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8-K
HRG GROUP, INC. filed this Form 8-K on 05/09/2016
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8-K




 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 8-K

 
CURRENT REPORT

Pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): May 9, 2016

HRG GROUP, INC.
(Exact name of registrant as specified in its charter)


 
 
 
 
 
 
Delaware
 
1-4219
 
74-1339132
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
 
 
450 Park Avenue, 29th Floor,
New York, New York
 
10022
(Address of principal executive offices)
 
(Zip Code)
 
Registrant's telephone number, including area code: (212) 906-8555
Former name or former address, if changed since last report.



Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
     
q
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
q
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
q
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
q
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))






 
Item 2.02.
Results of Operations and Financial Condition.
 
The following information, including the Exhibits referenced in this Item 2.02, to the extent the Exhibits discusses financial results of HRG Group, Inc. (the “Company”), are being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
 
On May 9, 2016, the Company issued a press release (the “Press Release”) discussing, among other things, its financial results for its quarterly period ended March 31, 2016. A copy of the Press Release is furnished as Exhibit 99.1 to this Report.

As previously announced, the Company will host a conference call on May 9, 2016 to discuss its financial results for its quarterly period ended March 31, 2016. A copy of the presentation (the "Company Presentation") to be used during the conference call is attached hereto as Exhibit 99.2 to this Report.

 
Item 9.01
Financial Statements and Exhibits.
 
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Exhibits
 
 
 
 
 
Exhibit
No.
  
 
Description
 
 
99.1
 
Press Release
99.2
 
Company Presentation
 





 

 
 

SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
HRG GROUP, INC.
 
 
 
 
 
 
/s/ George C. Nicholson
 
 
Name:  George C. Nicholson
 
 
Title:    Senior Vice President, Chief Accounting Officer and Acting Chief Financial Officer
 
 
 
 
Dated: May 9, 2016


Exhibit


HRG Group, Inc. Reports Second Quarter Results Achieves Consolidated Revenue Growth of 11.0% Over the Second Quarter of 2015
NEW YORK - May 9, 2016 -- 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 second quarter of Fiscal 2016 ended on March 31, 2016 (the “Fiscal 2016 Quarter”). The results include HRG's four segments:
Consumer Products, which consists of Spectrum Brands Holdings, Inc. and its subsidiaries (“Spectrum Brands”; NYSE: SPB);
Insurance, which consists of Front Street Re (Delaware) Ltd. and its subsidiaries (“Front Street”);
Energy, which consists of Compass Production Partners, LP and its subsidiaries (“Compass”); and
Asset Management, which consists of Salus Capital Partners, LLC (“Salus”), Energy & Infrastructure Capital, LLC (“EIC”) and CorAmerica Capital, LLC (“CorAmerica”).

“We are pleased to report another solid quarter at HRG, highlighted by strong growth on our topline as well as a substantial increase in consolidated operating income, which has increased in the first half of the year by more than half a billion dollars as compared to the first half of Fiscal 2015,” said Omar Asali, President and Chief Executive Officer of HRG.

“Spectrum Brands delivered yet another excellent quarter, achieving organic sales growth of 4.9% and higher Adjusted EBITDA, on a currency-consistent basis, from each of its major product categories, and we continue to anticipate record levels of annual revenue, Adjusted EBITDA and free cash flow from Spectrum in Fiscal 2016,” continued Asali. "In the Energy segment, we continue to maintain a focus on the leverage and liquidity profile at Compass, while in Asset Management, we have achieved a significant reduction in that segment's general and administrative costs as the wind down of Salus moves closer to completion.

“Elsewhere this quarter, FGL moved closer to completing its transaction with Anbang and received clearance from the Committee on Foreign Investment in the United States. FGL continues to make progress securing the remaining regulatory approvals and we expect FGL to close this transaction in the third quarter of calendar year 2016. We remain committed to using a portion of the proceeds from the FGL transaction to meaningfully delever at HRG Group and will consider other strategies that maximize shareholder value. We will outline a more specific plan for how we will use the proceeds after the close.”

Important Note Regarding the Presentation of our Insurance Segment:
Fidelity & Guaranty Life (“FGL”; NYSE: FGL) has reached a definitive merger agreement under which Anbang Insurance Group Co., Ltd. and certain of its subsidiaries will acquire FGL for $26.80 per share in cash. The Company owns 47 million shares in FGL, representing an approximately 80.4% interest as of March 31, 2016. As a result of this agreement, the Company's investment in FGL has been classified as held for sale on the balance sheet and FGL's operations have been classified as discontinued operations. Results for all periods have been reclassified accordingly. FGL's results were previously reflected in the Insurance segment; however, all segment information has been adjusted to exclude FGL's results from this segment. Accordingly, the commentary for the Insurance segment in this release no longer reflects the performance of FGL in either the current or prior year quarters.

Second Quarter Fiscal 2016 Consolidated Highlights:

HRG recorded total revenues of $1.3 billion for the Fiscal 2016 Quarter, an increase of $125.7 million, or 11.0%, as compared to the $1.1 billion recorded in the second quarter of fiscal 2015 (the "Fiscal 2015 Quarter"), as higher Consumer Products revenues, driven primarily by acquisitions completed within the past year and organic revenue growth, more than offset the impact of unfavorable foreign exchange and lower Energy revenues resulting primarily from declines in commodity prices.

1



Consolidated operating income of $115.8 million in the Fiscal 2016 Quarter increased $292.9 million as compared to the $177.1 million of operating loss reported in the Fiscal 2015 Quarter. The increase was due primarily to a lesser amount of impairments and bad debt expense in the current quarter, as described further in the Additional Items section. Excluding the impact of impairments and bad debt expense, operating income of $143.4 million in the Fiscal 2016 Quarter increased $105.9 million, due to the impact of the higher revenues as well as lower selling, acquisition, operating and general expenses.
Results reflect a $14.7 million increase in interest expense relative to the Fiscal 2015 Quarter associated with higher overall debt levels, due primarily to financing activities completed in connection with accretive acquisitions.
HRG incurred a tax expense of $8.9 million in the Fiscal 2016 Quarter and a 43.4% effective tax rate as compared to a $0.8 million tax benefit in the Fiscal 2015 Quarter and a 0.3% effective tax rate. The increase in tax expense in the current quarter was principally due to an increase in pre-tax income at Consumer Products and Insurance, partially offset by a decrease in Consumer Products' effective tax rate as a result of realization of tax benefits that were previously covered by a valuation allowance. In addition, HRG recognized partial tax benefits expected to be realized as a result of the expected gain from the sale of FGL.
Net loss from continuing operations attributable to common stockholders of $19.9 million, or $0.10 per common share attributable to controlling interest during the Fiscal 2016 Quarter, as compared to a net loss from continuing operations attributable to common stockholders of $236.9 million, or $1.20 per common share attributable to controlling interest during the Fiscal 2015 Quarter. The reduction in loss was due primarily to the higher operating income.
For the six months ended March 31, 2016 (the "Fiscal 2016 Six Months"), HRG had corporate cash and investments of approximately $237.4 million (primarily held at HRG and HGI Funding LLC), a decrease of $58.0 million from the comparable balance of $295.4 million held as of December 31, 2015 due primarily to the payment of semi-annual interest made during the quarter on the Company's notes.
In the Fiscal 2016 Six Months, HRG received dividends of $30.9 million from its subsidiaries, comprised of $24.3 million and $0.4 million from the Consumer Products and Asset Management segments, respectively, as well as $6.2 million from FGL.

Additional Items:
Non-Cash Impairments and Bad Debt Expense
Energy
Pursuant to SEC reporting requirements, Compass performed a ceiling test at the end of the quarter utilizing simple average first day of the month 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 $21.2 million to its proved oil and natural gas properties during the quarter, due primarily to the ongoing decline in oil and natural gas prices. This impairment is reflected in the operating income of the Energy segment for the Fiscal 2016 Quarter, and, if oil and gas prices do not increase, additional, non-cash impairments to Compass' properties may be required in Fiscal 2016. In the Fiscal 2015 Quarter, Compass recorded $146.6 million of impairments.
Asset Management
During the Fiscal 2016 Quarter, $6.7 million of impairments and bad-debt expense were recorded. As of March 31, 2016, Salus' portfolio of asset-based loans receivable, net of allowance for credit losses, was $136.8 million, a decline of $89.9 million from the comparable balance as of September 30, 2015, as Salus continues to execute the orderly wind down of its operations.
Discontinued Operations
During the Fiscal 2016 Quarter, the Company recorded a $13.1 million loss from discontinued operations, reflecting $10.4 million of a gain on FGL's operations in the quarter, offset by a $23.5 million reduction in the carrying value of FGL to fair value.

2



Detail on Second Quarter 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 $1,209.6 million for the Fiscal 2016 Quarter, an increase of $142.6 million, or 13.4%, as compared to the $1,067.0 million reported in the Fiscal 2015 Quarter. The increase was due primarily to the impact of newly acquired businesses, primarily in global auto care, and organic growth in certain product categories, including record second quarter hardware and home improvement results. These increases more than offset the negative impact of $32.1 million from unfavorable foreign exchange. Excluding the net impact of foreign exchange, sales increased $174.7 million, or 16.4%, as compared to the Fiscal 2015 Quarter, with higher currency-consistent sales in all product categories as compared to Fiscal 2015 except small appliances, which declined due to competitor discounting, softer North American category performance and the exit of unprofitable business. Excluding the impacts of both foreign exchange and $122.8 million in revenue from businesses acquired in Fiscal 2015, Consumer Products revenue increased $51.9 million, or 4.9%, on an organic basis over the Fiscal 2015 Quarter.
Gross profit, representing net Consumer Products sales minus Consumer Products cost of goods sold, increased $88.1 million, or 23.5%, to $462.8 million in the Fiscal 2016 Quarter. The increase was driven by the same factors that affected revenue. Gross profit margin, representing gross profit as a percentage of Consumer Products net sales, was 38.3% in the Fiscal 2016 Quarter, an increase of 320 basis points over the Fiscal 2015 Quarter, due, in part, to a shift toward higher margin products and the impact of cost improvement initiatives.
Operating income increased $60.1 million, or 68%, to $148.5 million in the Fiscal 2016 Quarter, as compared to $88.4 million in the Fiscal 2015 Quarter, due primarily to higher profitability in acquired businesses.
Consumer Products adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA-Consumer Products”) was $229.6 million for the Fiscal 2016 Quarter, as compared to $159.1 million for the Fiscal 2015 Quarter, an increase of $70.5 million, or 44.3%. Excluding the negative impact of $17.7 million in unfavorable foreign exchange in the current quarter, as well as acquisition-related EBITDA of $49.1 million, Adjusted EBITDA-Consumer Products increased 24.6%, or $39.2 million, to $198.2 million, with increases in all of the segment's product categories.
After the close of the Fiscal 2016 Quarter, on April 26, 2016, Spectrum Brands announced that its Board of Directors declared a quarterly dividend of $0.38 per share on Spectrum Brands’ common stock. This is a 15.2% increase in the quarterly dividend declared as compared to the $0.33 quarterly dividend paid per share in connection with the comparable period in Fiscal 2015. Over the past three years, the quarterly dividend Spectrum Brands has paid to its common stockholders has increased 52%.
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:
Insurance segment revenues of $39.6 million in the Fiscal 2016 Quarter increased $78.5 million from a $38.9 million loss recorded in the Fiscal 2015 Quarter. The increase was due primarily to the absence in 2016 of realized losses and impairments which negatively affected the 2015 results, as well as an increase in the fair value of the underlying securities included in the funds withheld receivable. This increase in fair value was driven by decreasing risk-free interest rates and tightening credit spreads during the quarter, which resulted in higher valuations of the fixed maturity securities in Front Street's funds withheld receivable.
The operating loss of $1.8 million for the Fiscal 2016 Quarter reflected an improvement of $54.5 million from the operating loss of $56.3 million reported for the Fiscal 2015 Quarter. The improvement was due primarily to the same factors affecting revenue. In addition, selling, acquisition, operating and general expenses were reduced substantially as compared to the prior year.

3



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, gain on sale of oil and gas properties, 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 in the tables accompanying this release.

Oil and natural gas revenues of $9.5 million for the Fiscal 2016 Quarter reflected a decrease of $16.5 million, or 63.5%, from the $26.0 million of revenues reported in the Fiscal 2015 Quarter. The decline 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 36% and 31%, respectively, in Fiscal 2016 as compared to Fiscal 2015 Quarter. Revenue was further affected by natural declines in production as well as the disposition of the Holly, Waskom and Danville assets as of December 1, 2015.
Operating loss for the Fiscal 2016 Quarter was $26.7 million, an improvement of $134.6 million from the operating loss of $161.3 million recorded in the Fiscal 2015 Quarter. The improvement was due primarily to a lesser amount of ceiling test impairment in the current quarter as discussed in the "Additional Items" section. Excluding impairments, the operating loss of $5.5 million in the Fiscal 2016 Quarter compared to an operating loss of $14.7 million in the Fiscal 2015 Quarter, with the improvement due primarily to a 67% reduction in selling, acquisition, operating and general expenses.
Energy segment adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA-Energy") was a loss of $0.6 million for the Fiscal 2016 Quarter, a decrease of $6.1 million from the $5.5 million of income recorded in the Fiscal 2015 Quarter due primarily to the impact of the lower pricing.
For the Fiscal 2016 Quarter, the Energy segment's production was 73 Mbbl of oil, 94 Mbbl of natural gas liquids and 3,420 Mmcf of natural gas. In the Fiscal 2016 Quarter, average daily production at Compass was 49 Mmcfe as compared to 90 Mmcfe in the Fiscal 2015 Quarter, with the decrease due primarily to the disposition of the Holly, Waskom and Danville assets as of December 1, 2015, as well as the impact of natural production declines.
Asset Management:
The Asset Management segment reported revenues of $1.6 million for the Fiscal 2016 Quarter, a decrease of $3.5 million, or 68.6%, from the $5.1 million reported in the Fiscal 2015 Quarter. The decrease was due primarily to a lower amount of interest income generated at Salus, which is in the process of winding down its operations and maximizing the recovery of capital from its existing loan portfolio. As of March 31, 2016, Salus, together with its affiliated co-lender Front Street Re, had $136.8 million of loans outstanding, net of allowance for credit losses of $47.8 million. This compares to $226.7 million of loans outstanding, net of allowance for credit losses of $47.9 million, as of September 30, 2015.
The Asset Management segment reported an operating loss of $9.2 million for the Fiscal 2016 Quarter, an improvement of $58.1 million as compared to the operating loss of $67.3 million reported in the Fiscal 2015 Quarter. The reduction in the operating loss was due primarily to a lower amount of impairments and bad debt expense in the current period, as described in the Additional Items section. Excluding the impact of impairments and bad debt expense from both periods, operating loss of $2.5 million in the Fiscal 2016 Quarter improved $1.8 million from for the Fiscal 2015 Quarter, due primarily to a reduction in operating expenses at Salus.
Conference Call
HRG Group, Inc. will host a live conference call to discuss its results on Monday, May 9, 2016 at 10:00 a.m. Eastern Daylight 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 79310346. 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 May 12, 2016 by dialing 1.855.859.2056 (U.S. callers) or 1.404.537.3406 (international callers), ID number 79310346. A replay will also be available on the Company's website.

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About HRG Group, Inc.
HRG 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 merger between FGL and Anbang, the Company's use of proceeds from the FGL merger, 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's 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 and subsequent Quarterly Reports on Form 10-Q, 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.
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. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) represent net income adjusted to exclude interest expense, income taxes and depreciation,

5



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.
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
 
 

Source: HRG Group, Inc.
(Tables Follow)




6



HRG GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
 
March 31,
2016
 
September 30,
2015
 
(Unaudited)
 
(As Adjusted)
ASSETS
 
 
 
Investments
$
139.3

 
$
278.9

Cash and cash equivalents
465.6

 
695.2

Funds withheld receivables
1,679.4

 
1,710.1

Receivables, net
662.3

 
632.9

Inventories, net
924.4

 
780.8

Deferred tax assets
299.8

 
51.2

Properties, including oil and natural gas properties, net
664.7

 
798.4

Goodwill
2,494.1

 
2,487.4

Intangibles
2,432.4

 
2,480.3

Other assets
149.1

 
134.3

Assets of business held for sale
25,544.0

 
24,984.5

Total assets
$
35,455.1

 
$
35,034.0

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Insurance reserves
$
1,824.8

 
$
1,856.0

Debt
6,232.0

 
6,310.5

Accounts payable and other current liabilities
847.5

 
1,095.6

Employee benefit obligations
87.6

 
92.9

Deferred tax liabilities
895.6

 
574.5

Other liabilities
71.6

 
95.5

Liabilities of business held for sale
23,988.1

 
23,420.9

Total liabilities
33,947.2

 
33,445.9

 
 
 
 
 Commitments and contingencies
 
 
 
 
 
 
 
 HRG Group, Inc. shareholders' equity:
 
 
 
Common stock
2.0

 
2.0

Additional paid-in capital
1,437.7

 
1,458.5

Accumulated deficit
(901.8
)
 
(833.1
)
Accumulated other comprehensive loss
(72.8
)
 
(40.7
)
Total HRG Group, Inc. shareholders' equity
465.1

 
586.7

 Noncontrolling interest
1,042.8

 
1,001.4

Total shareholders' equity
1,507.9

 
1,588.1

Total liabilities and equity
$
35,455.1

 
$
35,034.0




7



HRG GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
 
Three months ended March 31,
 
Six months ended March 31,
 
2016
 
2015
 
2016
 
2015
 
(Unaudited)
 
(Unaudited)
Revenues:
 
 
 
 
 
 
 
Net consumer and other product sales
$
1,209.6

 
$
1,086.5

 
$
2,428.4

 
$
2,175.3

Oil and natural gas
9.5

 
26.0

 
26.3

 
60.3

Net investment income
15.5

 
19.5

 
37.0

 
43.9

Net investment gains
33.1

 
9.7

 
7.2

 
4.8

Insurance and investment product fees and other
1.8

 
2.1

 
4.1

 
3.2

Total revenues
1,269.5

 
1,143.8

 
2,503.0

 
2,287.5

Operating costs and expenses:
 
 
 
 
 
 
 
Cost of consumer products and other goods sold
746.8

 
707.0

 
1,524.9

 
1,419.0

Oil and natural gas direct operating costs
9.2

 
23.3

 
26.3

 
43.8

Benefits and other changes in policy reserves
35.7

 
30.6

 
43.8

 
50.3

Selling, acquisition, operating and general expenses
311.0

 
324.2

 
619.1

 
660.4

Impairments and bad debt expense
27.6

 
214.6

 
90.8

 
464.4

Amortization of intangibles
23.4

 
21.2

 
47.0

 
41.7

Total operating costs and expenses
1,153.7

 
1,320.9

 
2,351.9

 
2,679.6

Operating income (loss)
115.8

 
(177.1
)
 
151.1

 
(392.1
)
Interest expense
(95.8
)
 
(81.1
)
 
(193.3
)
 
(157.5
)
Gain on sale of oil and gas properties
 
 
 
 
105.6

 

Gain upon gaining control of equity method investment

 

 

 
141.2

Other income, net
0.5

 
14.1

 
1.6

 
46.9

Income (loss) from continuing operations before income taxes
20.5

 
(244.1
)
 
65.0

 
(361.5
)
Income tax expense (benefit)
8.9

 
(0.8
)
 
10.8

 
5.2

Net income (loss) from continuing operations
11.6

 
(243.3
)
 
54.2

 
(366.7
)
(Loss) income from discontinued operations, net of tax
(13.1
)
 
5.8

 
(48.7
)
 
22.8

Net (loss) income
(1.5
)
 
(237.5
)
 
5.5

 
(343.9
)
Less: Net income (loss) attributable to noncontrolling interest
33.3

 
(9.2
)
 
74.2

 
(5.8
)
Net loss attributable to controlling interest
$
(34.8
)
 
$
(228.3
)
 
$
(68.7
)
 
$
(338.1
)
 
 
 
 
 
 
 
 
Amounts attributable to controlling interest:
 
 
 
 
 
 
 
Net loss from continuing operations
$
45.0

 
$
(123.5
)
 
$
(8.8
)
 
$
(360.4
)
Net (loss) income from discontinued operations
(45.0
)
 
13.7

 
(59.9
)
 
22.3

Net loss attributable to controlling interest
$
(34.8
)
 
$
(228.3
)
 
$
(68.7
)
 
$
(338.1
)
 
 
 
 
 
 
 
 
Net loss per common share attributable to controlling interest:
 
 
 
 
 
 
 
Basic loss from continuing operation
$
(0.10
)
 
$
(1.20
)
 
$
(0.05
)
 
$
(1.82
)
Basic (loss) income from discontinued operations
(0.08
)
 
0.04

 
(0.30
)
 
0.11

Basic
$
(0.18
)
 
$
(1.16
)
 
$
(0.35
)
 
$
(1.71
)
 
 
 
 
 
 
 
 
Diluted loss from continuing operation
$
(0.10
)
 
$
(1.20
)
 
$
(0.05
)
 
$
(1.82
)
Diluted (loss) income from discontinued operations
(0.08
)
 
0.04

 
(0.30
)
 
0.11

Diluted
$
(0.18
)
 
$
(1.16
)
 
$
(0.35
)
 
$
(1.71
)



8



HRG GROUP, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(In millions)
 
 
Fiscal Quarter
 
Fiscal Six Months
 
 
2016
 
2015
 
2016
 
2015
 
 
(Unaudited)
 
(Unaudited)
Revenues:
 
 
 
 
 
 
 
 
Consumer Products
 
$
1,209.6

 
$
1,067.0

 
$
2,428.4

 
$
2,134.8

Insurance
 
39.6

 
(38.9
)
 
29.6

 
(4.4
)
Energy
 
9.5

 
26.0

 
26.3

 
60.3

Asset Management
 
1.6

 
5.1

 
7.6

 
13.1

Intersegment elimination
 
9.2

 
65.1

 
11.1

 
43.2

Consolidated segment revenues
 
1,269.5

 
1,124.3

 
2,503.0

 
2,247.0

Corporate and Other
 

 
19.5

 

 
40.5

Total revenues
 
$
1,269.5

 
$
1,143.8

 
$
2,503.0

 
$
2,287.5

 
 
 
 
 
 
 
 
 
Operating income (loss):
 
 
 
 
 
 
 
 
Consumer Products
 
$
148.5

 
$
88.4

 
$
291.0

 
$
204.0

Insurance
 
(1.8
)
 
(56.3
)
 
(1.8
)
 
(50.7
)
Energy
 
(26.7
)
 
(161.3
)
 
(91.2
)
 
(356.3
)
Asset Management
 
(9.2
)
 
(67.3
)
 
(18.3
)
 
(68.5
)
Intersegment elimination
 
13.2

 
43.9

 
(5.8
)
 
27.7

Total segment operating income (loss)
 
124.0

 
(152.6
)
 
173.9

 
(243.8
)
Corporate and Other and eliminations
 
(8.2
)
 
(24.5
)
 
(22.8
)
 
(148.3
)
Consolidated operating income (loss)
 
115.8

 
(177.1
)
 
151.1

 
(392.1
)
Interest expense
 
(95.8
)
 
(81.1
)
 
(193.3
)
 
(157.5
)
Gain on sale of oil and gas properties
 

 

 
105.6

 

Gain upon gaining control of equity method investment
 

 

 

 
141.2

Other income, net
 
0.5

 
14.1

 
1.6

 
46.9

Income (loss) from continuing operations before income taxes
 
$
20.5

 
$
(244.1
)
 
$
65.0

 
$
(361.5
)





9



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 Six Months
Reconciliation to reported net income:
 
2016
 
2015
 
2016
 
2015
Reported net income - Consumer Products segment
 
$
75.3

 
$
27.9

 
$
149.0

 
$
77.9

Add back:
 
 
 
 
 
 
 
 
Interest expense
 
57.5

 
49.2

 
115.9

 
93.6

Income tax expense
 
14.9

 
8.1

 
21.8

 
28.6

Depreciation and amortization, net of accelerated depreciation
 
 
 
 
 
 
 
 
Depreciation of properties
 
21.3

 
18.7

 
44.4

 
37.1

Amortization of intangibles
 
23.4

 
21.2

 
47.0

 
41.7

      EBITDA - Consumer Products segment
 
192.4

 
125.1

 
378.1

 
278.9

Stock-based compensation
 
21.5

 
13.8

 
31.6

 
19.4

Restructuring and related charges
 
1.6

 
4.4

 
2.8

 
11.8

Acquisition and integration related charges
 
13.3

 
11.9

 
23.2

 
20.0

Purchase accounting inventory adjustment
 

 
2.2

 

 
3.0

Other
 
0.8

 
1.7

 
1.0

 
1.8

      Adjusted EBITDA - Consumer Products segment
 
$
229.6

 
$
159.1

 
$
436.7

 
$
334.9

The table below shows the adjustments made to the reported net income (loss) of the Energy segment to calculate its Adjusted EBITDA (unaudited):
 
 
Fiscal Quarter
 
Fiscal Six Months
Reconciliation to reported net (loss) income
 
2016
 
2015
 
2016
 
2015
Reported net (loss) income - Energy Segment
 
$
(29.8
)
 
$
(160.5
)
 
$
8.5

 
$
(200.0
)
Interest expense
 
3.6

 
4.4

 
8.2

 
8.9

Depreciation, amortization and depletion
 
3.6

 
12.5

 
10.1

 
26.0

EBITDA - Energy segment
 
(22.6
)
 
(143.6
)
 
26.8

 
(165.1
)
Accretion of discount on asset retirement obligations
 
0.4

 
0.7

 
1.0

 
1.3

Impairments and bad debt expense
 
21.2

 
146.6

 
75.6

 
336.6

Gain on sale of oil and gas properties
 

 

 
(105.6
)
 

Gain on remeasurement of investment to fair value
 

 

 

 
(141.2
)
Non-recurring other operating items
 
0.5

 
1.3

 
1.5

 
2.3

Gain on derivative financial instruments
 
(0.8
)
 
(5.3
)
 
(2.5
)
 
(24.0
)
Cash settlements on derivative financial instruments
 
0.7

 
5.5

 
9.0

 
7.9

Stock based compensation expense
 

 
0.3

 

 
0.6

Adjusted EBITDA - Energy segment
 
$
(0.6
)
 
$
5.5

 
$
5.8

 
$
18.4



10
a2q16conferencecallsl0b2
May 9th, 2016 2nd Quarter Conference Call Private & Confidential


 
2 Agenda  Quarterly Overview & Operating Highlights Omar Asali, President and CEO  Questions & Answers Omar Asali, President and CEO George Nicholson, Chief Financial Officer(NYSE: HRG)


 
Safe Harbor Disclaimer 3 Limitations on the Use of Information. This company overview has been prepared by HRG Group Inc. (the “Company” or “HRG”) solely for informational purposes, and not for the purpose of updating any information or forecast with respect to the Company or any of its affiliates or any other purpose. This information is subject to change without notice and should not be relied upon for any purpose. Neither the Company nor any of its affiliates makes any representation or warranty, express or implied, as to the accuracy or completeness of the information contained herein and no such party shall have any liability for such information. In furnishing this information and making any oral statements, neither the Company nor any of its affiliates undertakes any obligation to provide the recipient with access to any additional information or to update or correct such information. The information herein or in any oral statements (if any) are prepared as of the date hereof or as of such earlier dates as presented herein; neither the delivery of this document nor any other oral statements regarding the affairs of Company or its affiliates shall create any implication that the information contained herein or the affairs of the Company or its affiliates have not changed since the date hereof or after the dates presented herein (as applicable); that such information is correct as of any time subsequent to its date; or that such information is an indication regarding the performance of the Company or any of its affiliates since the time of the Company’s or such affiliates latest public filings or disclosure. These materials and any related oral statements are not all-inclusive and shall not be construed as legal, tax, investment or any other advice. You should consult your own counsel, accountant or business advisors. Special Note Regarding Forward-Looking Statements. 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 merger between FGL and Anbang, the Company’s use of proceeds from the FGL merger, 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 and subsequent Quarterly Reports on Form 10-Q, 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. Important Note Regarding the Presentation of our Insurance Segment: During the quarter, FGL announced it had reached a definitive merger agreement under which Anbang Insurance Group Co., Ltd. and certain of its subsidiaries will acquire FGL for $26.80 per share in cash. At the date of the transaction, the Company owned 47 million shares in FGL, or an 80.4% interest as of March 31, 2016. The transaction, which is subject to customary closing conditions and regulatory approvals, is expected to close in the third quarter of calendar year 2016. As a result of this agreement, beginning with the first quarter of Fiscal 2016, the Company's investment in FGL has been classified as held for sale on the balance sheet and FGL's operations have been classified as discontinued operations, and results for all periods have been reclassified accordingly. Previously, FGL's results were reflected in the Insurance segment; however, all segment information has been adjusted to exclude FGL's results from this segment. Accordingly, the commentary for the Insurance segment in this release no longer reflects the performance of FGL in either the current or prior year quarters, and the Insurance segment as reported consists of Front Street Re (Delaware) Ltd. and its subsidiaries. Non-GAAP Measures. Management believes that certain non-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. 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-GAAP financial measure frequently used throughout the insurance industry and is an economic measure the Insurance segment uses to evaluate financial performance each period. FGL’s adjusted operating income (“AOI”) is calculated by adjusting net income to eliminate (i) the impact of net investment gains including other-than-temporary impairment ("OTTI") losses recognized in operations, but excluding gains and losses on derivatives hedging our indexed annuity policies, (ii) the effect of changes in the interest rates used to discount the FIA embedded derivative liability, (iii) the effect of change in fair value of reinsurance related embedded derivative, and (iv) the effect of class action litigation reserves. All adjustments to AOI are net of the corresponding VOBA, DAC and income tax impact (using an effective tax rate of 35%) related to these adjustments as appropriate. 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, gain on sale of oil and gas properties, 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. We exclude the impact of foreign currency losses of $32.1 million and $122.8 million of revenues from acquisitions in the quarter on the measure of currency consistent organic revenue growth, which is based on a non-GAAP financial measure. We believe this measure assists in understanding the trends in our business. 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. By accepting this document, each recipient agrees to and acknowledges the foregoing terms and conditions.


 
Quarterly Overview & Operating Highlights Omar Asali Private & Confidential


 
HRG State of the Business 5 Consumer Products Asset ManagementEnergy OtherInsurance & Reinsurance  Continued strong organic topline growth on currency- consistent basis  Record second quarter results overall, and for the Home and Garden and HHI segments  Record fiscal year expected for revenue, Adjusted EBITDA, cash flow 1. Reflects the aggregate principal amount of debt outstanding at HRG as of March 31, 2016, excluding issuance discounts, and does not give effect to debt held by the subsidiaries. 2. As of March 31, 2016; includes $25.5 billion of assets held for sale related to Fidelity & Guaranty Life. 3. As of March 31, 2016, corporate cash, cash equivalents and investments held at HRG.  Debt1: $1.75BN  Consolidated Assets2: ~$35.5BN  Cash and Investments3: $237.4MM  Progress continues to be made in closing FGL’s transaction with Anbang: CFIUS approval received  Expect to close in 3rd calendar quarter  Expect to realize $1.26B in proceeds tax efficiently  Our focus remains on leverage & liquidity at the operating segment and in preserving value at the HRG- level  Working with lending group ahead of next redetermination  Cost discipline in full force  Continuing focus on maximizing capital recovery  Significant reduction in ABL portfolio balance: receivable down ~75% since 2Q15  Segment G&A expenses substantially reduced; further expenses tightly managed  Significantly reduced HRG’s operating expenses  De-levering at the HRG-level remains the priority  Committed to pursuing strategies that maximize shareholder value


 
Spectrum continues to deliver strong growth through product and geography expansion, and smart M&A 6 Consumer Products  Record second quarter financial performance at Spectrum  13.4% reported revenue growth, despite ongoing F/X headwinds —4.9% currency-consistent organic revenue growth —Broad-based growth, reflecting contributions from nearly all businesses —Record results in Home and Garden and Hardware and Home Improvement  44.3% increase in Adjusted EBITDA to $229.6 million —19.0% Adjusted EBITDA margin, up 410 basis points from 2Q15 —38.3% gross profit margins, up 320 basis points from 2Q15  Continue to expect 7th consecutive year of record financial performance in 2016 —Sales expected to increase in high-single digit range (including acquisitions, partially offset by negative F/X) —Growth in free cash flow in Fiscal 2016 to between $505-$515 million  We believe Spectrum remains significantly undervalued relative to its Consumer Products peer group based on multiples of EBITDA or free cash flow


 
7 Insurance Segment Our reported Insurance segment only reflects the results of Front Street, our reinsurance business Our discontinued operation, Fidelity & Guaranty Life, reported very solid 2nd quarter results  Insurance segment: — At Front Street, net book value increased 10% from 1Q16 to nearly $94 million  FGL business: — Adjusted operating income at FGL nearly doubled as compared to 2Q15 — Average assets under management at FGL increased 4.8% to $18.5 billion — FGL’s investment portfolio continues to perform very well, with across-the-board increases: — Average earned yield increased 19 basis points from 2Q15 to 4.91% — Net investment income of $227 million, up 9% from 2Q15 —Net investment spreads across all product lines increased 36 basis points from 2Q15 — Average NAIC rating remains approximately 1.5 — FGL’s GAAP book value, excluding AOCI, increased to $1.47 billion  Transaction between FGL and Anbang is progressing: —Received clearance for the transaction from the Committee on Foreign Investment in United States this quarter — Progressing the remaining regulatory approvals and expect to close this transaction in the 3rd calendar quarter


 
Our Energy Segment is comprised of long- lived, lower-decline rate and lower geologic risk conventional oil and gas assets 8 Energy Segment  Results reflect impacts of commodity pricing and recent asset sales  Decrease in average sale prices of 36% and 31% in oil and natural gas liquids, respectively, as compared to the prior year quarter  Segment operating loss, excluding impact of impairments, reduced considerably from 2nd quarter of 2015  Cost controls and strong operational oversight continue  Production levels are being managed to preserve the maximum protection of value  Next redetermination taking place this quarter


 
Our focus in Asset Management is mitigating risk to protect book value 9 Asset Management  Unwind of asset-based loan portfolio continues —No new loan originations since 2Q15 —Outstanding receivable down nearly $100 million from start of this Fiscal year  Amounts outstanding declining due primarily to capital recovery  Significant reductions to segment G&A


 
Private & Confidential 2Q 2016 Sum of the Parts Valuation (Dilutive) without AOCI 10 As of the close of the second quarter, the estimated net value of our assets and liabilities was $15.97 per share of diluted common stock, an increase of 6.2% from our December 31st value, and an increase of 13.5% from the start of Fiscal 2016. SUM OF THE PARTS VALUATION – ESTIMATED VALUE VS. COMMON STOCK PRICE ($) $14.43 $6.52 -$0.72 $3.59 -$0.30 $1.18 -$8.73 $15.97 $13.93 Difference of $2.04 or a 12.8% Discount Spectrum Brands1 Insurance Segment2 Total Estimated Value8 December 31st Common Stock Price9 HGI Funding LLC4 HGI Asset Mgmt Holdings LLC5 Cash6 Debt & Other Liabilities7 HGI Energy Holdings LLC3 1. The valuation of HRG’s interest in Spectrum Brands (NYSE: SPB) is based on the volume weighted average closing price (“VWAP”) of SPB shares for the 20 day trading period of $104.31 through March 31, 2016 multiplied by the 27,756,905 SPB shares owned by HRG. 2. The valuation of HRG’s interest in the insurance segment reflects the sum of the per-share-value of its interests in (i) Fidelity & Guaranty Life (NYSE: FGL) based on the VWAP of FGL shares for the 20-day trading period of $25.83 through March 31, 2016 multiplied by the 47,000,000 shares owned by HRG (or $6.05 per share); and (ii) of the $0.70 per share book value of the Insurance segment, Front Street Re (Holdings) Ltd. represents a net book value of $93.6 million, or $0.47 per share. 3. The valuation of HGI Energy Holdings LLC reflects its net book of value as of March 31, 2016. 4. The valuation of HGI Funding LLC reflects its net book value as of March 31, 2016 (which includes 6,582,847 SPB shares and the market value of other securities owned by HGI Funding). 5. The valuation of HGI Asset Management Holdings LLC, reflects its net book of value as of March 31, 2016. 6. Total cash consists of cash at HRG as of March 31, 2016. 7. Debt and other liabilities includes the face value of all liabilities at HRG as of March 31, 2016, excluding deferred tax liabilities. 8. Per share amount for each of the above mentioned assets and liabilities is calculated by dividing the total valuation of such asset or liability by the 200,598,064 shares of HRG common stock (NYSE: HRG) outstanding as of March 31, 2016, which amount does gives effect to dilution for the vesting of all outstanding restricted shares (2,076,973). 9. The closing price for HRG’s shares of common stock March 31, 2016. Note: Book value as reflected above is not necessarily indicative of market value


 
Questions and Answers Private & Confidential


 
May 9th, 2016 2nd Quarter Conference Call Private & Confidential


 
Appendix Private & Confidential


 
Private & Confidential Reconciliation of Adjusted EBITDA of Consumer Products Segment to U.S. GAAP Net Income (Unaudited) 14 RECONCILIATION OF ADJUSTED EBITDA OF CONSUMER PRODUCTS SEGMENT TO U.S. GAAP NET INCOME (UNAUDITED) ($ in Millions) 2016 2015 2016 2015 Reported net income - Consumer Products segment 75.3$ 27.9$ 149.0$ 77.9$ Add back: Interest expense 57.5 49.2 115.9 93.6 Income tax expense 14.9 8.1 21.8 28.6 Depreciation and amortization, net of accelerated depreciation Depreciation of properties 21.3 18.7 44.4 37.1 Amortization of intangibles 23.4 21.2 47.0 41.7 EBITDA - Consumer Products segment 192.4 125.1 378.1 278.9 Stock-based compensation 21.5 13.8 31.6 19.4 Restructuring and related charges 1.6 4.4 2.8 11.8 Acquisition and integration related charges 13.3 11.9 23.2 20.0 Purchase accounting inventory adjustment - 2.2 - 3.0 Other 0.8 1.7 1.0 1.8 Adjusted EBITDA - Consumer Products segment 229.6$ 159.1$ 436.7$ 334.9$ Fiscal Quarter (a) Fiscal Six Months (b) a. For the three months ended March 31, 2016 and March 31, 2015, respectively. b. For the six months ended March 31, 2016 and March 31, 2015, respectively..


 
Private & Confidential Reconciliation of Adjusted EBITDA of Energy Segment to U.S. GAAP Net Loss (Unaudited) 15 RECONCILIATION OF ADJUSTED EBITDA OF ENERGY SEGMENT TO U.S. GAAP NET LOSS (UNAUDITED) ($ in Millions) 2016 2015 2016 2015 Reported net income (loss) - Energy segment (29.8)$ (160.5)$ 8.5$ (200.0)$ Interest expense 3.6 4.4 8.2 8.9 Depreciation, amortization and depletion 3.6 12.5 10.1 26.0 EBITDA - Energy segment (22.6) (143.6) 26.8 (165.1) Accretion of discount on asset retirement obligations 0.4 0.7 1.0 1.3 Impairments and bad debt expense 21.2 146.6 75.6 336.6 Gain on sale of oil and gas properties - - (105.6) - Gain on remeasurement of investment to fair value - - - (141.2) Non-recurring other operating items 0.5 1.3 1.5 2.3 Gain on derivative financial instruments (0.8) (5.3) (2.5) (24.0) Cash settlements on derivative financial instruments 0.7 5.5 9.0 7.9 Stock-based compensation expense - 0.3 - 0.6 Adjusted EBITDA - Energy segment (0.6)$ 5.5$ 5.8$ 18.4$ Fiscal Quarter (a) Fiscal Six Months (b) a. For the three months ended March 31, 2016 and March 31, 2015, respectively. b. For the six months ended March 31, 2016 and March 31, 2015, respectively..


 
Private & Confidential Reconciliation of Adjusted Operating Income of Fidelity & Guaranty Life to U.S. GAAP Net (Loss) Income (Unaudited) 16 RECONCILIATION OF ADJUSTED OPERATING INCOME OF FIDELITY & GUARANTY LIFE TO U.S. GAAP NET (LOSS) INCOME (UNAUDITED) ($ in Millions) 2016 2015 Reported net income - Fidelity & Guaranty Life 9$ (12)$ Effect of investment (gains) losses, net of offsets (4) 21 Effect of change in FIA embedded derivative discount rate, net of offsets 29 15 Effect of change in fair value of reinsurance related embedded derivative, net of offsets 9 (1) Adjusted operating Income - Fidelity & Guaranty Life 43$ 23$ Fiscal Quarter (a) a. For the three months ended March 31, 2016.


 
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