|HRG GROUP, INC. filed this Form 8-K on 08/09/2016|
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properties may be required in Fiscal 2016. In the Fiscal 2015 Quarter, Compass recorded $102.8 million of impairments.
During the Fiscal 2016 Quarter, the Company recorded a $208.4 million loss from discontinued operations, driven primarily by a write-down of the asset held for sale to its fair value less cost to sell, in accordance with US GAAP.
On July 1, 2016, the Company, through its wholly-owned subsidiary, HGI Energy Holdings, LLC ("HGI Energy"), entered into an agreement to sell its equity interest in Compass to a third party for $145.0 million in cash, subject to customary closing adjustments. The purchase price will be reduced at closing by the balance of Compass' credit facility outstanding at close. As of June 30, 2016, the Compass credit facility had $125.0 million outstanding. The closing, which is subject to the satisfaction of customary closing conditions, is expected during the quarter ending September 30, 2016. As the agreement was signed on July 1, 2016, following the close of the Fiscal 2016 Quarter, the transaction had no impact on the Company's results for the current period. The Company expects to report Compass as discontinued operations in the fourth quarter.
Detail on Third Quarter Segment Results:
Note: Organic net sales, as described below, is a non-U.S. GAAP measure defined as net sales excluding the effect of changes in foreign currency exchange rates and impact from acquisitions. 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 Reported Net Sales to Organic Net Sales and 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 $1,361.6 million for the Fiscal 2016 Quarter, an increase of $114.1 million, or 9.1%, as compared to the $1,247.5 million reported in the Fiscal 2015 Quarter. The increase was due primarily to the impact of the newly acquired global auto care business as well as organic growth in certain product categories, including record third quarter results in both hardware and home improvement as well as in home and garden products.
These increases more than offset the negative impact of $15.8 million from unfavorable foreign exchange. Excluding the net impact of foreign exchange, sales increased $129.9 million, or 10.4%, as compared to the Fiscal 2015 Quarter.
Excluding the impacts of both foreign exchange and $84.1 million in revenue from businesses acquired in Fiscal 2015, Consumer Products revenue increased $45.7 million, or 3.7%, on an organic basis over 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 softer North American category performance, and pet supplies, which declined due to unfavorable weather in Europe and the planned exit of certain low-margin business in North America.
Gross profit, representing net Consumer Products sales minus Consumer Products cost of goods sold, increased $72.7 million, or 15.9%, to $530.7 million in the Fiscal 2016 Quarter. The increase was driven by the same factors that affected revenue, as well as a shift toward higher margin products. Gross profit margin, representing gross profit as a percentage of Consumer Products net sales, was 39.0% in the Fiscal 2016 Quarter, an increase of 230 basis points over the Fiscal 2015 Quarter.
Operating income increased $71.1 million, or 52%, to $206.8 million in the Fiscal 2016 Quarter, as compared to $135.7 million in the Fiscal 2015 Quarter, due primarily to higher profitability in the acquired global auto care business.
Consumer Products adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA-Consumer Products”) was $279.2 million for the Fiscal 2016 Quarter, as compared to $236.3 million for the Fiscal 2015 Quarter, an increase of $42.9 million, or 18.2%.
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