NEW YORK, Nov. 20, 2017
/PRNewswire/ -- HRG Group, Inc. ("HRG" or the "Company"; NYSE:
HRG) today announced its consolidated results for the fourth
quarter of fiscal 2017 ended on September 30, 2017 (the
"Fiscal 2017 Quarter") as well as the results for the full fiscal
year ended on September 30, 2017 ("Fiscal 2017").
The results include HRG's two segments: (i) Consumer Products,
which consists of Spectrum Brands Holdings, Inc. and its
subsidiaries ("Spectrum Brands"; NYSE: SPB); and (ii) Corporate and
Other, which includes Salus Capital Partners, LLC, ("Salus"), which
was created for the purpose of serving as an asset-based lender,
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. See additional
information under "Certain Other Items" below.
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 a reconciliation to comparable GAAP
metrics.
Fiscal 2017 Consolidated Highlights:
- HRG recorded total revenues of $5,008.5
million for Fiscal 2017, a decrease of $40.1 million, or 0.8%, from the year ended
September 30, 2016 ("Fiscal 2016"),
driven primarily by lower net sales from our Consumer Products
segment and lower revenues generated by Salus as a result of
run-off of the asset-backed loan portfolio.
- Consolidated operating income for Fiscal 2017 decreased
$57.2 million, or 10.0%, to
$516.3 million from $573.5 million for Fiscal 2016. The $57.2 million decrease was primarily driven by
lower operating profit in 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 $35.8 million from a rawhide dog chew product
safety recall initiated in June 2017
and additional restructuring costs of $47.3
million. The decrease was partially offset by lower
impairments and stock based compensation expense in our Corporate
and Other segment.
- Interest expense decreased $42.4
million to $360.1 million for
Fiscal 2017 from $402.5 million for
Fiscal 2016 primarily due to the effect of refinancing activities
to lower interest rates at our Consumer Products segment, partially
offset by higher overall debt levels.
- The Company recorded income tax expense of $48.3 million, or a 31.9% effective tax rate, in
Fiscal 2017 compared to $31.6
million, or 18.0%. The increase in income tax expense was
primarily due to release of a domestic valuation allowance on
certain U.S. net operating loss carryforwards by Spectrum Brands in
Fiscal 2016.
- Net loss from continuing operations attributable to controlling
interest increased to $20.6 million,
or $0.10 per basic and diluted common
share attributable to controlling interest in Fiscal 2017, compared
to net loss from continuing operations attributable to controlling
interest of $1.6 million, or
$0.01 per basic and diluted common
share attributable to controlling interest in Fiscal 2016. The
increase in net loss per share was primarily due to lower operating
profit and higher income tax expense, partially offset by lower
interest expenses.
- HRG ended Fiscal 2017 with corporate cash and investments of
$93.0 million, a decrease of
$79.0 million from the comparable
balance of $172.0 million held as of
Fiscal 2016, primarily due to the payment of interest on the
Company's notes, partially offset by receipts of dividends from
subsidiaries and $50.0 million
proceeds from a secured loan agreement that the Company's
subsidiary entered into during Fiscal 2017, pursuant to which it
may borrow up to an aggregate amount of $150.0 million.
- In Fiscal 2017, HRG received dividends of $68.5 million from its subsidiaries, including
$56.3 million from Spectrum Brands
and $12.2 million from FGL.
Fourth Quarter Fiscal 2017 Consolidated Highlights:
- The Company recorded total revenues of $1.32 billion for the Fiscal 2017 Quarter, an
increase of $72.0 million, or 5.8%,
as compared to the $1.25 billion in
the fourth quarter of fiscal 2016 (the "Fiscal 2016 Quarter"). The
increase was driven by higher revenues in our Consumer Products
segment as a result of higher organic net sales, acquisition sales,
and positive foreign exchange impact.
- Operating income was $102.3
million in the Fiscal 2017 Quarter, a decrease of
$32.3 million as compared to
$134.6 million in the Fiscal 2016
Quarter. The decrease was primarily driven by lower operating
profit at our Consumer Products segment as a result of higher
operating expenses and lower gross profit; partially offset by
lower bonus, stock based compensation and impairments expense in
our Corporate and Other segment.
- Net income from continuing operations attributable to
controlling interest was $11.0
million, or $0.05 per basic
and diluted common share, attributable to controlling interest in
the Fiscal 2017 Quarter, as compared to a net loss from continuing
operations attributable to controlling interest of $45.8 million, or $0.23 per basic and diluted common share,
attributable to controlling interest during the Fiscal 2016
Quarter. The increase in income was primarily due to higher income
tax expense in the Fiscal 2016 Quarter due to a change in the
Company's expectation with respect to the timing of the completion
of the FGL merger transaction (as further described below under the
heading "Certain Other Items"), which resulted in the reversal of
tax benefits previously recognized in the first nine months of
Fiscal 2016, and lower interest expense, partially offset by lower
operating profits during the Fiscal 2017 Quarter, which are
discussed above.
Detail on Fourth Quarter Segment Results:
Consumer Products:
Consumer Products reported consolidated net sales of
$1,321.8 million for the Fiscal 2017
Quarter, an increase of $72.1
million, or 5.8%, as compared to the $1,249.7 million reported in the Fiscal 2016
Quarter driven by increased organic net sales in home and garden
control and hardware and home improvement product lines, and sales
from companies acquired in Fiscal 2017 of $20.9 million and positive foreign exchange
impact of $12.3 million. Home and
garden control organic net sales increased $24.8 million due to favorable weather and
point-of-sale, along with increased replenishment orders due to
lower retailer inventory levels. Hardware and home improvement
organic net sales improved $18.9
million driven by strong growth in residential security and
plumbing in North America.
Gross profit, representing net sales minus cost of goods sold,
increased $10.6 million from the
Fiscal 2016 Quarter, or 2.2%, to $496.3
million in the Fiscal 2017 Quarter. Gross profit margin,
representing gross profit as a percentage of net sales, decreased
to 37.5% in the Fiscal 2017 Quarter from 38.9% for the Fiscal 2016
Quarter, which was primarily due to unfavorable mix despite higher
volumes, the negative impact of Spectrum Brands' rawhide safety
recall, and operating start-up inefficiencies.
Selling, acquisition, operating and general expenses increased
$60.7 million from the Fiscal 2016
Quarter, or 18.6%, to $387.9 million
in the Fiscal 2017 Quarter primarily due to acquisitions, higher
stock-based compensation costs, increased restructuring and related
charges, and an impairment of intangible assets.
Operating income decreased $50.1
million, or 31.6%, to $108.4
million in the Fiscal 2017 Quarter, as compared to the
$158.5 million reported in the Fiscal
2016 Quarter. The decrease was primarily as a result of higher
operating expenses and lower gross profit, which are discussed
above.
Net income of our Consumer Products segment was $94.6 million in the Fiscal 2017 Quarter, an
increase of $5.5 million, or 6.2%,
compared to net income of $89.1 million reported in the
Fiscal 2016 Quarter. The increase was primarily due to reduced
interest expense and a higher income tax benefit during the Fiscal
2017 Quarter offset by lower operating profit.
Our Consumer Products segment's adjusted earnings before
interest, taxes, depreciation and amortization ("Adjusted EBITDA -
Consumer Products") increased by $20.6
million, or 8.7%, to $257.5
million versus the Fiscal 2016 Quarter. The increase was
primarily driven by $12.2 million
increase in home and garden control products due to higher volumes
as well as favorable product mix and operating efficiencies, and a
$7.3 million increase in the hardware
and home improvements products due to higher volumes. 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 November 14, 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 $17.2 million,
to an operating loss of $6.7 million
from $23.9 million for the Fiscal
2016 Quarter. The decrease in loss was primarily due to lower
impairments and loan loss provision expenses on the asset-based
loan portfolio, as well as 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 Company's review and evaluation of available
strategic alternatives for to the Company and/or its assets.
Certain Other Items:
As previously disclosed, HRG has initiated a process to review
and evaluate strategic alternatives with a view towards 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. As part of this strategic review
process, HRG has made/received, and may in the future make/receive,
one or more proposals to/from third parties and/or Spectrum Brands,
its management, its board of directors, its stockholders and other
persons, including discussions and proposals that may include, but
are not limited to, a merger or a sale and/or a business
combination of the Company and Spectrum Brands. 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.
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"). Pursuant to
the FGL Merger Agreement, the consummation of the FGL Merger is
subject to the satisfaction or waiver of the following closing
conditions, which have been satisfied: (i) on June 16, 2017, the Federal Trade Commission
granted early termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended;
(ii) on August 8, 2017, CF Corp held
an extraordinary general meeting in lieu of an annual general
meeting of shareholders, at which CF Corp's shareholders approved,
among other items, all of the proposals relating to the FGL Merger
Agreement and the FGL Merger; (iii) on August 14, 2017, FGL filed with the SEC and
mailed to its stockholders a definitive information statement in
connection with the FGL Merger; (iv) on August 24, 2017, the Vermont Department of
Financial Regulation granted its required regulatory approval
relating to the FGL Merger; and (v) on November 8, 2017, the New York Department of
Financial Services granted its required regulatory approval
relating to the FGL Merger. In addition, the consummation of the
FGL Merger is also subject to satisfaction or waiver of other
closing conditions, including the receipt of regulatory approvals
from the Iowa Insurance Division ("IID") and the absence of any law
or order enacted, issued or enforced that is in effect and that
prevents or prohibits the consummation of the FGL Merger. With
respect to the regulatory approvals from the IID, on November 7, 2017, the IID held a public hearing
to consider whether the proposed acquisition of control of Fidelity
& Guaranty Life Insurance Company complies with the standards
set forth under applicable Iowa
insurance laws.
FGL expects to be in a position to close the FGL Merger before
the end of calendar year 2017; however, the closing of the FGL
Merger and the timing thereof is subject to the IID's regulatory
review and approval process, the results of which cannot be
assured. In the event the FGL Merger Agreement is terminated, under
certain circumstances, FGL may be required to pay a termination fee
to CF Corp in an aggregate amount of $50.0
million.
In a separate transaction, 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 $65.0 million,
subject to customary adjustments for transaction expenses (the
"Front Street Sale"). The required regulatory approvals in
connection with the transaction have been received and the closing
of the transaction is expected to take place before the end of
calendar year 2017, subject to the satisfaction of other customary
closing conditions, including the consummation of the FGL
Merger.
In addition, on May 24, 2017, HRG,
FS Holdco II Ltd. ("FS Holdco"), CF Corp and FGL U.S. Holdings
Inc., an indirect wholly owned subsidiary of CF Corp ("CF/FGL US")
entered into an agreement (the "338 Agreement") pursuant to which
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
(the "338 Tax Election"). Pursuant to the 338 Agreement, if FS
Holdco elects to make the 338 Tax Election, it will be required to
pay CF/FGL US $30.0 million, plus
additional specified amounts in excess of $6.0 million, determined by reference to FGL's
incremental current tax costs attributable to the 338 Tax Election,
if any, and CF/FGL US will be required to pay FS Holdco additional
specified amounts in excess of $6.0
million, determined by reference to FGL's incremental
current tax savings attributable to the 338 Tax Election, if any.
As of the date hereof, the Company expects to exercise the 338 Tax
Election. As of September 30, 2017,
HRG had approximately $1.8 billion of
gross U.S. net operating loss ("NOL") and capital carryforwards. If
the 338 Tax Election is made, HRG expects to retain such federal
NOL and capital carryforwards following the sale of its stock in
the FGL Merger. If the Company exercises the 338 Tax Election, at
September 30, 2017, the Company
estimated to receive a $9.6 million
net payment from CF Corp in relation to the 338 Tax Election, which
was reflected in the estimated fair value, less cost to sell of FGL
as of September 30, 2017. Nonetheless, there can be no
assurance that the Company will receive the expected benefits of
such election. In addition, the estimated payment described herein
is preliminary and subject to change, and will not be definitively
determined until the FGL Merger is closed and the 338 Tax Election
is made and the parties to the 338 Agreement complete their review
of the election in accordance with the terms of the 338
Agreement.
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.
Fourth Quarter Results of Discontinued Operations:
Loss from discontinued operations, net of tax for the Fiscal
2017 Quarter was $25.1 million and
was entirely attributable to our Insurance Operations. Income from
discontinued operations, net of tax for the Fiscal 2016 Quarter was
$44.5 million due to $44.3 million of income related to Compass'
operations and $0.2 million of income
attributable to our Insurance Operations. The change in income
(loss) from discontinued operations attributable to our Insurance
Operations was driven by higher income tax benefit in the Fiscal
2016 Quarter due to a change in the Company's expectation with
respect to the timing of the completion of the FGL merger
transaction and capital loss carryforwards generated from the
Compass sale, which resulted in the reversal of tax expense
previously recognized in the first nine months of Fiscal 2016.
Partially offsetting this increase in loss was the effect of lower
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 as
compared to the Fiscal 2016 Quarter and an increase in net income
attributable to the operations of FGL and Front Street of
$7.3 million.
On November 9, 2017, FGL announced
that its Board of Directors declared a quarterly dividend of
$0.065 per share. The dividend is
payable on December 11, 2017 to
shareholders of record as of the close of business on
November 27, 2017.
Additional Information:
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
September 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; whether HRG determines
to exercise the 338 Tax Election and realizes the expected benefits
from such election; 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' management 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' management
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 Spectrum Brands'
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' management 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
reconcile the non-GAAP measurements discussed above to the 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)
|
|
|
September 30,
2017
|
|
September 30,
2016
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
|
270.1
|
|
|
$
|
465.2
|
|
Receivables,
net
|
569.8
|
|
|
539.1
|
|
Inventories,
net
|
775.5
|
|
|
740.6
|
|
Deferred tax
assets
|
20.2
|
|
|
18.3
|
|
Property, plant and
equipment, net
|
700.7
|
|
|
543.4
|
|
Goodwill
|
2,626.0
|
|
|
2,478.4
|
|
Intangibles,
net
|
2,424.0
|
|
|
2,372.5
|
|
Other
assets
|
137.2
|
|
|
138.3
|
|
Assets of businesses
held for sale
|
28,326.2
|
|
|
26,284.3
|
|
Total
assets
|
$
|
35,849.7
|
|
|
$
|
33,580.1
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Debt
|
$
|
5,774.1
|
|
|
$
|
5,525.8
|
|
Accounts payable and
other current liabilities
|
1,115.6
|
|
|
983.2
|
|
Employee benefit
obligations
|
87.5
|
|
|
125.4
|
|
Deferred tax
liabilities
|
531.4
|
|
|
546.0
|
|
Other
liabilities
|
43.5
|
|
|
28.7
|
|
Liabilities of
businesses held for sale
|
26,350.7
|
|
|
24,553.8
|
|
Total
liabilities
|
33,902.8
|
|
|
31,762.9
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
HRG Group,
Inc. shareholders' equity:
|
|
|
|
Common
stock
|
2.0
|
|
|
2.0
|
|
Additional
paid-in capital
|
1,372.9
|
|
|
1,447.1
|
|
Accumulated
deficit
|
(925.9)
|
|
|
(1,031.9)
|
|
Accumulated
other comprehensive income
|
309.0
|
|
|
220.9
|
|
Total HRG Group, Inc.
shareholders' equity
|
758.0
|
|
|
638.1
|
|
Noncontrolling interest
|
1,188.9
|
|
|
1,179.1
|
|
Total shareholders'
equity
|
1,946.9
|
|
|
1,817.2
|
|
Total liabilities and
equity
|
$
|
35,849.7
|
|
|
$
|
33,580.1
|
|
HRG GROUP, INC.
AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(In millions,
except per share data)
|
|
|
Three months ended
September 30,
|
|
Year ended
September 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
(Unaudited)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Net sales
|
$
|
1,321.8
|
|
|
$
|
1,249.7
|
|
|
$
|
5,007.4
|
|
|
$
|
5,039.7
|
|
Net investment
income
|
—
|
|
|
0.1
|
|
|
1.1
|
|
|
8.9
|
|
Total
revenues
|
1,321.8
|
|
|
1,249.8
|
|
|
5,008.5
|
|
|
5,048.6
|
|
Operating costs
and expenses:
|
|
|
|
|
|
|
|
Cost of goods
sold
|
825.5
|
|
|
764.0
|
|
|
3,132.6
|
|
|
3,119.8
|
|
Selling, acquisition,
operating and general expenses
|
394.0
|
|
|
351.2
|
|
|
1,359.6
|
|
|
1,355.3
|
|
Total operating costs
and expenses
|
1,219.5
|
|
|
1,115.2
|
|
|
4,492.2
|
|
|
4,475.1
|
|
Operating
income
|
102.3
|
|
|
134.6
|
|
|
516.3
|
|
|
573.5
|
|
Interest
expense
|
(89.6)
|
|
|
(111.8)
|
|
|
(360.1)
|
|
|
(402.5)
|
|
Other (expense)
income, net
|
(2.7)
|
|
|
5.0
|
|
|
(5.0)
|
|
|
4.8
|
|
Income (loss) from
continuing operations before income taxes
|
10.0
|
|
|
27.8
|
|
|
151.2
|
|
|
175.8
|
|
Income tax
expense
|
(39.1)
|
|
|
36.1
|
|
|
48.3
|
|
|
31.6
|
|
Net income (loss)
from continuing operations
|
49.1
|
|
|
(8.3)
|
|
|
102.9
|
|
|
144.2
|
|
Income (loss) from
discontinued operations, net of tax
|
(25.1)
|
|
|
44.5
|
|
|
170.3
|
|
|
(178.1)
|
|
Net income
(loss)
|
24.0
|
|
|
36.2
|
|
|
273.2
|
|
|
(33.9)
|
|
Less: Net income
attributable to noncontrolling interest
|
50.2
|
|
|
43.5
|
|
|
167.2
|
|
|
164.9
|
|
Net income (loss)
attributable to controlling interest
|
$
|
(26.2)
|
|
|
$
|
(7.3)
|
|
|
$
|
106.0
|
|
|
$
|
(198.8)
|
|
|
|
|
|
|
|
|
|
Amounts attributable
to controlling interest:
|
|
|
|
|
|
|
|
Net loss from
continuing operations
|
$
|
11.0
|
|
|
$
|
(45.8)
|
|
|
$
|
(20.6)
|
|
|
$
|
(1.6)
|
|
Net income (loss)
from discontinued operations
|
(37.2)
|
|
|
38.5
|
|
|
126.6
|
|
|
(197.2)
|
|
Net income (loss)
attributable to controlling interest
|
$
|
(26.2)
|
|
|
$
|
(7.3)
|
|
|
$
|
106.0
|
|
|
$
|
(198.8)
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
common share attributable to controlling interest:
|
|
|
|
|
|
|
|
Basic loss from
continuing operations
|
$
|
0.05
|
|
|
$
|
(0.23)
|
|
|
$
|
(0.10)
|
|
|
$
|
(0.01)
|
|
Basic income (loss)
from discontinued operations
|
(0.18)
|
|
|
0.19
|
|
|
0.63
|
|
|
(0.99)
|
|
Basic
|
$
|
(0.13)
|
|
|
$
|
(0.04)
|
|
|
$
|
0.53
|
|
|
$
|
(1.00)
|
|
|
|
|
|
|
|
|
|
Diluted loss from
continuing operations
|
$
|
0.05
|
|
|
$
|
(0.23)
|
|
|
$
|
(0.10)
|
|
|
$
|
(0.01)
|
|
Diluted income (loss)
from discontinued operations
|
(0.18)
|
|
|
0.19
|
|
|
0.63
|
|
|
(0.99)
|
|
Diluted
|
$
|
(0.13)
|
|
|
$
|
(0.04)
|
|
|
$
|
0.53
|
|
|
$
|
(1.00)
|
|
HRG GROUP, INC.
AND SUBSIDIARIES
|
RESULTS OF
OPERATIONS BY SEGMENT
|
(In
millions)
|
|
|
|
Fiscal
Quarter
|
|
Fiscal
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
(Unaudited)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Consumer
Products
|
|
$
|
1,321.8
|
|
|
$
|
1,249.7
|
|
|
$
|
5,007.4
|
|
|
$
|
5,039.7
|
|
Corporate and
Other
|
|
—
|
|
|
0.1
|
|
|
1.1
|
|
|
8.9
|
|
Total
revenues
|
|
$
|
1,321.8
|
|
|
$
|
1,249.8
|
|
|
$
|
5,008.5
|
|
|
$
|
5,048.6
|
|
|
|
|
|
|
|
|
|
|
Operating
income:
|
|
|
|
|
|
|
|
|
Consumer
Products
|
|
$
|
108.4
|
|
|
$
|
158.5
|
|
|
$
|
561.4
|
|
|
$
|
656.3
|
|
Corporate and Other
and eliminations
|
|
(6.1)
|
|
|
(23.9)
|
|
|
(45.1)
|
|
|
(82.8)
|
|
Consolidated
operating income
|
|
102.3
|
|
|
134.6
|
|
|
516.3
|
|
|
573.5
|
|
Interest
expense
|
|
(89.6)
|
|
|
(111.8)
|
|
|
(360.1)
|
|
|
(402.5)
|
|
Other (expense)
income, net
|
|
(2.7)
|
|
|
5.0
|
|
|
(5.0)
|
|
|
4.8
|
|
Income (loss) from
continuing operations before income taxes
|
|
$
|
10.0
|
|
|
$
|
27.8
|
|
|
$
|
151.2
|
|
|
$
|
175.8
|
|
HRG GROUP, INC. AND
SUBSIDIARIES
OTHER SUPPLEMENTAL INFORMATION
(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 Quarter and Fiscal 2017, compared to net sales for the
Fiscal 2016 Quarter and Fiscal 2016, respectively (unaudited):
|
|
Fiscal
Quarter
|
|
Variance
|
|
Fiscal
|
|
Variance
|
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
Consumer
batteries
|
|
$
|
235.1
|
|
|
$
|
222.7
|
|
|
$
|
12.4
|
|
|
5.6
|
%
|
|
$
|
865.6
|
|
|
$
|
840.7
|
|
|
$
|
24.9
|
|
|
3.0
|
%
|
Small
appliances
|
|
171.6
|
|
|
176.7
|
|
|
(5.1)
|
|
|
(2.9)
|
%
|
|
626.9
|
|
|
656.0
|
|
|
(29.1)
|
|
|
(4.4)
|
%
|
Personal care
products
|
|
127.2
|
|
|
120.6
|
|
|
6.6
|
|
|
5.5
|
%
|
|
505.4
|
|
|
513.6
|
|
|
(8.2)
|
|
|
(1.6)
|
%
|
Global batteries &
appliances
|
|
533.9
|
|
|
520.0
|
|
|
13.9
|
|
|
2.7
|
%
|
|
1,997.9
|
|
|
2,010.3
|
|
|
(12.4)
|
|
|
(0.6)
|
%
|
Hardware and home
improvement products
|
|
348.9
|
|
|
328.1
|
|
|
20.8
|
|
|
6.3
|
%
|
|
1,276.1
|
|
|
1,241.0
|
|
|
35.1
|
|
|
2.8
|
%
|
Global pet
supplies
|
|
217.2
|
|
|
206.7
|
|
|
10.5
|
|
|
5.1
|
%
|
|
793.2
|
|
|
825.7
|
|
|
(32.5)
|
|
|
(3.9)
|
%
|
Home and garden
control products
|
|
119.1
|
|
|
94.3
|
|
|
24.8
|
|
|
26.3
|
%
|
|
493.3
|
|
|
509.0
|
|
|
(15.7)
|
|
|
(3.1)
|
%
|
Global auto
care
|
|
102.7
|
|
|
100.6
|
|
|
2.1
|
|
|
2.1
|
%
|
|
446.9
|
|
|
453.7
|
|
|
(6.8)
|
|
|
(1.5)
|
%
|
Total net sales to
external customers
|
|
$
|
1,321.8
|
|
|
$
|
1,249.7
|
|
|
$
|
72.1
|
|
|
5.8
|
%
|
|
$
|
5,007.4
|
|
|
$
|
5,039.7
|
|
|
$
|
(32.3)
|
|
|
(0.6)
|
%
|
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' management
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 rates 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
|
Consumer
batteries
|
|
$
|
235.1
|
|
|
$
|
(4.5)
|
|
|
$
|
230.6
|
|
|
$
|
—
|
|
|
$
|
230.6
|
|
|
$
|
222.7
|
|
|
$
|
7.9
|
|
|
3.5
|
%
|
Personal care
products
|
|
171.6
|
|
|
(1.1)
|
|
|
170.5
|
|
|
—
|
|
|
170.5
|
|
|
176.7
|
|
|
(6.2)
|
|
|
(3.5)
|
%
|
Hardware and home
improvement products
|
|
127.2
|
|
|
(2.0)
|
|
|
125.2
|
|
|
—
|
|
|
125.2
|
|
|
120.6
|
|
|
4.6
|
|
|
3.8
|
%
|
Global Batteries
& Appliances
|
|
533.9
|
|
|
(7.6)
|
|
|
526.3
|
|
|
—
|
|
|
526.3
|
|
|
520.0
|
|
|
6.3
|
|
|
1.2
|
%
|
Small
Appliances
|
|
348.9
|
|
|
(1.9)
|
|
|
347.0
|
|
|
—
|
|
|
347.0
|
|
|
328.1
|
|
|
18.9
|
|
|
5.8
|
%
|
Home and garden
control products
|
|
217.2
|
|
|
(2.3)
|
|
|
214.9
|
|
|
(20.9)
|
|
|
194.0
|
|
|
206.7
|
|
|
(12.7)
|
|
|
(6.1)
|
%
|
Global pet
supplies
|
|
119.1
|
|
|
—
|
|
|
119.1
|
|
|
—
|
|
|
119.1
|
|
|
94.3
|
|
|
24.8
|
|
|
26.3
|
%
|
Global Auto
care
|
|
102.7
|
|
|
(0.5)
|
|
|
102.2
|
|
|
—
|
|
|
102.2
|
|
|
100.6
|
|
|
1.6
|
|
|
1.6
|
%
|
Total
|
|
$
|
1,321.8
|
|
|
$
|
(12.3)
|
|
|
$
|
1,309.5
|
|
|
$
|
(20.9)
|
|
|
$
|
1,288.6
|
|
|
$
|
1,249.7
|
|
|
$
|
38.9
|
|
|
3.1
|
%
|
The tables below represent a reconciliation of reported net
sales to organic net sales, by product line for Fiscal 2017
compared to net sales for Fiscal 2016:
|
|
Net
Sales
|
|
Effect of Changes
in Currency
|
|
Net Sales
Excluding Effect of Changes in Currency
|
|
Effect of
Acquisitions
|
|
Organic Net
Sales
|
|
Net Sales
September 30, 2016
|
|
Variance
|
|
%
Variance
|
Consumer
batteries
|
|
$
|
865.6
|
|
|
$
|
4.5
|
|
|
$
|
870.1
|
|
|
$
|
—
|
|
|
$
|
870.1
|
|
|
$
|
840.7
|
|
|
$
|
29.4
|
|
|
3.5
|
%
|
Small
Appliances
|
|
626.9
|
|
|
13.5
|
|
|
640.4
|
|
|
—
|
|
|
640.4
|
|
|
656.0
|
|
|
(15.6)
|
|
|
(2.4)
|
%
|
Personal care
products
|
|
505.4
|
|
|
6.0
|
|
|
511.4
|
|
|
—
|
|
|
511.4
|
|
|
513.6
|
|
|
(2.2)
|
|
|
(0.4)
|
%
|
Global Batteries
& Appliances
|
|
1,997.9
|
|
|
24.0
|
|
|
2,021.9
|
|
|
—
|
|
|
2,021.9
|
|
|
2,010.3
|
|
|
11.6
|
|
|
0.6
|
%
|
Hardware and home
improvement products
|
|
1,276.1
|
|
|
(2.7)
|
|
|
1,273.4
|
|
|
—
|
|
|
1,273.4
|
|
|
1,241.0
|
|
|
32.4
|
|
|
2.6
|
%
|
Global pet
supplies
|
|
793.2
|
|
|
6.7
|
|
|
799.9
|
|
|
(28.1)
|
|
|
771.8
|
|
|
825.7
|
|
|
(53.9)
|
|
|
(6.5)
|
%
|
Home and garden
control products
|
|
493.3
|
|
|
—
|
|
|
493.3
|
|
|
—
|
|
|
493.3
|
|
|
509.0
|
|
|
(15.7)
|
|
|
(3.1)
|
%
|
Global Auto
care
|
|
446.9
|
|
|
0.3
|
|
|
447.2
|
|
|
—
|
|
|
447.2
|
|
|
453.7
|
|
|
(6.5)
|
|
|
(1.4)
|
%
|
Total
|
|
$
|
5,007.4
|
|
|
$
|
28.3
|
|
|
$
|
5,035.7
|
|
|
$
|
(28.1)
|
|
|
$
|
5,007.6
|
|
|
$
|
5,039.7
|
|
|
$
|
(32.1)
|
|
|
(0.6)
|
%
|
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 costs 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 cost, which consist of project costs associated with
restructuring initiatives; (4) non-cash asset impairments or
write-offs realized; (5) non-cash purchase accounting inventory
adjustments recognized in earnings subsequent to an acquisition;
(6) and other adjustments. During the Fiscal 2017 Quarter and
Fiscal 2017, other adjustments consisted of recognized 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,
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
|
Reconciliation to
reported net income:
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Reported net income -
Consumer Products segment
|
|
$
|
94.6
|
|
|
$
|
89.1
|
|
|
$
|
297.1
|
|
|
$
|
357.7
|
|
Interest
expense
|
|
52.3
|
|
|
74.2
|
|
|
211.1
|
|
|
250.0
|
|
Income tax
expense
|
|
(41.3)
|
|
|
(6.9)
|
|
|
47.5
|
|
|
40.0
|
|
Depreciation of
properties
|
|
31.3
|
|
|
22.9
|
|
|
103.5
|
|
|
89.1
|
|
Amortization of
intangibles
|
|
24.3
|
|
|
23.4
|
|
|
95.2
|
|
|
93.9
|
|
EBITDA - Consumer
Products segment
|
|
161.2
|
|
|
202.7
|
|
|
754.4
|
|
|
830.7
|
|
Stock-based
compensation
|
|
28.8
|
|
|
17.0
|
|
|
57.2
|
|
|
64.4
|
|
Acquisition and
integration related charges
|
|
5.9
|
|
|
5.5
|
|
|
20.9
|
|
|
36.7
|
|
Restructuring and
related charges
|
|
29.8
|
|
|
7.0
|
|
|
62.5
|
|
|
15.2
|
|
Product Safety
Recall
|
|
10.9
|
|
|
—
|
|
|
35.8
|
|
|
—
|
|
Write-off from
impairment of intangible assets
|
|
16.3
|
|
|
4.7
|
|
|
16.3
|
|
|
4.7
|
|
Purchase accounting
inventory adjustment
|
|
3.3
|
|
|
—
|
|
|
3.3
|
|
|
—
|
|
Inventory acquisition
step-up
|
|
(0.8)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Other
|
|
2.1
|
|
|
—
|
|
|
5.3
|
|
|
1.1
|
|
Adjusted EBITDA -
Consumer Products segment
|
|
$
|
257.5
|
|
|
$
|
236.9
|
|
|
$
|
955.7
|
|
|
$
|
952.8
|
|
View original
content:http://www.prnewswire.com/news-releases/hrg-group-inc-reports-fiscal-2017-fourth-quarter-results-300559694.html
SOURCE HRG Group, Inc.