Harbinger Group Inc. ("HGI"; NYSE: HRG) today announced its consolidated results for the Fiscal 2012 third quarter ended July 1, 2012, which includes the results of its operating subsidiaries, Spectrum Brands Holdings, Inc. (“Spectrum Brands”), which comprises HGI’s Consumer Products segment, Fidelity & Guaranty Life Holdings, Inc. (“FGL”), which comprises HGI’s Insurance segment, and Salus Capital Partners, LLC (“Salus”), which comprises HGI’s Other Financial Services segment.
- Consumer Products segment sales growth of 3% (or 6% excluding negative foreign exchange impact) led by strong increases from pet supplies and home and garden products.
- Consumer Products segment operating income grew 21% and adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) grew 4% (or 12% excluding negative foreign exchange impact) on higher sales, synergy benefits and cost reduction initiatives. Adjusted EBITDA margin represented 16% of net sales.
- Insurance fixed indexed annuities (“FIA”) product sales surged 225% year on year to $461 million on market share gains by Prosperity Elite SM indexed annuities, maintaining FGL as a top 10 writer of FIAs, and bringing total FIA sales in the first half of calendar 2012 to over $1 billion.
- Underlying value of Insurance segment reflected in net U.S. GAAP book value was $845 million (including accumulated other comprehensive income (“AOCI”) of $280 million) as of July 1, 2012, and net unrealized gains on investments were $696 million on a U.S. GAAP basis ($923 million on a statutory basis). FGL’s investment portfolio continues to be conservatively positioned, as it holds cash in excess of $1.5 billion, has shortened portfolio duration, and remains well matched against its liability profile.
- HGI stock price appreciation of 50% from $5.18 to $7.79 per share during the quarter resulted in a $125 million liability increase related to the fair value of the preferred stock equity conversion feature, which represents a non-cash charge to HGI’s bottom-line.
- Net loss attributable to HGI common and participating preferred stockholders was ($149 million) or ($1.07) per common share compared to net income of $211 million or $1.16 per common share in third quarter of Fiscal 2011, largely driven by the increase in liability of the preferred stock conversion feature.
- HGI’s corporate cash and short-term investments position of approximately $404 million supports the company’s business strategy and growth of existing businesses.
Omar Asali, President of HGI said, “We are very pleased to report that our underlying operating businesses continue to grow and perform in this economic environment. The Spectrum Brands value model is winning as net sales grew 3% despite significant foreign exchange challenges, and reported record level adjusted EBITDA of $133 million in the fiscal third quarter, driven by sales growth from most of their product lines, and strong SG&A expense reduction. In our insurance business, Fidelity & Guaranty Life’s product sales tripled year on year, helping us reach as high as the number four position in the FIA market – a remarkable achievement for FGL’s employees and management team as we marked the one-year anniversary of this acquisition.”