SEC Filings
 |
| 10-Q | |
| HRG GROUP, INC. filed this Form 10-Q on 08/09/2016 | |
| Entire Document | |
| << Previous Page | Next Page >> | |
The increases were primarily due to growth from acquisitions and organic net sales from our Consumer Products segment, coupled with an increase in fair value of the funds withheld receivables with third parties in the Insurance segment due to lower interest rates and tighter credit spreads. These increases were partially offset by lower sales in the Energy segment as a result of the decrease in oil and natural gas prices, lower investment income as a result of the decrease in the asset-based loan portfolio of the Asset Management segment, and negative impact of foreign exchange in the Consumer Product segment. Consolidated operating income (loss). Consolidated operating income for the Fiscal 2016 Quarter increased $283.2 million, or 380.1%, to $208.7 million from an operating loss of $74.5 million for the Fiscal 2015 Quarter. Consolidated operating income for the Fiscal 2016 Nine Months increased $826.4 million, or 177.1%, to $359.8 million from an operating loss of $466.6 million for the Fiscal 2015 Nine Months. The increases were primarily due to increased profitability in our Consumer Product segment as a result of the acquisition of AAG during the fiscal year ended September 30, 2015; lower ceiling test impairments in the Energy segment; credit impairment losses recorded in the Insurance and Asset Management segments mainly associated with the impairment of a loan to RadioShack that was recorded in the Fiscal 2015 Nine Months; impairments of goodwill and intangibles due to a change in view of the strategic direction of Frederick’s of Hollywood Inc. (“FOH”) recognized in the Fiscal 2015 Nine Months; and reversal of bad debt expense resulting from higher than expected recovery rate from the partial paydown of the loan to RadioShack recorded in the Fiscal 2016 Quarter and Fiscal 2016 Nine Months. Interest Expense. Interest expense decreased $50.7 million to $98.4 million for the Fiscal 2016 Quarter from $149.1 million for the Fiscal 2015 Quarter. Interest expense decreased $14.9 million to $291.7 million for the Fiscal 2016 Nine Months from $306.6 million for the Fiscal 2015 Nine Months. The decreases were primarily due to $58.8 million of one-time costs incurred related to Spectrum Brands’ financing of the AAG acquisition, the refinancing of Spectrum Brands’ term loan, revolver facility and the redemption of Spectrum Brands’ 6.75% senior unsecured notes in the Fiscal 2015 Quarter and the Fiscal 2015 Nine Months; partially offset by an increase in interest expenses due to higher overall debt levels in the Consumer Products segment and Corporate and Other segment. Gain on sale of oil and gas properties. The Compass Asset Sale resulted in a gain on sale of oil and gas properties of $105.6 million for the Fiscal 2016 Nine Months. Gain on deconsolidation of subsidiary. The deconsolidation of FOH resulted in a gain of $38.5 million upon the elimination of FOH’s cumulative historical losses through April 19, 2015, the date FOHG Holdings, LLC (“FOHG”) filed for bankruptcy. Other (expense) income, net. Other expense for the Fiscal 2016 Quarter was $3.3 million compared to other income of $3.0 million for the Fiscal 2015 Quarter. Other income decreased $51.6 million to a $1.7 million expense for the Fiscal 2016 Nine Months from $49.9 million for the Fiscal 2015 Nine Months. The income in the Fiscal 2015 Nine Months was primarily due to oil and natural gas derivative gains as a result of declining oil and natural gas prices; unrealized gains on our investment in HC2 Holdings Inc. that was sold during the first fiscal quarter of 2016; as well as a gain on contingent purchase price reduction and associated interest income as a result of a settlement with OM Group (UK) Limited (“OMGUK”) during the Fiscal 2015 Nine Months of a purchase price adjustment in connection with HRG’s acquisition of FGL’s subsidiaries; partially offset by foreign exchange losses on asset based loans denominated in Canadian Dollars for which Salus bears the foreign exchange exposure. Income Taxes. For the Fiscal 2016 Quarter and the Fiscal 2016 Nine Months, our effective tax rate of (7.9)% and (8.7)%, respectively, differed from the expected U.S. statutory tax rate of 35.0% and was impacted by the change in judgment in the realizability on a portion of Spectrum Brand’s U.S. net operating loss (“NOL”) carryforwards that were previously recorded with valuation allowance and recognition of a portion of tax benefits on current year losses from the Energy and Corporate and Other segments in the U.S. that are more likely than not to be realized based on the expected taxable gain from the FGL Merger. For the Fiscal 2016 Nine Months, the effective tax rate was reduced due to $5.9 million of non-recurring items related to the impact of tax law changes and changes in state deferred tax rates on Spectrum Brands’ net deferred tax liabilities. The effective tax rate for the Fiscal 2016 Quarter and Fiscal 2016 Nine Months also included the effect of $25.5 million of income tax expense recognized by Spectrum Brands for a tax contingency reserve for a tax exposure in Germany. During the Fiscal 2016 Quarter, a local court ruled against Spectrum Brands’ characterization of certain assets as amortizable under German tax law. Spectrum Brands has appealed this ruling to the German Federal Court. While Spectrum Brands continues to believe that Spectrum Brands’ tax treatment was correct under the applicable German law, Spectrum Brands has concluded that sufficient uncertainty on the ruling from the German Federal Court exists to record a full tax contingency for this exposure. The effective tax rate for the Fiscal 2016 Quarter and Fiscal 2016 Nine Months also included the effect of the adoption of Accounting Standards Update (“ASU”) No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”) which resulted in the recognition of excess tax benefits in our provision for income taxes rather than paid-in capital of $11.6 million and $29.0 million during the Fiscal 2016 Quarter and the Fiscal 2016 Nine Months, respectively. 48 | |
| << Previous Page | Next Page >> | |