SEC Filings
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| 10-K | |
| HRG GROUP, INC. filed this Form 10-K on 11/23/2016 | |
| Entire Document | |
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negative impact of foreign exchange in the Consumer Products segment and a decrease in the fair value of the underlying fixed maturity debt securities included in the funds withheld receivables during Fiscal 2015, coupled with realized losses related to credit impairment losses related to intercompany investments and asset-based loan participations that were recorded in Fiscal 2015. Consolidated operating income. Consolidated operating income for Fiscal 2016 increased $582.2 million, or 1,271.2%, to $628.0 million from an operating income of $45.8 million for Fiscal 2015. The $582.2 million increase in operating income was mainly due to increased profitability in our Consumer Products segment, lower impairments in our Insurance and Corporate and Other segments, lower selling, acquisition, operating and general expenses in the Corporate and Other segment and an increase in the fair value of the underlying fixed maturity debt securities included in the funds withheld receivables during Fiscal 2016 due to market conditions with decreasing risk-free rates and tightening credit spreads resulting in generally higher valuations of fixed maturity debt securities. Operating income for Fiscal 2015 decreased $381.6 million, or 89.3%, to $45.8 million from $427.4 million for Fiscal 2014. The decrease was primarily due to impairments in our Insurance and Corporate and Other segments; an increase in the fixed index annuities (“FIA”) present value of future credits in our Insurance segment; increased costs and lower revenues in our Corporate and Other segment; and the severance payments associated with the departure of Philip Falcone, the Company’s former Chief Executive Officer, in December 2014 (the “2014 CEO Departure”). Interest expense. Interest expense decreased $4.5 million to $397.1 million for Fiscal 2016 from $401.6 million for Fiscal 2015. The decrease was primarily due to $58.8 million of one-time costs incurred in Fiscal 2015 related to the financing of Spectrum Brands’ acquisition of AAG (the “AAG Acquisition”), the refinancing of certain of Spectrum Brands’ term loans (the “Term Loans Refinancing”) and the refinancing of Spectrum Brands’ revolver facility (the “Revolver Facility Refinancing”) and redemption of SBI’s 6.75% senior unsecured notes (the “6.75% Notes”). Expenses related to the financing of the AAG Acquisition included $14.1 million of costs related to bridge financing commitments and $4.5 million of costs related to interest on the acquired AAG senior notes from the date of the acquisition through the time of payoff. Expenses related to the Term Loan Refinancing, Revolver Facility Refinancing and redemption of the 6.75% Notes included: (i) $16.9 million of cash costs related to the call premium and pre-paid interest on the 6.75% Notes; (ii) $10.4 million of cash costs related to fees associated with the refinancing of the Term Loan; (iii) $8.8 million of non-cash costs for the write-off of unamortized deferred financing fees and original issue discount; and (iv) $4.1 million of non-cash costs for the write off of unamortized deferred financing fees on the 6.75% Notes. This decrease was partially offset by $21.4 million of non-recurring costs due to Spectrum Brands’ refinancing activity during Fiscal 2016, including (i) $15.6 million tender premium upon repayment of 6.375% Notes, and (ii) a $5.8 million non-cash expense for the write-off of debt issuance costs associated with the repayment of 6.375% Notes. Excluding the one-time and non-recurring costs, interest expense increased $32.9 million due to higher overall debt levels in the Consumer Products segment and Corporate and Other segment. Interest expense increased $102.8 million to $401.6 million for Fiscal 2015 from $298.8 million for Fiscal 2014. As described further above, the increase was primarily due to $58.8 million non-recurring costs incurred related to the financing of the AAG Acquisition and Term Loan Refinancing, Revolver Facility Refinancing and redemption of the 6.75% Notes in Fiscal 2015. Also contributing to the increases in interest expense were higher overall debt levels in the Consumer Products segment and Corporate and Other segment, offset in part by refinancing to lower rate debt during Fiscal 2014. Loss from the change in the fair value of the equity conversion feature of preferred stock. The loss from the change in the fair value of the equity conversion feature of HRG’s then outstanding Preferred Stock of $12.7 million for Fiscal 2014 was primarily due to an increase in the market price of our common stock from $10.37 to $11.69 per share during Fiscal 2014 through the date of the conversion of HRG’s then outstanding Preferred Stock on May 15, 2014. Gain on deconsolidation of subsidiary. FOH was deconsolidated in Fiscal 2015, which resulted in a gain of $38.5 million upon the elimination of FOH’s cumulative historical losses through April 19, 2015, the date FOHG, FOH and their subsidiaries filed for bankruptcy. Following the completion of the bankruptcy of FOHG, FOH and their subsidiaries, such entities ceased to be subsidiaries of HRG. Other income (expense), net. Other income decreased $9.2 million to $1.0 million for Fiscal 2016 compared to $10.2 million for Fiscal 2015. Other income for Fiscal 2015 increased $22.1 million from other expense of $11.9 million for Fiscal 2014. The income for Fiscal 2015 of $10.2 million was primarily due to unrealized gains on our ownership interest in HC2 Holdings Inc. (“HC2”) which was sold during the first fiscal quarter of 2016; and a gain on contingent purchase price reduction and associated interest income as a result of a settlement with OM Group (UK) Limited (“OMGUK”) during Fiscal 2015 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. Other expense for Fiscal 2014 of $11.9 million was primarily due to unrealized losses on marketable securities classified as trading. Income Taxes. Our tax rates are affected by many factors, including our mix of worldwide earnings related to operations in various taxing jurisdictions, changes in tax legislation and the character of our income. 84 | |
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