 Quarter, FGL announced a
definitive merger agreement under which Anbang Insurance Group Co.,
Ltd. will acquire FGL for $26.80 per
share in cash. The merger agreement permits FGL to continue
paying out a regular quarterly cash dividend, provided it does not
exceed its most recently-declared $0.065 per share, per quarter amount. The
transaction, which is subject to customary closing conditions and
regulatory approvals, is expected to close in the second quarter of
calendar year 2016.
Compass Transaction
After the close of the Fiscal 2015 Quarter, Compass signed a
definitive agreement to sell certain of its assets for $160 million in cash, subject to customary
closing adjustments. The transaction is expected to close
prior to the close of the first quarter of Fiscal 2016 and the
proceeds are expected to be used to reduce the borrowings
outstanding under Compass' credit facility, which totaled
$327 million as of September 30th.
Non-Cash Impairments
Energy
Pursuant to SEC reporting requirements, Compass performed a
ceiling test at the end of the quarter utilizing simple average
spot prices for the trailing twelve month period for proved
reserves, which may not be indicative of actual market values or
forward strip prices for those reserves. As a result of this
test, Compass recorded a non-cash impairment of $45.7 million to its proved oil and natural gas
properties during the quarter, due primarily to the decline in oil
and natural gas prices. This impairment is reflected in the
Operating income of the Energy segment for the Fiscal 2015
Quarter.
Over the course of Fiscal 2015, Compass recorded $485.1 million in non-cash impairments to its oil
and natural gas properties and, if oil and gas prices do not
increase, additional, non-cash impairments to properties may be
required in Fiscal 2016.
Asset Management
During the Fiscal 2015 Quarter, $15.7
million of impairments were recorded to asset-backed loans
originated by Salus where the underlying collateral was determined
to be under-performing. Over the course of Fiscal 2015, the
Asset Management segment recorded a total of $87.9 million in impairments, which includes the
amounts previously-disclosed with respect to the term loan that was
originated to RadioShack Corp.
Segment Highlights:
Consumer Products
- Consumer Products Revenues increased $129.8 million, or 11.0%, to $1.3 billion in the Fiscal 2015 Quarter, as the
impact of newly acquired businesses more than offset the negative
impact of $73.7 million in
unfavorable foreign exchange. Excluding the impact of foreign
exchange, revenue increased $203.5
million, or 17.3%. Excluding the impacts of foreign
exchange and businesses acquired during Fiscal 2015, revenue
increased $25.6 million, or
2.2%. The segment's Operating income of $134.4 million increased 16.3%, or $18.8 million, as compared to the $115.6 million reported for the Fiscal 2014
Quarter, due primarily to the impact of businesses acquired within
the past year, which more than offset the costs associated with
their integration.
- On November 17, 2015, Spectrum
Brands announced that its Board of Directors approved a
$0.33 per share quarterly common
stock dividend, a 10% increase from the $0.30 dividend declared in the Fiscal 2014
Quarter.
Insurance
- Sales of fixed indexed annuities in Fiscal 2015 increased 50.1%
over Fiscal 2014 to $2.2 billion, and
decreased 6.8% as compared to the Fiscal 2014 Quarter to
$424 million in the Fiscal 2015
Quarter. New products introduced in 2015 contributed
$189 million, or 45%, of fixed
indexed annuity sales in the current period.
- Insurance Revenues decreased 60.7%, from $283.0 million in the Fiscal 2015 Quarter to
$111.1 million in the Fiscal 2014
Quarter due to higher net investment gains recorded in the Fiscal
2014 Quarter. Excluding the net investment (losses) gains
from both periods, Insurance Revenues increased 10.4% to
$280.4 million primarily due to
higher investment income.
Energy
- The Energy segment reported Revenue of $22.8 million, a decrease of $11.9 million, or 34.3%, from the Fiscal 2014
Quarter, as lower commodity prices and natural production declines
were only partially offset by the impact of the acquisition of the
full interest in Compass in the first fiscal quarter of 2015.
Asset Management
- The Asset Management segment generated $1.9 million in revenues for the Fiscal 2015
Quarter, a decrease of $6.7 million
over the Fiscal 2014 Quarter due principally to a lower amount of
realized interest income at Salus.
Detail on Fourth Quarter and Fiscal Year 2015 Segment
Results:
Consumer Products:
Note: Adjusted EBITDA-Consumer
Products, as described below, is a non-U.S. GAAP measure that
excludes interest, income tax expense, certain purchase accounting
fair value adjustments, restructuring and related charges,
acquisition and integration related charges, depreciation and
amortization expenses and stock-based compensation - see "Non-U.S.
GAAP Measures" and the reconciliation of Adjusted EBITDA-Consumer
Products to the Consumer Product segment's net income or loss in
the tables accompanying this release.
Consumer Products reported consolidated net sales of
$1,308.1 million for the Fiscal 2015
Quarter, an increase of $129.8
million, or 11.0%, as compared to the $1,178.3 million reported in the Fiscal 2014
Quarter. In Fiscal 2015, net sales increased $261.3 million, or 5.9%, to $4,690.4 million. The increase in both
periods was due primarily to the impact of newly acquired
businesses, which more than offset the $73.7
million and $229.8 million of
negative impact from unfavorable foreign exchange in the Fiscal
2015 Quarter and Fiscal 2015, respectively, as the Euro weakened
relative to the US dollar over the course of the year.
Excluding the net impact of foreign exchange, sales increased
$203.5 million, or 17.3%, as compared
to the Fiscal 2014 Quarter, and increased $491.1 million, or 11.1%, in Fiscal 2015, with
higher sales in all product categories as compared to Fiscal 2014
except consumer batteries, which declined due primarily to lower
distribution space, holiday shipment timing and the bankruptcy of a
key retailing partner.
Gross profit, representing net Consumer Products sales minus
Consumer Products cost of goods sold, increased $56.6 million, or 13.8%, to $467.5 million in the Fiscal 2015 Quarter, and
increased $101.6 million, or 6.5%, to
$1,670.4 million in Fiscal
2015. The increase in both periods was driven by the same
factors that affected revenue. Gross profit margin,
representing gross profit as a percentage of Consumer Products net
sales, was 35.7% in the Fiscal 2015 Quarter, an increase of 80
basis points over the Fiscal 2014 Quarter, and 35.6% in Fiscal
2015, an increase of 20 basis points over Fiscal 2014.
Operating income increased $18.8
million, or 16.3%, to $134.4
million in the Fiscal 2015 Quarter, as compared to
$115.6 million in the Fiscal 2014
Quarter. Operating income decreased $7.8 million, or 1.6%, to $474.1 million in Fiscal 2015, as compared to the
$481.9 million reported in Fiscal
2014, due primarily to the impact of unfavorable foreign exchange
as well as increased selling, general and administrative costs
related to acquisitions and costs related to their integration.
Consumer Products adjusted earnings before interest, taxes,
depreciation and amortization ("Adjusted EBITDA-Consumer Products")
was $229.4 million for the Fiscal
2015 Quarter, an increase of $42.5
million, or 22.7%, as compared to the Fiscal 2014
Quarter. In Fiscal 2015, Adjusted EBITDA-Consumer Products
was $800.6 million, an increase of
$76.2 million, or 10.5%, as compared
to the $724.4 million reported in
Fiscal 2014.
After the close of the Fiscal 2015 Quarter, on November 17, 2015, Spectrum Brands announced that
its Board of Directors declared a quarterly dividend of
$0.33 per share on Spectrum Brands'
common stock. This is a 10% increase in the quarterly
dividend declared as compared to the $0.30 quarterly dividend paid per share in
connection with the comparable period in Fiscal 2014. Over
the past two years, the quarterly dividend paid to Spectrum Brands
common stockholders has increased 32%. The newly-declared
dividend, which is a regular taxable cash dividend, is payable on
December 17, 2015 to all Spectrum
Brands stockholders of record as of the close of business on
December 1, 2015.
For more information on HRG's Consumer Products segment,
interested parties should read Spectrum Brands' announcements and
public filings with the Securities and Exchange Commission,
including Spectrum Brands' most recent quarterly earnings
announcement, which may be accessed at www.spectrumbrands.com.
Insurance:
Note: Insurance AOI, as described below,
is a non-U.S. GAAP insurance industry measure that eliminates the
impact of realized investment gains (losses), the effect of
interest rate changes on the fixed indexed annuities ("FIA")
embedded derivative liability, impairments and bad debt expense in
subsidiaries and the effect of class action litigation reserves -
see "Non-U.S. GAAP Measures" and a reconciliation of Insurance AOI
to the Insurance segment's reported income in the tables
accompanying this release. In the second quarter of 2014, the
Insurance AOI definition was revised from a pre-tax basis to an
after-tax basis. Insurance AOI now includes interest expense and an
effective tax rate of 35% is now applied to reconciling items made
to net income.
The Insurance segment recorded annuity sales, which are recorded
as deposit liabilities (i.e. contract holder funds) in accordance
with US GAAP, of $2.5 billion in
Fiscal 2015 and $433 million for the
Fiscal 2015 Quarter. This was an increase of $304 million, or 14.1%, as compared to the
$2.2 billion of sales recorded in
Fiscal 2014 and a decrease of $68
million, or 13.6%, as compared to the $501 million of sales recorded in the Fiscal 2014
Quarter. During Fiscal 2015, FGL grew fixed indexed
annuities by 50% over Fiscal 2014, due primarily to the launch of
new products introduced in the last few quarters, which contributed
$189 million of new sales to the
current period.
Net investment income increased $18.4
million, or 8.3%, to $240.0
million for the Fiscal 2015 Quarter, from $221.6 million for the Fiscal 2014 Quarter, and
increased $93.8 million, or 11.4%, to
$918.3 million in Fiscal 2015.
The yield on average invested assets at FGL was 4.92%, a 19 basis
points increase from the third quarter of 2015 and a 14 basis point
increase from the 4.78% yield reported in the Fiscal 2014
Quarter.
Operating loss of $10.2 million
for the Fiscal 2015 Quarter reflected a decrease of $74.8 million, or 115.8%, from an operating
income of $64.6 million for the
Fiscal 2014 Quarter, and declined $241.3
million, or 85%, to $43.5
million in operating income in Fiscal 2015. The
decline in both periods was primarily due to the lower net
investment gains, which were only partially offset by an increase
in net investment income.
The segment recorded Insurance AOI of $36.6 million for the Fiscal 2015 Quarter, an
increase of $5.3 million, or 17%,
from $31.3 million for the Fiscal
2014 Quarter. The increase was primarily due to
increases in average assets under management and earned
yields. In Fiscal 2015, Insurance AOI of $111.2 million declined $43.3 million, or 28.0%, from $154.5 million in Fiscal 2014, due to an
unfavorable increase in mortality experience on immediate annuity
products in Fiscal 2015 and the release of a tax valuation in
Fiscal 2014.
The Insurance segment had average invested assets (on an
amortized cost basis) of approximately $19.1
billion as of September 30, 2015. The investment
portfolio continues to be conservatively positioned in its credit
and duration profile and well matched against its liabilities.
As of September 30, 2015, HRG's Insurance segment had a net
U.S. GAAP book value of $1.4 billion
(excluding Accumulated Other Comprehensive Income ("AOCI") of
$149.1 million). As of
September 30, 2015, the Insurance segment's available for sale
investment portfolio had $146.5
million in net unrealized gains on a U.S. GAAP basis.
For more information on HRG's Insurance segment, interested
parties should read Fidelity & Guaranty Life's
announcements and public filings with the Securities & Exchange
Commission, including Fidelity & Guaranty Life's most recent
quarterly earnings announcement, available at www.fglife.com.
Energy:
Note: Adjusted EBITDA-Energy is a non-U.S.
GAAP measure that excludes interest expense, depreciation,
amortization and depletion, accretion of discount on asset
retirement obligations, non-cash write-downs of assets, gain on
remeasurement of investment to fair value, non-recurring other
operating items, non-cash changes in the fair value of derivatives,
cash settlements on derivative financial instruments and
stock-based compensation - see "Non-U.S. GAAP Measures" and a
reconciliation of Adjusted EBITDA-Energy to the Energy segment's
operating income below.
Oil and natural gas revenues were $22.8
million for the Fiscal 2015 Quarter, a decrease of
$11.9 million, or 34.3%, from the
Fiscal 2014 Quarter. In Fiscal 2015, revenues of $107.4 million declined $39.6 million, or 26.9%. The decline in
revenues in both periods was due primarily to lower prices for oil,
natural gas and natural gas liquids, as the average sales price per
barrel for oil and natural gas liquids declined by 44% and 51%,
respectively, in Fiscal 2015 as compared to Fiscal 2014.
Revenue in both periods was further affected by the expected
decreases in natural gas production, which was offset by the
additional revenue earned through the acquisition of a full
ownership interest in Compass.
Operating loss for the Fiscal 2015 Quarter was $56.0 million, a decrease of $59.5 million from the Fiscal 2014 Quarter due
primarily to the ceiling test impairment previously discussed in
the "Additional Items" section. The Operating loss in Fiscal
2015 was $526.6 million, a decrease
of $472.9 million from the Fiscal
2014 loss of $53.7 million, which was
also due primarily to the ceiling test impairments. Excluding
impairments, the operating loss of $10.3
million for the Fiscal 2015 Quarter and $41.5 million in Fiscal 2015 was a decrease of
$13.8 million and $68.8 million, respectively, from the comparable
periods in 2014. The decline in both the quarter and the year
was due primarily to the impact of the lower revenues.
Energy segment adjusted earnings before interest, taxes,
depreciation and amortization ("Adjusted EBITDA-Energy") was
$4.7 million for the Fiscal 2015
Quarter, a decrease of $8.9 million,
or 65.4%, from the Fiscal 2014 Quarter, and was $28.9 million in Fiscal 2015, a decrease of
$34.4 million, or 54.3% from Fiscal
2014.
For the Fiscal 2015 Quarter, the Energy segment's production was
113 Mbbl of oil, 151 Mbbl of natural gas liquids and 6,123 Mmcf of
natural gas. In the Fiscal 2015 Quarter, average daily
production at Compass was 86 Mmcfe as compared to 73 Mmcfe in the
Fiscal 2014 Quarter, with the increase due primarily to the
acquisition of the full interest in Compass, as the prior period
reflects only the Company's proportional interest in Compass'
production, which more than offset the impact of natural production
declines.
Asset Management:
The Asset Management segment reported revenues of $1.9 million for the Fiscal 2015 Quarter, a
decrease of $6.7 million, or 77.9%,
from the $8.6 million reported in the
Fiscal 2014 Quarter. Fiscal 2015 revenues decreased
$12.0 million, or 35.1%, to
$22.2 million. The decrease in
both the quarter and the year was due primarily to a lower amount
of interest income generated at Salus, which, during the course of
the year, shifted the strategic focus of its operations from loan
originations to the recovery of capital from its existing loan
portfolio. Accordingly, Salus originated no new asset-based
loan commitments in the Fiscal 2015 Quarter, and as of
September 30, 2015, Salus, together with its affiliated
co-lenders FGL and FSR, had $335.8
million of loans outstanding, net of allowance for credit
losses of $60.1 million.
The Asset Management segment reported an operating loss of
$20.4 million for the Fiscal 2015
Quarter, a decline of $17.9 million
as compared to the operating loss of $2.5
million for the Fiscal 2014 Quarter. For Fiscal 2015,
the operating loss declined $103.8
million to $103.1
million. The decrease in profitability in both the
quarter and the year was due primarily to the impairments and bad
debt expense described in the Additional Items section.
Excluding these items, operating losses of $4.7 million in the Fiscal 2015 Quarter and
$15.2 million in Fiscal 2015 reflect
a decline of $3.2 million and
$18.2 million, respectively, over the
comparable periods in 2014, and were driven by costs incurred to
support the expansion of the segment into infrastructure and
commercial and residential real estate investing.
Conference Call
HRG Group, Inc. will host a live conference call to discuss its
results on Friday, November 20, 2015
at 10:00 a.m. Eastern Standard
Time. To join the event, participants may call
1.844.856.8663 (U.S. callers) or 1.779.232.4737 (international
callers), using conference ID number 79310307. Alternatively,
a live webcast of the conference call can be accessed by interested
parties through the Investor Relations section of the HRG Website,
www.HRGgroup.com.
For those unable to listen to the live broadcast of the
conference call, a telephonic replay of the call will be available
through midnight November 23, 2015 by
dialing 1.855.859.2056 (U.S. callers) or 1.404.537.3406
(international callers), ID number 79310307. A replay will
also be available on the Company's website.
About HRG Group, Inc.
HRG Group, Inc. (formerly "Harbinger Group Inc.") is a
diversified holding company focused on owning businesses that the
Company believes can, in the longer term, generate sustainable free
cash flow or attractive returns on investment. The Company's
principal operations are conducted through businesses that: offer
branded consumer products (such as consumer batteries, residential
locksets, residential builders' hardware, faucets, shaving and
grooming products, personal care products, small household
appliances, specialty pet supplies, lawn, garden and home pest
control products, personal insect repellents, and auto care
products); offer life insurance and annuity products; provide
asset-backed loans; and own energy assets. 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 completion of the transaction between FGL
and Anbang, the completion of the transaction at Compass, expected
dividends from our subsidiaries, our or our subsidiaries' capital
needs and potential acquisitions, dispositions or other
transactions by us or our subsidiaries, and expectations with
respect to foreign exchange rates and commodity prices. Generally,
forward-looking statements 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 (including target businesses). Factors that
could cause actual results, events and developments to differ
include, without limitation: the ability of HRG subsidiaries to
close previously announced transactions; the ability of HRG's
subsidiaries (including, target businesses following their
acquisition) to generate sufficient net income and cash flows to
make upstream cash distributions; the decision of HRG subsidiaries'
boards 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 current and future
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, efficiencies/cost avoidance or
savings, income and margins, growth, economies of scale,
streamlined/combined operations, economic performance and
conditions to, and the timetable for, completing applicable
financial reporting requirements; litigation; potential and
contingent liabilities; management's plans; changes in regulations;
taxes; and the risks that may affect the performance of the
operating subsidiaries of HRG and those factors listed under the
caption "Risk Factors" in HRG's most recent Annual Report on Form
10-K, filed with the Securities and Exchange Commission. 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-U.S. GAAP Measures
Management believes that certain non-U.S. GAAP financial
measures may be useful in certain instances to provide additional
meaningful comparisons between current results and results in prior
operating periods. Reconciliations of such measures to the most
comparable U.S. GAAP measures are included herein.
We exclude the impact of foreign currency losses of $73.7 and $229.8
million and the net investment gains on the measure of
revenue growth of the quarter and year, respectively, which is
based on a non-GAAP financial measure. While such adjustments
are an integral part of the overall performance of the business,
macroeconomic factors can overshadow the underlying
performance. We believe this measure assists in understanding
the trends in our business.
Adjusted EBITDA is a non-GAAP financial measure used in our
Consumer Products ("Adjusted EBITDA - Consumer Products") and
Energy ("Adjusted EBITDA - Energy") segments and one of the
measures used for determining Spectrum Brands and Compass' debt
covenant compliance. "Insurance AOI" is a non-US GAAP
financial measure frequently used throughout the insurance industry
and is an economic measure the Insurance segment uses to evaluate
financial performance each period. Earnings before interest, taxes,
depreciation and amortization ("EBITDA") represent net income
adjusted to exclude interest expense, income taxes and
depreciation, depletion and amortization. Adjusted EBITDA excludes
certain items that are unusual in nature or not comparable from
period to period and other non-recurring operating items, accretion
of discount on asset retirement obligations, non-cash changes in
the fair value of derivatives, non-cash write-downs of assets, and
stock-based compensation. Adjusted EBITDA is a metric used by
management and frequently used by the financial community and
provides insight into an organization's operating trends and
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 can also be a useful measure of a
company's ability to service debt. Computations of EBITDA and
Adjusted EBITDA may differ from computations of similarly titled
measures of other companies due to differences in the inclusion or
exclusion of items in our computations as compared to those of
others. Insurance AOI is calculated by adjusting the Insurance
segment's net income to eliminate (i) the impact of net
investment gains, including other-than-temporary impairment losses
recognized in operations, but excluding gains and losses on
derivatives; (ii) the effect of changes in the rates used to
discount the FIA embedded derivative liability; (iii) the impact of
certain litigation reserves and (iv) impairments and bad debt
expense from subsidiaries. All adjustments to Insurance AOI are net
of the corresponding value of business acquired, deferred
acquisition costs and income tax impact related to these
adjustments as appropriate. While these adjustments are an integral
part of the overall performance of the Insurance segment, market
conditions impacting these items can overshadow the underlying
performance of the business. Accordingly, we believe using a
measure which excludes their impact is effective in analyzing the
trends of our operations and together with net income, we believe
Insurance AOI provides meaningful financial metric that helps
investors understand our underlying results and profitability.
While management believes that non-U.S. GAAP measurements are
useful supplemental information, such adjusted results are not
intended to replace U.S. GAAP financial results and should be read
in conjunction with those U.S. GAAP results.
For further information contact:
HRG Group, Inc.
James Hart, SVP
Communications
Tel:
212.906.8542
Email: jhart@HRGgroup.com
HRG GROUP, INC.
AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(In
millions)
|
|
|
September 30,
2015
|
|
September 30,
2014
|
|
|
|
|
ASSETS
|
|
|
|
Investments:
|
|
|
|
Fixed
maturities
|
$
|
17,514.8
|
|
|
$
|
17,211.5
|
|
Equity
securities
|
649.4
|
|
|
768.1
|
|
Derivatives
|
81.9
|
|
|
296.3
|
|
Asset-based
loans
|
335.8
|
|
|
811.6
|
|
Commercial mortgage
loans
|
489.2
|
|
|
136.2
|
|
Other invested
assets
|
39.6
|
|
|
28.8
|
|
Total
investments
|
19,110.7
|
|
|
19,252.5
|
|
Cash and cash
equivalents
|
1,197.0
|
|
|
1,319.2
|
|
Receivables,
net
|
632.9
|
|
|
585.1
|
|
Inventories,
net
|
780.8
|
|
|
635.2
|
|
Accrued investment
income
|
192.0
|
|
|
184.9
|
|
Reinsurance
recoverable
|
2,351.9
|
|
|
2,397.6
|
|
Deferred tax
assets
|
285.0
|
|
|
186.7
|
|
Properties, including
oil and natural gas properties, net
|
812.8
|
|
|
908.6
|
|
Goodwill
|
2,487.4
|
|
|
1,524.8
|
|
Intangibles,
including deferred acquisition costs and value of business
acquired, net
|
3,528.9
|
|
|
2,683.7
|
|
Other
assets
|
954.7
|
|
|
421.9
|
|
Total
assets
|
$
|
32,334.1
|
|
|
$
|
30,100.2
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
|
|
|
Insurance
reserves:
|
|
|
|
Contractholder
funds
|
$
|
17,769.8
|
|
|
$
|
16,463.5
|
|
Future policy
benefits
|
4,096.8
|
|
|
3,655.5
|
|
Liability for policy
and contract claims
|
55.3
|
|
|
58.1
|
|
Funds withheld from
reinsurers
|
9.8
|
|
|
38.0
|
|
Total insurance
reserves
|
21,931.7
|
|
|
20,215.1
|
|
Debt
|
6,382.7
|
|
|
5,157.8
|
|
Accounts payable and
other current liabilities
|
1,137.7
|
|
|
1,033.0
|
|
Employee benefit
obligations
|
92.9
|
|
|
86.2
|
|
Deferred tax
liabilities
|
613.6
|
|
|
533.3
|
|
Other
liabilities
|
587.4
|
|
|
817.8
|
|
Total
liabilities
|
30,746.0
|
|
|
27,843.2
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
HRG Group,
Inc. stockholders' equity:
|
|
|
|
Common
stock
|
2.0
|
|
|
2.0
|
|
Additional paid-in
capital
|
1,458.5
|
|
|
1,472.3
|
|
Accumulated
deficit
|
(833.1)
|
|
|
(276.3)
|
|
Accumulated other
comprehensive income
|
(40.7)
|
|
|
243.6
|
|
Total HRG Group, Inc.
stockholders' equity
|
586.7
|
|
|
1,441.6
|
|
Noncontrolling interest:
|
1,001.4
|
|
|
815.4
|
|
Total permanent
equity
|
1,588.1
|
|
|
2,257.0
|
|
Total liabilities and
equity
|
$
|
32,334.1
|
|
|
$
|
30,100.2
|
|
HRG GROUP, INC.
AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(In millions,
except per share data)
|
|
|
|
Fiscal
Quarter
|
|
Fiscal
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
(Unaudited)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Net consumer and
other product sales
|
|
$
|
1,308.1
|
|
|
$
|
1,193.7
|
|
|
$
|
4,733.1
|
|
|
$
|
4,449.2
|
|
Oil and natural
gas
|
|
22.8
|
|
|
34.7
|
|
|
107.4
|
|
|
147.0
|
|
Insurance
premiums
|
|
15.8
|
|
|
14.6
|
|
|
59.8
|
|
|
56.6
|
|
Net investment
income
|
|
239.8
|
|
|
223.7
|
|
|
927.2
|
|
|
842.2
|
|
Net investment
(losses) gains
|
|
(158.5)
|
|
|
27.9
|
|
|
(104.7)
|
|
|
395.3
|
|
Insurance and
investment product fees and other
|
|
24.5
|
|
|
17.8
|
|
|
93.1
|
|
|
72.7
|
|
Total
revenues
|
|
1,452.5
|
|
|
1,512.4
|
|
|
5,815.9
|
|
|
5,963.0
|
|
Operating costs
and expenses:
|
|
|
|
|
|
|
|
|
Cost of consumer
products and other goods sold
|
|
840.6
|
|
|
779.2
|
|
|
3,050.9
|
|
|
2,875.6
|
|
Oil and natural gas
direct operating costs
|
|
19.8
|
|
|
18.7
|
|
|
85.9
|
|
|
69.6
|
|
Benefits and other
changes in policy reserves
|
|
132.5
|
|
|
156.4
|
|
|
625.5
|
|
|
852.7
|
|
Selling, acquisition,
operating and general expenses
|
|
363.0
|
|
|
354.1
|
|
|
1,476.5
|
|
|
1,332.5
|
|
Impairments and bad
debt expense
|
|
61.9
|
|
|
1.4
|
|
|
675.3
|
|
|
83.9
|
|
Amortization of
intangibles
|
|
(20.0)
|
|
|
57.7
|
|
|
129.6
|
|
|
179.2
|
|
Total operating costs
and expenses
|
|
1,397.8
|
|
|
1,367.5
|
|
|
6,043.7
|
|
|
5,393.5
|
|
Operating (loss)
income
|
|
54.7
|
|
|
144.9
|
|
|
(227.8)
|
|
|
569.5
|
|
Interest
expense
|
|
(109.6)
|
|
|
(82.8)
|
|
|
(429.7)
|
|
|
(321.9)
|
|
Loss from the change
in the fair value of the equity conversion feature of
preferred stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12.7)
|
|
Gain on
deconsolidation of subsidiary
|
|
—
|
|
|
—
|
|
|
38.5
|
|
|
—
|
|
Gain upon gaining
control of equity method investment
|
|
—
|
|
|
—
|
|
|
141.2
|
|
|
—
|
|
Other income
(expense), net
|
|
(15.1)
|
|
|
(11.7)
|
|
|
37.0
|
|
|
(21.7)
|
|
(Loss) income from
continuing operations before income taxes
|
|
(70.0)
|
|
|
50.4
|
|
|
(440.8)
|
|
|
213.2
|
|
Income tax
expense
|
|
57.1
|
|
|
32.8
|
|
|
71.6
|
|
|
111.5
|
|
Net (loss)
income
|
|
(127.1)
|
|
|
17.6
|
|
|
(512.4)
|
|
|
101.7
|
|
Less: Net income
(loss) attributable to noncontrolling interest
|
|
16.0
|
|
|
23.9
|
|
|
44.4
|
|
|
112.0
|
|
Net loss attributable
to controlling interest
|
|
(143.1)
|
|
|
(6.3)
|
|
|
(556.8)
|
|
|
(10.3)
|
|
Less: Preferred stock
dividends and accretion
|
|
—
|
|
|
—
|
|
|
—
|
|
|
73.6
|
|
Net loss attributable
to common and participating preferred stockholders
|
|
$
|
(143.1)
|
|
|
$
|
(6.3)
|
|
|
$
|
(556.8)
|
|
|
$
|
(83.9)
|
|
|
|
|
|
|
|
|
|
|
Net loss per common
share attributable to controlling interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.73)
|
|
|
$
|
(0.03)
|
|
|
$
|
(2.81)
|
|
|
$
|
(0.51)
|
|
Diluted
|
|
$
|
(0.73)
|
|
|
$
|
(0.03)
|
|
|
$
|
(2.81)
|
|
|
$
|
(0.51)
|
|
HRG GROUP, INC.
AND SUBSIDIARIES
|
RESULTS OF
OPERATIONS BY SEGMENT
|
(In
millions)
|
|
|
|
Fiscal
Quarter
|
|
Fiscal
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
(Unaudited)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Consumer
Products
|
|
$
|
1,308.1
|
|
|
$
|
1,178.3
|
|
|
$
|
4,690.4
|
|
|
$
|
4,429.1
|
|
Insurance
|
|
111.1
|
|
|
283.0
|
|
|
836.2
|
|
|
1,349.7
|
|
Energy
|
|
22.8
|
|
|
34.7
|
|
|
107.4
|
|
|
147.0
|
|
Asset
Management
|
|
1.9
|
|
|
8.6
|
|
|
22.2
|
|
|
34.2
|
|
Intersegment
elimination (a)
|
|
8.6
|
|
|
(7.6)
|
|
|
117.0
|
|
|
(17.1)
|
|
Consolidated segment
revenues
|
|
1,452.5
|
|
|
1,497.0
|
|
|
5,773.2
|
|
|
5,942.9
|
|
Corporate and
Other
|
|
—
|
|
|
15.4
|
|
|
42.7
|
|
|
20.1
|
|
Total
revenues
|
|
$
|
1,452.5
|
|
|
$
|
1,512.4
|
|
|
$
|
5,815.9
|
|
|
$
|
5,963.0
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss):
|
|
|
|
|
|
|
|
|
Consumer
Products
|
|
$
|
134.4
|
|
|
$
|
115.6
|
|
|
$
|
474.1
|
|
|
$
|
481.9
|
|
Insurance
|
|
(10.2)
|
|
|
64.6
|
|
|
43.5
|
|
|
284.8
|
|
Energy
|
|
(56.0)
|
|
|
3.5
|
|
|
(526.6)
|
|
|
(53.7)
|
|
Asset
Management
|
|
(20.4)
|
|
|
(2.5)
|
|
|
(103.1)
|
|
|
0.7
|
|
Intersegment
elimination (a)
|
|
8.4
|
|
|
(8.0)
|
|
|
75.2
|
|
|
(17.7)
|
|
Total segment
operating income (loss)
|
|
56.2
|
|
|
173.2
|
|
|
(36.9)
|
|
|
696.0
|
|
Corporate and Other
and eliminations
|
|
(1.5)
|
|
|
(28.3)
|
|
|
(190.9)
|
|
|
(126.5)
|
|
Consolidated
operating income (loss)
|
|
54.7
|
|
|
144.9
|
|
|
(227.8)
|
|
|
569.5
|
|
Interest
expense
|
|
(109.6)
|
|
|
(82.8)
|
|
|
(429.7)
|
|
|
(321.9)
|
|
Loss from the change
in the fair value of the equity conversion feature of preferred
stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12.7)
|
|
Gain on
deconsolidation of subsidiary
|
|
—
|
|
|
—
|
|
|
38.5
|
|
|
—
|
|
Gain upon gaining
control of equity method investment
|
|
—
|
|
|
—
|
|
|
141.2
|
|
|
—
|
|
Other (expense)
income, net
|
|
(15.1)
|
|
|
(11.7)
|
|
|
37.0
|
|
|
(21.7)
|
|
(Loss) income from
continuing operations before income taxes
|
|
$
|
(70.0)
|
|
|
$
|
50.4
|
|
|
$
|
(440.8)
|
|
|
$
|
213.2
|
|
|
(a) The Intersegment
eliminations represent the reversal and reclassification of
impairments recorded in our Insurance segment, as well as normal
intercompany transactions for the period. For Fiscal 2015, the
Insurance segment eliminations include the reversal of intercompany
assets impairments of $57.1 million. For Fiscal 2015, the Insurance
segment eliminations also include a reclassification of $40.0
million of impairments resulting from the RadioShack bankruptcy
from Net investment losses to Bad debt expense and the reversal of
impairments of $35.4 million already reflected in the Asset
Management segment.
|
HRG GROUP, INC.
AND SUBSIDIARIES
|
ADJUSTED EBITDA
AND ADJUSTED OPERATING INCOME RECONCILIATIONS
|
(In
millions)
|
|
The table below shows
the adjustments made to the reported net income of the Consumer
Products segment to calculate its Adjusted EBITDA
(unaudited):
|
|
|
|
|
|
|
|
|
Fiscal
Quarter
|
|
Fiscal
|
Reconciliation to
reported net income:
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Reported net income -
Consumer Products segment
|
|
$
|
26.6
|
|
|
$
|
48.1
|
|
|
$
|
149.4
|
|
|
$
|
214.5
|
|
Add back:
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
65.4
|
|
|
50.4
|
|
|
271.9
|
|
|
202.1
|
|
Income tax
expense
|
|
39.1
|
|
|
15.2
|
|
|
43.9
|
|
|
59.0
|
|
Purchase accounting
fair value adjustment
|
|
14.0
|
|
|
—
|
|
|
21.7
|
|
|
—
|
|
Restructuring and
related charges
|
|
6.4
|
|
|
6.9
|
|
|
28.7
|
|
|
22.9
|
|
Acquisition and
integration related charges
|
|
14.6
|
|
|
5.6
|
|
|
58.8
|
|
|
20.1
|
|
Venezuela
devaluation
|
|
2.5
|
|
|
—
|
|
|
2.5
|
|
|
—
|
|
Other
|
|
2.2
|
|
|
1.3
|
|
|
6.1
|
|
|
1.3
|
|
Adjusted EBIT -
Consumer Products segment
|
|
170.8
|
|
|
127.5
|
|
|
583.0
|
|
|
519.9
|
|
Depreciation and
amortization, net of accelerated depreciation
|
|
|
|
|
|
|
|
|
Depreciation of
properties
|
|
23.5
|
|
|
19.6
|
|
|
82.2
|
|
|
76.0
|
|
Amortization of
intangibles
|
|
23.8
|
|
|
20.5
|
|
|
87.8
|
|
|
81.7
|
|
Stock-based
compensation
|
|
11.3
|
|
|
19.3
|
|
|
47.6
|
|
|
46.8
|
|
Adjusted EBITDA -
Consumer Products segment
|
|
$
|
229.4
|
|
|
$
|
186.9
|
|
|
$
|
800.6
|
|
|
$
|
724.4
|
|
|
The table below shows
the adjustments made to the reported net (loss) income of the
Energy segment to calculate its Adjusted EBITDA
(unaudited):
|
|
|
|
|
|
|
|
Fiscal
Quarter
|
|
Fiscal
|
Reconciliation to
reported net loss (income):
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Reported net (loss)
income - Energy segment
|
|
$
|
(56.7)
|
|
|
$
|
5.4
|
|
|
$
|
(378.6)
|
|
|
$
|
(76.9)
|
|
Interest
expense
|
|
4.8
|
|
|
4.0
|
|
|
18.9
|
|
|
16.7
|
|
Depreciation,
amortization and depletion
|
|
7.7
|
|
|
9.4
|
|
|
43.4
|
|
|
39.9
|
|
EBITDA - Energy
segment
|
|
(44.2)
|
|
|
18.8
|
|
|
(316.3)
|
|
|
(20.3)
|
|
Accretion of discount
on asset retirement obligations
|
|
0.7
|
|
|
0.5
|
|
|
2.8
|
|
|
2.0
|
|
Impairments and bad
debt expense
|
|
45.7
|
|
|
—
|
|
|
485.1
|
|
|
81.0
|
|
Gain on remeasurement
of investment to fair value
|
|
—
|
|
|
—
|
|
|
(141.2)
|
|
|
—
|
|
Non-recurring other
operating items
|
|
—
|
|
|
0.2
|
|
|
2.6
|
|
|
0.2
|
|
(Gain) loss on
derivative financial instruments
|
|
(4.0)
|
|
|
(5.8)
|
|
|
(25.3)
|
|
|
6.6
|
|
Cash settlements on
derivative financial instruments
|
|
6.5
|
|
|
—
|
|
|
20.6
|
|
|
(6.2)
|
|
Stock based
compensation expense
|
|
—
|
|
|
(0.1)
|
|
|
0.6
|
|
|
—
|
|
Adjusted EBITDA -
Energy segment
|
|
$
|
4.7
|
|
|
$
|
13.6
|
|
|
$
|
28.9
|
|
|
$
|
63.3
|
|
|
The table below shows
the adjustments made to the reported net (loss) income of the
Insurance segment to calculate its adjusted operating income
(unaudited):
|
|
|
|
|
|
|
|
Fiscal
Quarter
|
|
Fiscal
|
Reconciliation to
reported net (loss) income:
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Reported net (loss)
income - insurance segment
|
|
$
|
(33.6)
|
|
|
$
|
35.8
|
|
|
$
|
(93.7)
|
|
|
$
|
202.3
|
|
Effect of investment
losses (gains), net of offsets
|
|
29.5
|
|
|
(5.2)
|
|
|
77.9
|
|
|
(54.5)
|
|
Effect of change in
FIA embedded derivative discount rate, net of offsets
|
|
24.9
|
|
|
0.7
|
|
|
39.5
|
|
|
5.7
|
|
Impairments and bad
debt expense from subsidiary, net of offsets
|
|
15.7
|
|
|
—
|
|
|
87.9
|
|
|
—
|
|
Effect of class
action litigation reserves, net of offsets
|
|
0.1
|
|
|
—
|
|
|
(0.4)
|
|
|
1.0
|
|
Adjusted operating
income - Insurance segment
|
|
$
|
36.6
|
|
|
$
|
31.3
|
|
|
$
|
111.2
|
|
|
$
|
154.5
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/hrg-group-inc-reports-fourth-quarter-and-fiscal-year-2015-results-300182498.html
SOURCE HRG Group, Inc.