Highlights for the Fiscal 2017 Quarter Significant Transactions and Activity Consumer Products Segment
| | • | On October 6, 2016, Spectrum Brands replaced all of its U.S. dollar-denominated term loans with new U.S. dollar-denominated term loans that carry lower interest rate margins, but otherwise are on the same terms as the old term loans, including the maturity date. |
| | • | On October 20, 2016, Spectrum Brands redeemed $129.7 million aggregate principal amount of 6.375% Senior Notes due 2020 (the “6.375% Notes”) with a make whole premium of $4.6 million. |
Corporate and Other
| | • | On November 17, 2016, HRG announced that Mr. Omar Asali, President, Chief Executive Officer and a director of the Company, plans to leave the Company in the second half of the fiscal year ending September 30, 2017. |
| | • | In addition, on November 17, 2016, the Company announced that its Board had initiated a process to explore and evaluate strategic alternatives available to the Company with a view toward enhancing shareholder value. Strategic alternatives may include, but are not limited to, a merger, sale or other business combination involving the Company and/or its assets. |
| | • | On January 13, 2017, subsequent to the end of the fiscal quarter, the Company entered into a Loan Agreement (“2017 Loan”), pursuant to which it may borrow up to an aggregate amount of $150.0 million. The 2017 Loan bears interest at an adjusted International Exchange London Interbank Offered Rate, plus 2.35% per annum, payable quarterly. At the end of January 2017, the Company had drawn $50.0 million under the 2017 Loan. The scheduled maturity date of the 2017 Loan is July 13, 2018, with an option for early termination by the borrower. |
| | • | During the Fiscal 2017 Quarter, we continued the wind-down of the operations of Salus. The remaining outstanding amount of Salus loans continued to run-off, primarily attributable to paydowns. In addition, during the Fiscal 2017 Quarter, Salus sold its entire interest in the loan to RadioShack Corporation (“RadioShack”) to a third party buyer for $1.0 million (including $0.3 million attributable to FGL). The net carrying value of the loan to RadioShack prior to the sale was $2.5 million (including $0.8 million attributable to FGL). |
Discontinued Operations
| | • | On November 3, 2016, FGL, Anbang, AB Infinity, and Merger Sub amended the FGL Merger Agreement to extend the outside termination date for the completion of the FGL Merger from November 7, 2016 to February 8, 2017. Accordingly, either party may terminate the FGL Merger Agreement if the closing of the FGL Merger does not occur on or prior to February 8, 2017. As of the date hereof, the parties to the FGL Merger Agreement were in discussions regarding an extension of the outside termination date beyond February 8, 2017. It is expected that FGL will make an announcement on or about February 9, 2017 regarding the outcome of those discussions. |
Key financial highlights
| | • | Basic and diluted net loss from continuing operations attributable to common stockholders for the Fiscal 2017 Quarter was $0.13 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 $0.11 per basic and diluted common share attributable to controlling interest in the Fiscal 2016 Quarter. |
| | • | We ended the quarter with corporate cash and investments of approximately $148.2 million (primarily held at HRG and HGI Funding). |
| | • | Our Consumer Products segment’s operating income for the Fiscal 2017 Quarter increased $8.5 million, or 6.0%, to $151.0 million from $142.5 million for the Fiscal 2016 Quarter. Our Consumer Products segment’s adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA - Consumer Products”) increased by $7.1 million, or 3.4%, to $214.2 million versus the Fiscal 2016 Quarter. The increase in operating income and Adjusted EBITDA - Consumer Products was primarily driven by $5.5 million improvements in the hardware and home improvement product category due to increase in net sales, cost improvements and product mix. Adjusted EBITDA margin represented 17.7% of sales as compared to 17.0% in the Fiscal 2016 Quarter. |
| | • | Our Insurance segment’s operating loss of $15.4 million for the Fiscal 2017 Quarter reflected a decrease of $15.4 million from the break-even operating income reported for the Fiscal 2016 Quarter driven by lower values of the assets backing the insurance liabilities due to market conditions with increasing risk-free rates; and impairments on intercompany accounts that are eliminated upon consolidation. The decrease in operating income was partially offset by the effect of the insurance liability discount rates on the insurance liabilities. |
| | • | During the Fiscal 2017 Quarter, we received cash dividends of approximately $16.1 million from our subsidiaries, including $13.0 million and $3.1 million from Spectrum Brands and FGL, respectively. |
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