Harbinger Group Inc.
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SEC Filings

10-Q
HRG GROUP, INC. filed this Form 10-Q on 02/07/2017
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Personal care products organic net sales decreased $2.5 million for the Fiscal 2017 Quarter compared to the Fiscal 2016 Quarter primarily attributable to decreases in NA of $5.2 million due to softer category POS and retail inventory reductions; offset by increases in EMEA of $2.8 million from promotional sales and market expansion.
Global auto care organic net sales decreased $4.1 million due to the timing of sales in the prior year in coordination with integration activities and the deferral of product sales with certain customers in EMEA.
Global pet supplies organic net sales decreased $6.4 million for the Fiscal 2017 Quarter compared to the Fiscal 2016 Quarter driven by decreases in companion animal and pet food sales of $8.8 million from reduced listings and retail inventory reductions with key pet retailers, increased competition and low-margin product exits of $2.1 million, partially offset by increased sales through strategic customers and other channels including e-commerce; and further offset by an increase in aquatic sales of $2.4 million primarily in EMEA related to promotional activity.
Cost of consumer products and other goods sold / Consumer products segment gross profit. Consumer products segment gross profit, representing net consumer products sales minus consumer products cost of goods sold, for the Fiscal 2017 Quarter was $450.0 million compared to $440.7 million for the Fiscal 2016 Quarter. The increase in gross profit was mainly attributable to an increase in gross profit margin. Gross profit margin for the Fiscal 2017 Quarter increased to 37.1% compared to 36.2% for the Fiscal 2016 Quarter. The increase in gross profit margin was primarily due to a shift to higher margin product sales and the exit of low-margin product sales and continuing cost improvements initiatives.
Selling, acquisition, operating and general expenses. Selling, acquisition, operating and general expenses increased by $0.8 million, or 0.3%, to $299.0 million for the Fiscal 2017 Quarter, from $298.2 million for the Fiscal 2016 Quarter mainly due to an increase in selling and general and administrative expenses of $5.0 million; and an increase in restructuring and related charges of $1.0 million related to global auto care restructuring initiatives; partially offset by decreased acquisition and integration related charges of $5.8 million due to lower integration activity.

Insurance Segment
Presented below is a table that summarizes the results of operations of our Insurance segment and compares the amount of the change between the fiscal periods (in millions):
 
 
Fiscal Quarter
 
 
2017
 
2016
 
Increase / (Decrease)
Insurance segment revenues
 
$
(28.7
)
 
$
(10.0
)
 
$
(18.7
)
 
 
 
 
 
 
 
Benefits and other changes in policy reserves
 
(15.7
)
 
(12.4
)
 
(3.3
)
Selling, acquisition, operating and general expenses
 
2.4

 
2.4

 
—

Total Insurance segment operating costs and expenses
 
(13.3
)
 
(10.0
)
 
(3.3
)
 Operating loss - Insurance segment
 
$
(15.4
)
 
$
—

 
$
(15.4
)
For segment reporting purposes, at the inception date of the reinsurance transactions, Front Street elected to apply the fair value option to account for its funds withheld receivables, non-funds withheld assets and future policyholder benefits reserves related to its assumed reinsurance. For consolidated reporting, the results from Front Street’s assumed reinsurance business with FGL is reported on FGL’s historical basis. Upon completion of the FGL Merger, our consolidated results will reflect all reinsurance business on the fair value option.
Insurance segment revenues. For the Fiscal 2017 Quarter, Insurance segment revenues decreased $18.7 million to a loss of $28.7 million from a loss of $10.0 million for the Fiscal 2016 Quarter. The decrease in Insurance segment revenues was primarily driven by a decrease in the fair value of the underlying fixed maturity debt securities included in the funds withheld receivables during the Fiscal 2017 Quarter due to market conditions with increasing risk-free rates and widening credit spreads resulting in generally lower valuations of fixed maturity debt securities coupled with credit impairment losses due to intercompany investments.
Benefits and other changes in policy reserves. For the Fiscal 2017 Quarter, benefits and other changes in policy reserves were $15.7 million as compared to $12.4 million for the Fiscal 2016 Quarter. The change was primarily due to the increase in the insurance liability discount rate for the Fiscal 2017 Quarter.
Selling, acquisition, operating and general expenses. Selling, acquisition, operating and general expenses of the Insurance segment remained flat for the Fiscal 2017 Quarter as compared to the Fiscal 2016 Quarter.


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