Harbinger Group Inc.
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SEC Filings

10-Q
HRG GROUP, INC. filed this Form 10-Q on 02/05/2016
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Highlights for the Fiscal 2016 Quarter
Significant Transactions and Activity
On November 8, 2015, Anbang entered into the FGL Merger agreement. Pursuant to this agreement, Anbang, through its subsidiaries, will acquire all of the outstanding shares of FGL. Stockholders of FGL will receive $26.80 per share in cash at closing. At the date of the transaction, the Company owned 47 million shares, or 80.4% of FGL.
In the Fiscal 2016 Quarter, Compass completed the sale of its Holly, Waskom, and Danville assets (the “Compass Sold Assets”) to Indigo Resources LLC (the “Buyer”) for total cash consideration of $151.7 million, pursuant to the Purchase Agreement entered into with the Buyer as previously announced on October 9, 2015 (the “Compass Asset Sale”). Proceeds were primarily used to reduce Compass’ borrowings under its existing credit facility (the “Compass Credit Agreement”).
During the Fiscal 2016 Quarter, Compass reduced its borrowing under the Compass Credit Agreement from $327.0 million to $160.0 million, a reduction of $167.0 million.
During the Fiscal 2016 Quarter, our Energy segment recorded impairments to its oil and natural gas properties of $54.4 million based on the ceiling test limitation under the full cost method of accounting. The impairments were primarily due to the decline in oil and natural gas prices.
Key financial highlights
Basic and diluted net income from continuing operations attributable to common stockholders for the Fiscal 2016 Quarter was $0.06 per basic and diluted common share attributable to controlling interest, compared to basic and diluted net loss from continuing operations attributable to common stockholders of $0.63 per basic and diluted common share attributable to controlling interest in the Fiscal 2015 Quarter.
We ended the quarter with corporate cash and investments of approximately $295.4 million (primarily held at HRG and HGI Funding).
Our Consumer Products segment’s operating income for the Fiscal 2016 Quarter increased $26.9 million, or 23.3%, to $142.5 million from $115.6 million for the Fiscal 2015 Quarter. Our Consumer Products segment’s adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA - Consumer Products”) increased by $31.3 million, or 17.8%, to $207.1 million versus the Fiscal 2015 Quarter. The increase in operating income and Adjusted EBITDA - Consumer Products was primarily driven by higher profitability in the businesses acquired during the fiscal year 2015: Armored AutoGroup Parent Inc. (“AAG”); IAMS and Eukanuba brands (“European IAMS and Eukanuba”); and Salix Animal Health LLC (“Salix”). Adjusted EBITDA margin represented 17.0% of sales as compared to 16.5% in the Fiscal 2015 Quarter.
Our Insurance segment’s operating income decreased $5.6 million for the Fiscal 2016 Quarter compared to $5.6 million for the Fiscal 2015 Quarter. The decline in operating profit was primarily due to fair value movements mismatch between funds withheld receivables and the related insurance reserves.
Our Energy segment’s operating loss for the Fiscal 2016 Quarter was $64.5 million compared to $195.0 million in the Fiscal 2015 Quarter. The decrease in operating loss was primarily driven by lower ceiling test impairments recorded in the Fiscal 2016 Quarter, partially offset by decreased revenues as a result of lower oil and natural gas prices. The Energy segment’s adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA - Energy”) for the Fiscal 2016 Quarter was $6.3 million, a decrease of $6.6 million from the Fiscal 2015 Quarter. The decrease was primarily attributable to the decrease in average sales prices and volume during the Fiscal 2016 Quarter.
Our Asset Management segment recorded an operating loss of $9.1 million for the Fiscal 2016 Quarter compared to $1.2 million for the Fiscal 2015 Quarter. The increase in operating loss was mainly as a result of increases in impairments and bad debt expenses on loans classified as doubtful.
During the Fiscal 2016 Quarter, we received cash dividends of approximately $14.8 million from our subsidiaries, including $11.3 million, $3.1 million and $0.4 million from Spectrum Brands, FGL and CorAmerica, respectively, which does not give effect to the net impact from interest payments made by HRG on behalf of our Energy segment with respect to certain intercompany notes issued by HGI Energy.

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