|HRG GROUP, INC. filed this Form 8-K on 05/05/2017|
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Detail on Second Quarter Segment Results:
Consumer Products reported consolidated net sales of $1,169.9 million for the Fiscal 2017 Quarter, a decrease of $39.7 million, or 3.3%, as compared to the $1,209.6 million reported in the Fiscal 2016 Quarter primarily due to a decline in home and garden control products, global pet supplies and small appliances product categories, and a negative impact of foreign exchange rates of $9.6 million. These decreases were partially offset by the increases in organic net sales in hardware and home improvement products and consumer batteries product categories.
Gross profit, representing net Consumer Products sales minus Consumer Products cost of goods sold, decreased $7.6 million, or 1.6%, to $455.2 million in the Fiscal 2017 Quarter. The decrease 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 38.9% in the Fiscal 2017 Quarter, an increase from 38.3% for the Fiscal 2016 Quarter. The gross profit margin percentage increase was primarily due to a shift to higher margin product sales, the exit of low-margin product sales and continuing cost improvements initiatives.
Operating income decreased $4.3 million, or 2.9%, to $144.2 million in the Fiscal 2017 Quarter, as compared to the $148.5 million reported in the Fiscal 2016 Quarter primarily as a result of lower volumes, negative impact of foreign exchange and one-time operating expenses of $4.8 million associated with a retail bankruptcy, acquired business indirect taxes and legal costs.
Net income of our Consumer Products segment was $58.7 million in the Fiscal 2017 Quarter, a decrease of $34.0 million or 36.7% compared to net income of $92.7 million reported in the Fiscal 2016 Quarter primarily due to a lower effective tax rate last year relating to the adoption of a new accounting standard for stock compensation.
Our Consumer Products segment’s adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA - Consumer Products”) decreased by $9.4 million, or 4.1%, to $220.2 million versus the Fiscal 2016 Quarter. The decrease was primarily driven by an $8.6 million decrease in the home and garden product categories due to lower sales volumes, incremental marketing costs for new product launches and channel expansion.
After the close of the Fiscal 2017 Quarter, on April 25, 2017, Spectrum Brands announced that its Board of Directors declared a quarterly dividend of $0.42 per share on Spectrum Brands’ common stock, which represents an increase of 10.5% compared to the $0.38 quarterly dividend paid per share in connection with the comparable period in Fiscal 2016. Over the past three years, the quarterly dividend that Spectrum Brands has paid to its common stockholders has increased 40%.
For the Fiscal 2017 Quarter, the Insurance segment revenues improved slightly to $41.0 million compared to $40.1 million for the Fiscal 2016 Quarter primarily driven by an increase in the fair value of the underlying fixed maturity debt securities included in the funds withheld receivables. The favorable change in fair value was due to market conditions with decreasing risk-free rates and tightening credit spreads resulting in generally higher valuations of the fixed maturity debt securities.
Our Insurance segment reported operating loss of $4.1 million for the Fiscal 2017 Quarter compared to operating loss of $1.4 million for the Fiscal 2016 Quarter. The $2.7 million increase in operating loss was primarily driven by a mismatch between the changes in the fair value of the insurance liabilities and the fair value of the assets backing such liabilities due to market conditions and changes in risk-free and discount rates.
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