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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(Loss) income from discontinued operations, net of tax. Discontinued operations include FGL’s and Compass’ results from operations that were previously reported in our Insurance segment and our former Energy segment, respectively. Loss from discontinued operations, net of tax for Fiscal 2016 was $224.3 million compared to $221.5 million for Fiscal 2015. The $2.8 million increase in loss from discontinued operations, net of tax was primarily driven by a decrease in income attributable to FGL of $412.2 million, partially offset by an increase in income attributable to Compass of $409.4 million. The decrease in income of $412.2 million attributable to FGL was driven by a write-down of the carrying value of the assets of business held for sale to fair value less cost to sell of $362.8 million (mostly due to the increase in unrealized gains, net of offsets in FGL’s investment portfolio). Such write-down could be partially reversed if the carrying value of FGL decreases in future reporting periods. If the FGL Merger is consummated , the amount of AOCI related to FGL will be recognized through (loss) income from discontinued operations on the statement of operations and could result in a gain from discontinued operations. In addition, there was a decrease in net income attributable to FGL’s operations of $34.2 million which was driven primarily by a decrease in fair value of FGL’s reinsurance related embedded derivative resulting from an increase in the fair value of the underlying assets held in the funds withheld portfolio. Partially offsetting these decreases were increases recognized by FGL in net investment income due to increased average assets under management as well as higher earned yields from repositioning activities, tender offer consideration and bond prepayment income; and insurance and investment product fees due to increases in rider fees on FIA policies and in cost of insurance charges on universal life policies. Also attributing to the decrease in FGL’s net income in Fiscal 2016 was $15.2 million of income tax expense primarily related to the establishment of a deferred tax liability of $367.9 million at September 30, 2016 as a result of classifying HRG’s ownership interest in FGL as held for sale, partially offset by the recognition of a $94.7 million deferred tax asset related to realized capital losses primarily from the Compass Sale and $258.0 million reduction of valuation allowances on HRG’s net operating and capital loss carryforwards expected to offset the tax effects of the FGL Merger. The $409.4 million increase in income attributable to Compass was primarily due to a decrease of ceiling test impairments in Fiscal 2016 of $391.9 million year over year; a gain on sale of oil and gas properties of $105.6 million in Fiscal 2016; and $53.6 million gain on disposal of Compass; partially offset by a gain upon gaining control of an equity method investment of $141.2 million in Fiscal 2015. Loss from discontinued operations, net of tax for Fiscal 2015 was $221.5 million compared to income from discontinued operations, net of tax of $87.3 million for Fiscal 2014. The $308.8 million increase in loss from discontinued operations, net of tax was primarily driven by an increase attributable to Compass of $300.9 million due to higher ceiling test impairments in Fiscal 2015 and lower prices of oil, natural gas and natural gas liquids and natural production declines, partially offset by a gain upon gaining control of an equity method investment. Noncontrolling Interest. The net income attributable to noncontrolling interest reflects the share of the net income of our subsidiaries, which are not wholly-owned, attributable to the noncontrolling interest. Such amount varies in relation to such subsidiary’s net income or loss for the period and the percentage interest not owned by HRG. Preferred Stock Dividends and Accretion. While outstanding, HRG’s Preferred Stock dividends and accretion consisted of (i) a cumulative quarterly cash dividend at an annualized rate of 8%; (ii) a quarterly non-cash principal accretion, which accrued under certain circumstances; (iii) accretion of the carrying value of the Preferred Stock, which was discounted by the bifurcated equity conversion feature and issuance costs; and (iv) any gain or loss realized upon the conversion of the Preferred Stock. As a result of the conversion of HRG’s Preferred Stock in the third quarter of Fiscal 2014, HRG no longer recognizes preferred dividends and accretion. On May 15, 2014, the Company elected to exercise its option to convert all but one share of the remaining outstanding Preferred Stock into shares of its common stock. Upon converting the outstanding Preferred Stock, the Company recognized a loss of $43.9 million. As a result of the conversion of the Preferred Stock, the Company ceased recognizing any additional dividends and accretion, and is no longer required to compute the Preferred Stock net asset value (“NAV”). The remaining share of Preferred Stock only provides its holders certain information and governance rights and does not have any dividend or accretion rights. Consumer Products Segment Acquisitions The application of acquisition accounting as a result of business combinations can significantly affect certain assets, liabilities and expenses. During Fiscal 2015 and 2014, Spectrum Brands completed a number of acquisitions as outlined below. There were no acquisitions during Fiscal 2016. See Note 3, “Acquisitions” to our Consolidated Financial Statements included in Part IV - Item 15. Exhibits, Financial Statements and Schedules for further details regarding acquisition activity. AAG - Spectrum Brands completed the acquisition of AAG, a consumer products company consisting primarily of Armor All branded appearance products, STP branded performance chemicals, and A/C PRO branded do-it-yourself automotive air conditioner recharge products. The results of AAG’s operations are included in the Company’s Consolidated Statements of Operations, since May 21, 2015. 86 | |
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