Harbinger Group Inc.
    Print Page | Close Window

SEC Filings

10-Q
HRG GROUP, INC. filed this Form 10-Q on 02/05/2016
Entire Document
 << Previous Page | Next Page >>

The following table summarizes the impact of the effective portions of cash flow hedges and the gains and losses recognized in the Condensed Consolidated Statements of Operations for the three months ended December 31, 2015 and 2014:
 
 
 
 
Three months ended December 31,
 
 
 
 
2015
 
2014
 
 
Classification
 
Gain (Loss) in AOCI
 
Gain (Loss) reclassified to Earnings
 
Gain (Loss) in AOCI
 
Gain (Loss) reclassified to Earnings
Interest rate swaps
 
Interest expense
 
$
0.3

 
$
(0.5
)
 
$
(0.6
)
 
$
(0.5
)
Commodity swaps
 
Cost of consumer products and other goods sold
 
(1.0
)
 
(1.4
)
 
(1.2
)
 
0.4

Foreign exchange contracts
 
Net consumer and other product sales
 
(0.1
)
 
—

 
0.1

 
—

Foreign exchange contracts
 
Cost of consumer products and other goods sold
 
5.4

 
2.1

 
9.4

 
4.9

 
 
 
 
$
4.6

 
$
0.2

 
$
7.7

 
$
4.8

During the three months ended December 31, 2015 and 2014, the Company recognized the following gains and losses on its derivatives:
 
 
 
 
Three months ended December 31,
Classification
 
Derivatives Not Designated as Hedging Instruments
 
2015
 
2014
Revenues:
 
 
 
 
 
 
Net investment gains
 
Call options
 
$
1.9

 
$
2.7

Other income and expense:
 
 
 
 
 
 
Benefits and other changes in policy reserves
 
Embedded derivatives in Front Street's assumed FIA business
 
$
2.4

 
$
(6.2
)
Other income, net
 
Oil and natural gas commodity contracts
 
1.7

 
18.7

 
 
Foreign exchange contracts
 
(2.1
)
 
(1.7
)
Additional Disclosures
Call options. Derivative financial instruments included within or outside of the funds withheld receivables at fair value on the Condensed Consolidated Balance Sheets are in the form of call options receivable to Front Street. Front Street hedges exposure to product related equity market risk by entering into derivative transactions. These options hedge Front Street’s share of the FIA index credit. The change in fair value is recognized within “Net investment losses” in the accompanying Condensed Consolidated Statements of Operations.
Embedded derivatives in Front Street's assumed FIA business. Front Street has assumed FIA contracts that permit the holder to elect an interest rate return or an equity index linked component, where interest credited to the contracts is linked to the performance of various equity indices, primarily the Standard & Poor’s Ratings Services (“S&P”) 500 Index. This feature represents an embedded derivative under U.S. GAAP. The FIA embedded derivative is valued at fair value and included in the “Insurance reserves” in the accompanying Condensed Consolidated Balance Sheets with changes in fair value included as a component of “Benefits and other changes in policy reserves” in the accompanying Condensed Consolidated Statements of Operations.
Interest Rate Swaps. When it deems appropriate, Spectrum Brands has used interest rate swaps to manage its interest rate risk. The swaps are designated as cash flow hedges with the changes in fair value recorded in Accumulated other comprehensive loss (“AOCI”) and as a derivative hedge asset or liability, as applicable. The swaps settle periodically in arrears with the related amounts for the current settlement period payable to, or receivable from, the counterparties included in accrued liabilities or receivables, respectively, and recognized in earnings as an adjustment to interest from the underlying debt to which the swap is designated. As of December 31, 2015 and September 30, 2015, Spectrum Brands had a series of U.S. dollar denominated interest rate swaps outstanding which effectively fix the interest on floating rate debt, exclusive of lender spreads, at 1.36% for a notional principal amount of $300.0 through April 2017. The derivative net losses estimated to be reclassified from AOCI into earnings over the next 12 months is $0.7, net of tax.
Foreign exchange contracts. Spectrum Brands periodically enters into forward foreign exchange contracts to hedge the risk from forecasted foreign currency denominated third party and intercompany sales or payments. These obligations generally require Spectrum Brands to exchange foreign currencies for U.S. Dollars, Euros, Pounds Sterling, Australian Dollars, Brazilian Reals, Mexican Pesos, Canadian Dollars or Japanese Yen. These foreign exchange contracts are cash flow hedges of fluctuating foreign exchange rates related to sales of product or raw material purchases. Until the sale or purchase is recognized, the fair value of the related cash flow hedge is recorded in AOCI and as a derivative hedge asset or liability, as applicable. At the time the sale or purchase is recognized, the fair value of the related cash flow hedge is reclassified as an adjustment to “Net consumer and other

16
 << Previous Page | Next Page >>