Harbinger Group Inc.
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HRG GROUP, INC. filed this Form 8-K on 02/07/2017
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Important Notes Regarding the Presentation of our Results:
On August 23, 2016, HGI Energy Holdings, LLC (“HGI Energy”), a wholly-owned subsidiary of the Company, completed the sale of its equity interests in Compass Production Partners, LP and its subsidiaries (“Compass”) to a third party. Following the completion of the sale, the Company no longer owns, directly or indirectly, any oil and gas properties. Accordingly, the historical results of Compass are presented as discontinued operations, and the operations of HGI Energy are included in the Corporate and Other segment.
The operations of Salus, Energy & Infrastructure Capital, LLC (“EIC”) and CorAmerica Capital, LLC (“CorAmerica”), each an asset manager subsidiary of the Company, were historically presented in the Asset Management segment. During the fourth quarter of the fiscal year 2016, the Company sold all of its interest in CorAmerica to a third party. In addition, the Company has been winding down the operations of Salus, and during the Fiscal 2016 Quarter, completed the wind down of EIC’s operations. Due to the diminished operations of these businesses, the Company is presenting the operations of Salus, EIC and CorAmerica within the Corporate and Other segment. All historical results have been restated to reflect this change.
Income from discontinued operations, net of tax for the Fiscal 2017 Quarter was $258.8 million and was entirely attributable to FGL. Loss from discontinued operations, net of tax for the Fiscal 2016 Quarter was $2.5 million due to a $35.6 million loss attributable to FGL, partially offset by $33.1 million income related to the operations of Compass which was sold during the fiscal 2016 year. The increase in income of $294.4 million attributable to FGL was driven by a write-up of the carrying value of the assets of business held for sale to fair value less cost to sell of $144.5 million in accordance with US GAAP; the non-recurrence of $90.9 million income tax expense recorded in the Fiscal 2016 Quarter; and an increase in net income attributable to FGL’s operations of $56.7 million.
The $33.1 million in income from discontinued operations, net of tax attributable to Compass in the Fiscal 2016 Quarter was primarily due to a gain on sale of oil and gas properties of $105.6 million, partially offset by a ceiling test impairment of $54.4 million.
Please also see “Certain Other Items” below.
Detail on First Quarter Segment Results:
Consumer Products:
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 $1,211.8 million for the Fiscal 2017 Quarter, a decrease of $7.0 million, or 0.6%, as compared to the $1,218.8 million reported in the Fiscal 2016 Quarter. Excluding the impact of $19 million in unfavorable foreign exchange, sales increased $11.8 million, or 1.0%, as compared to the Fiscal 2016 Quarter. Such results were impacted by planned exits of unprofitable businesses and two fewer shipping days. The shipping days impact will largely benefit the fourth quarter of the Consumer Products segment.
Gross profit, representing net Consumer Products sales minus Consumer Products cost of goods sold, increased $9.3 million, or 2.1%, to $450.0 million in the Fiscal 2017 Quarter. The increase was driven by an ongoing shift toward higher margin products. Gross profit margin, representing gross profit as a percentage of Consumer Products net sales, was 37.1% in the Fiscal 2017 Quarter, an increase from 36.2% for the Fiscal 2016 Quarter. The gross profit margin percentage increase was primarily due to strong productivity and improved mix, partially offset by the negative impact of foreign exchange.
Operating income increased $8.5 million, or 6.0%, to $151.0 million in the Fiscal 2017 Quarter, as compared to the $142.5 million reported in the Fiscal 2016 Quarter. The increase is primarily due to higher overall gross profit margins.


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