Highlights for the Fiscal 2016 Quarter and the Fiscal 2016 Nine Months 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 at closing. 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. |
| | • | During the Fiscal 2016 Nine Months, 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 $153.4 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”). |
| | • | Subsequent to the end of the Fiscal 2016 Quarter, on July 1, 2016, HGI Energy entered into an agreement to sell its equity interests in Compass to a third party for a cash purchase price of $145.0 million (the “Compass Sale”). The purchase price will be reduced at closing by the balance of Compass’ credit facility outstanding at closing ($125.0 million as of June 30, 2016) and is subject to other customary closing adjustments, including adjustments for title and environmental defects. The closing of the Compass Sale is subject to the satisfaction of customary closing conditions. |
| | • | During the Fiscal 2016 Nine Months, Compass reduced its borrowing under the Compass Credit Agreement from $327.0 million to $125.0 million, a reduction of $202.0 million. |
| | • | During the Fiscal 2016 Nine Months, our Energy segment recorded impairments to its oil and natural gas properties of $93.2 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. |
| | • | During the Fiscal 2016 Quarter, Salus and Front Street received a partial recovery on the loan to RadioShack Corporation (“RadioShack”) of $43.4 million, excluding $21.7 million repayment on FGL’s participation on the loan. As a result of the aforementioned partial recovery, we also reversed $18.0 million of previously recorded allowance for bad debt, excluding $9.0 million of realized gains by FGL recorded in “(Loss) income from discontinued operations, net of tax” in the accompanying Condensed Consolidated Statements of Operations. |
| | • | During the Fiscal 2016 Quarter, CorAmerica amended its investment management agreement with a counterparty that resulted in a decrease to CorAmerica’s projected future revenues, which triggered a goodwill impairment test. The test resulted in an impairment of $10.7 million to goodwill. |
| | • | During the Fiscal 2016 Quarter, Front Street was provided information on a recapture notice of a reinsurance agreement between third parties and as a result, Front Street’s funds withheld receivables and insurance reserves decreased by approximately $83.0 million during the Fiscal 2016 Quarter and the Fiscal 2016 Nine Months. |
Key financial highlights
| | • | Basic and diluted net income from continuing operations attributable to common stockholders for the Fiscal 2016 Quarter was $0.39 and $0.38 per basic and diluted common share attributable to controlling interest, respectively, compared to basic and diluted net loss from continuing operations attributable to common stockholders of $0.82 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 $210.3 million (primarily held at HRG and HGI Funding). |
| | • | Our Consumer Products segment’s operating income for the Fiscal 2016 Quarter increased $71.1 million, or 52.4%, to $206.8 million from $135.7 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 $42.9 million, or 18.2%, to $279.2 million versus the Fiscal 2015 Quarter. The increase in operating income and Adjusted EBITDA - Consumer Products was primarily driven by higher profitability in Armored AutoGroup Parent Inc. (“AAG”) that was acquired during the fiscal year 2015; coupled with higher sales and margins in the home and garden product line due to increased demand for repellents and household insect controls driven by the Zika virus. Adjusted EBITDA margin represented 20.5% of sales as compared to 18.9% in the Fiscal 2015 Quarter. |
| | • | Our Insurance segment’s operating profit for the Fiscal 2016 Quarter was $3.6 million compared to an operating loss of $28.6 million for the Fiscal 2015 Quarter. The decrease in operating loss was primarily due to credit impairment losses on intercompany investments recorded in the Fiscal 2015 Quarter. |
| | • | Our Energy segment’s operating loss for the Fiscal 2016 Quarter was $22.0 million compared to $114.3 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 |
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