HRG Group, Inc. Reports First Quarter Results
- Consumer Products, which consists of
Spectrum Brands Holdings, Inc. ("Spectrum Brands ";NYSE : SPB) and its subsidiaries; and
- Insurance, which consists of
Front Street Re (Delaware) Ltd. and its subsidiaries ("Front Street").
"In the first quarter of Fiscal 2017, HRG reported very strong results, highlighted by solid operating income growth at HRG overall driven by another strong performance from the Consumer Products segment, which maintained its momentum from fiscal 2016 and is well positioned for another great year in fiscal 2017. Subsequent to the quarter-end,
"With respect to the pending merger between
First Quarter Fiscal 2017 Consolidated Highlights:
- HRG recorded total revenues of
$1.19 billion for the Fiscal 2017 Quarter, a decrease of$19.8 million , or 1.6%, as compared to the$1.21 billion recorded in the first quarter of fiscal 2016 (the "Fiscal 2016 Quarter"). The decrease was primarily due to lower net sales from our Consumer Products segment mainly as a result of the effect of foreign exchange rates; lower revenues generated bySalus Capital Partners, LLC ("Salus") as a result of the continued run-off of the asset-backed loan portfolio; and a decrease in fair value of the funds withheld receivables with third parties in the Insurance segment due to higher interest rates and wider credit spreads.
- Consolidated operating income of
$117.7 million in the Fiscal 2017 Quarter increased$17.9 million as compared to$99.8 million reported in the Fiscal 2016 Quarter. The increase was primarily due to increased profitability in our Consumer Products segment and lower impairments and loan loss provision expense in our Corporate and Other segment.
- Results reflect a
$3.5 million decrease in interest expense relative to the Fiscal 2016 Quarter, which was primarily due to the effect of refinancing activities atSpectrum Brands .
- HRG recorded a tax expense of
$25.4 million , or a 92.7% effective tax rate, in the Fiscal 2017 Quarter compared to a$5.6 million tax benefit, or a (143.6)% effective tax rate, in the Fiscal 2016 Quarter. The increase in tax expense in the Fiscal 2017 Quarter was principally due to higher taxes in our Consumer Products segment, which benefited from the valuation allowance release in the Fiscal 2016 Quarter, coupled with the recognition on tax benefits of a portion of current year losses recognized in our Corporate and Other segment in the Fiscal 2016 Quarter.
- Net loss from continuing operations attributable to common stockholders was
$25.5 million , or$0.13 per common share attributable to controlling interest during the Fiscal 2017 Quarter, as compared to a net loss from continuing operations attributable to common stockholders of$21.8 million , or$0.11 per common share attributable to controlling interest during the Fiscal 2016 Quarter. The increase in loss was primarily due to higher effective income tax rate during the Fiscal 2017 Quarter, partially offset by increased operating income.
- In the Fiscal 2017 Quarter, HRG received dividends of
$16.1 million from its subsidiaries, comprised of$13.0 million from Spectrum Brand and$3.1 million fromFidelity & Guaranty Life ("FGL";NYSE : FGL), which is reported as discontinued operations.
Important Notes Regarding the Presentation of our Results:
On
The operations of Salus,
Income from discontinued operations, net of tax for the Fiscal 2017 Quarter was
The
Please also see "Certain Other Items" below.
Detail on First Quarter Segment Results:
Consumer Products:
Note: Organic net sales, as described below, is a non-
Consumer Products reported consolidated net sales of
Gross profit, representing net Consumer Products sales minus Consumer Products cost of goods sold, increased
Operating income increased
Our Consumer Products segment's adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA - Consumer Products") increased by
After the close of the Fiscal 2017 Quarter, on
Also on
Insurance:
For the Fiscal 2017 Quarter, the Insurance segment revenues decreased
The operating loss of
Certain Other Items:
HRG Strategic Review Process
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 does not intend to provide any further updates until such time as it determines in its sole discretion, as required by law and/or it has entered into definitive documentation with respect to any strategic transaction. There can be no assurance that this process will result in a transaction, or if a transaction is undertaken, as to its terms or timing. In light of the strategic review process, HRG has elected to discontinue hosting quarterly conference calls.
FGL and
On
Corporate Financing Activity
On
Additional Information:
For more information on HRG's Consumer Products segment, including information in addition to that included in our reports and public announcements, interested parties should read
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
About
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 Company's review of strategic alternatives and FGL's merger with Anbang, and any expected or anticipated benefits from the Company's strategic review process and/or FGL's merger with Anbang. 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. 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 FGL's merger with
Non-GAAP Measurements
Management believes that certain non-
Adjusted EBITDA — Consumer Products
Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA - Consumer Products") is a non-GAAP financial measure used by
EBITDA is calculated by excluding income tax expense, interest expense, depreciation expense and amortization expense (from intangible assets) from our Consumer Products segment's 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; and (4) other adjustments. During the Fiscal 2017 Quarter, other adjustments consisted of costs associated with the exiting of a key executive, coupled with onboarding a key executive at Spectrum Brands.
Organic
Our Consumer Products segment results contain financial information regarding organic net sales, which is defined as net sales excluding the effect of changes in foreign currency exchange rates and/or impact from acquisitions (when applicable). We believe this non-GAAP measure provides useful information to investors because it reflects regional and operating performance from our Consumer Products segment's activities without the effect of changes in currency exchange rate and/or acquisitions. The Consumer Products segment 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 period. 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.
While management believes that non-GAAP measurements are useful supplemental information, such adjusted results are not intended to replace the Company's GAAP financial results or the GAAP financial results of our Consumer Products segment. EBITDA and Adjusted EBITDA are measures that are not prescribed by
For further information contact:
Investor Relations
Tel: 212.906.8555
Email: [email protected]
(Tables Follow)
CONDENSED CONSOLIDATED BALANCE SHEETS (In millions) |
|||||||
|
|
||||||
(Unaudited) |
|||||||
ASSETS |
|||||||
Cash and cash equivalents |
$ |
348.8 |
$ |
497.3 |
|||
Funds withheld receivables |
1,609.0 |
1,650.4 |
|||||
Receivables, net |
556.5 |
556.3 |
|||||
Inventories, net |
779.7 |
740.6 |
|||||
Deferred tax assets |
48.4 |
42.6 |
|||||
Property, plant and equipment, net |
569.1 |
543.4 |
|||||
|
2,464.5 |
2,478.4 |
|||||
Intangibles, net |
2,327.9 |
2,372.5 |
|||||
Other assets |
157.2 |
172.6 |
|||||
Assets of business held for sale |
26,801.6 |
26,738.7 |
|||||
Total assets |
$ |
35,662.7 |
$ |
35,792.8 |
|||
LIABILITIES AND EQUITY |
|||||||
Insurance reserves |
$ |
1,721.9 |
$ |
1,751.3 |
|||
Debt |
5,459.0 |
5,430.9 |
|||||
Accounts payable and other current liabilities |
900.4 |
989.8 |
|||||
Employee benefit obligations |
111.7 |
125.4 |
|||||
Deferred tax liabilities |
573.1 |
546.0 |
|||||
Other liabilities |
26.7 |
32.0 |
|||||
Liabilities of business held for sale |
25,200.5 |
25,100.2 |
|||||
Total liabilities |
33,993.3 |
33,975.6 |
|||||
Commitments and contingencies |
|||||||
HRG Group, Inc. shareholders' equity: |
|||||||
Common stock |
2.0 |
2.0 |
|||||
Additional paid-in capital |
1,388.0 |
1,447.1 |
|||||
Accumulated deficit |
(819.7) |
(1,031.9) |
|||||
Accumulated other comprehensive (loss) income |
(22.2) |
220.9 |
|||||
|
548.1 |
638.1 |
|||||
Noncontrolling interest |
1,121.3 |
1,179.1 |
|||||
Total shareholders' equity |
1,669.4 |
1,817.2 |
|||||
Total liabilities and equity |
$ |
35,662.7 |
$ |
35,792.8 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share data) |
||||||||
Three months ended |
||||||||
2016 |
2015 |
|||||||
(Unaudited) |
||||||||
Revenues: |
||||||||
Net consumer and other product sales |
$ |
1,211.8 |
$ |
1,218.8 |
||||
Net investment income |
10.7 |
20.3 |
||||||
Net investment losses |
(33.8) |
(32.0) |
||||||
Insurance and investment product fees and other |
0.9 |
2.3 |
||||||
Total revenues |
1,189.6 |
1,209.4 |
||||||
Operating costs and expenses: |
||||||||
Cost of consumer products and other goods sold |
761.8 |
778.1 |
||||||
Benefits and other changes in policy reserves |
(11.6) |
0.8 |
||||||
Selling, acquisition, operating and general expenses |
321.7 |
330.7 |
||||||
Total operating costs and expenses |
1,071.9 |
1,109.6 |
||||||
Operating income |
117.7 |
99.8 |
||||||
Interest expense |
(91.7) |
(95.2) |
||||||
Other income (expense), net |
1.4 |
(0.7) |
||||||
Income from continuing operations before income taxes |
27.4 |
3.9 |
||||||
Income tax expense (benefit) |
25.4 |
(5.6) |
||||||
Net income from continuing operations |
2.0 |
9.5 |
||||||
Income (loss) from discontinued operations, net of tax |
258.8 |
(2.5) |
||||||
Net income |
260.8 |
7.0 |
||||||
Less: Net income attributable to noncontrolling interest |
48.6 |
40.9 |
||||||
Net income (loss) attributable to controlling interest |
$ |
212.2 |
$ |
(33.9) |
||||
Amounts attributable to controlling interest: |
||||||||
Net loss from continuing operations |
$ |
(25.5) |
$ |
(21.8) |
||||
Net income (loss) from discontinued operations |
237.7 |
(12.1) |
||||||
Net income (loss) attributable to controlling interest |
$ |
212.2 |
$ |
(33.9) |
||||
Net income (loss) per common share attributable to controlling interest: |
||||||||
Basic loss from continuing operations |
$ |
(0.13) |
$ |
(0.11) |
||||
Basic income (loss) from discontinued operations |
1.19 |
(0.06) |
||||||
Basic |
$ |
1.06 |
$ |
(0.17) |
||||
Diluted loss from continuing operations |
$ |
(0.13) |
$ |
(0.11) |
||||
Diluted income (loss) from discontinued operations |
1.19 |
(0.06) |
||||||
Diluted |
$ |
1.06 |
$ |
(0.17) |
RESULTS OF OPERATIONS BY SEGMENT (In millions) |
||||||||
|
||||||||
2017 |
2016 |
|||||||
(Unaudited) |
||||||||
Revenues: |
||||||||
Consumer Products |
$ |
1,211.8 |
$ |
1,218.8 |
||||
Insurance |
(28.7) |
(10.0) |
||||||
Intersegment adjustments and eliminations |
6.2 |
(5.4) |
||||||
Consolidated segment revenues |
1,189.3 |
1,203.4 |
||||||
Corporate and Other |
0.3 |
6.0 |
||||||
Total revenues |
$ |
1,189.6 |
$ |
1,209.4 |
||||
Operating income: |
||||||||
Consumer Products |
$ |
151.0 |
$ |
142.5 |
||||
Insurance |
(15.4) |
— |
||||||
Intersegment elimination |
2.3 |
(19.0) |
||||||
Total segment operating income |
137.9 |
123.5 |
||||||
Corporate and Other |
(20.2) |
(23.7) |
||||||
Consolidated operating income |
117.7 |
99.8 |
||||||
Interest expense |
(91.7) |
(95.2) |
||||||
Other income (expense), net |
1.4 |
(0.7) |
||||||
Income from continuing operations before income taxes |
$ |
27.4 |
$ |
3.9 |
|
||||||||
Adjusted EBITDA — Consumer Products |
||||||||
The table below shows the adjustments made to the reported net income of the Consumer Products segment to calculate its Adjusted EBITDA (unaudited): |
||||||||
|
||||||||
Reconciliation to reported net income: |
2017 |
2016 |
||||||
Reported net income - Consumer Products segment |
$ |
65.2 |
$ |
73.7 |
||||
Interest expense |
55.8 |
58.4 |
||||||
Income tax expense |
31.1 |
6.9 |
||||||
Depreciation of properties |
22.4 |
23.0 |
||||||
Amortization of intangibles |
23.6 |
23.6 |
||||||
EBITDA - Consumer Products segment |
198.1 |
185.6 |
||||||
Stock-based compensation |
8.8 |
10.1 |
||||||
Acquisition and integration related charges |
4.1 |
9.9 |
||||||
Restructuring and related charges |
3.2 |
1.2 |
||||||
Other |
— |
0.3 |
||||||
Adjusted EBITDA - Consumer Products segment |
$ |
214.2 |
$ |
207.1 |
Organic |
|||||||||||||||||||||||
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): |
|||||||||||||||||||||||
|
Effect of |
Organic Net |
|
$ Variance |
% Variance |
||||||||||||||||||
Hardware and home improvement products |
$ |
288.8 |
$ |
0.2 |
$ |
289.0 |
$ |
282.7 |
$ |
6.3 |
2.2 |
% |
|||||||||||
Consumer batteries |
260.5 |
4.5 |
265.0 |
252.6 |
12.4 |
4.9 |
% |
||||||||||||||||
Global pet supplies |
194.2 |
2.8 |
197.0 |
203.4 |
(6.4) |
(3.1)% |
|||||||||||||||||
Small appliances |
186.4 |
7.5 |
193.9 |
189.9 |
4.0 |
2.1 |
% |
||||||||||||||||
Personal care products |
162.6 |
3.7 |
166.3 |
168.8 |
(2.5) |
(1.5)% |
|||||||||||||||||
Global auto care |
69.5 |
0.1 |
69.6 |
73.7 |
(4.1) |
(5.6)% |
|||||||||||||||||
Home and garden control products |
49.8 |
— |
49.8 |
47.7 |
2.1 |
4.4 |
% |
||||||||||||||||
Total |
$ |
1,211.8 |
$ |
18.8 |
$ |
1,230.6 |
$ |
1,218.8 |
$ |
11.8 |
1.0 |
% |
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/hrg-group-inc-reports-first-quarter-results-300403689.html
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