Harbinger Group Inc. Reports First Quarter Fiscal 2013 Results

(Tables Follow)

HARBINGER GROUP INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In millions)
							December 30, 2012						September 30, 2012
							(Unaudited)
ASSETS
Investments:
Fixed maturities							$	16,476.6					$	16,088.9
Equity securities							312.1						394.9
Derivative investments							156.4						200.7
Asset-backed loans							204.8						180.1
Other invested assets							66.6						53.8
Total investments							17,216.5						16,918.4
Cash and cash equivalents							1,103.7						1,470.7
Receivables, net							566.7						414.4
Inventories, net							679.2						452.6
Accrued investment income							153.0						191.6
Reinsurance recoverable							2,378.5						2,363.1
Deferred tax assets							189.0						312.7
Properties, net							328.0						221.6
Goodwill							1,421.3						694.2
Intangibles, including DAC and VOBA, net							2,475.7						1,988.5
Other assets							347.2						172.6
Total assets							$	26,858.8					$	25,200.4
LIABILITIES AND EQUITY
Insurance reserves:
Contractholder funds							$	15,349.0					$	15,290.4
Future policy benefits							3,592.3						3,614.8
Liability for policy and contract claims							99.7						91.1
Total insurance reserves							19,041.0						18,996.3
Debt							3,917.8						2,167.0
Accounts payable and other current liabilities							736.2						754.2
Equity conversion feature of preferred stock							163.1						232.0
Employee benefit obligations							100.2						95.1
Deferred tax liabilities							492.3						382.4
Other liabilities							416.8						655.3
Total liabilities							24,867.4						23,282.3
Commitments and contingencies
Temporary equity:
Redeemable preferred stock							323.0						319.2
Harbinger Group Inc. stockholders' equity:
Common stock							1.4						1.4
Additional paid-in capital							848.3						861.2
Accumulated deficit							(36.4		)				(98.2		)
Accumulated other comprehensive income							403.3						413.2
Total Harbinger Group Inc. stockholders' equity							1,216.6						1,177.6
Noncontrolling interest							451.8						421.3
Total permanent equity							1,668.4						1,598.9
Total liabilities and equity							$	26,858.8					$	25,200.4

HARBINGER GROUP INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share data)
							Three months ended
							December 30, 2012					January 1, 2012
							(Unaudited)
Revenues:
Net consumer product sales							$  870.3					$	848.8
Insurance premiums							13.8						16.8
Net investment income							178.0						186.8
Net investment gains							146.5						103.9
Insurance and investment product fees and other							13.7						9.7
Total revenues							1,222.3						1,166.0
Operating costs and expenses:
Consumer products cost of goods sold							582.1						564.7
Benefits and other changes in policy reserves							83.6						176.9
Selling, acquisition, operating and general expenses							254.6						255.9
Amortization of intangibles							86.6						56.7
Total operating costs and expenses							1,006.9						1,054.2
Operating income							215.4						111.8
Interest expense							(143.1	)					(55.9	)
Gain from the change in the fair value of the equity conversion feature of preferred stock							68.9						27.9
Other (expense) income, net							(8.7	)					1.2
Income from continuing operations before income taxes							132.5						85.0
Income tax expense							64.4						39.5
Net income							68.1						45.5
Less: Net (loss) income attributable to noncontrolling interest							(6.0	)					6.0
Net income attributable to controlling interest							74.1						39.5
Less: Preferred stock dividends and accretion							12.1						15.7
Net income attributable to common and participating preferred stockholders							$  62.0					$	23.8
Net income per common share attributable to controlling interest:
Basic							$  0.31					$	0.12
Diluted							$  0.03					$	0.06

HARBINGER GROUP INC. AND SUBSIDIARIES ADJUSTED EBITDA AND ADJUSTED OPERATING INCOME RECONCILIATIONS (In millions)
The table below shows the adjustments made to the reported operating income of the consumer products segment to calculate its Adjusted EBITDA:
				Three months ended
				December 30, 2012					January 1, 2012
				(Unaudited)
Reconciliation to reported Consumer Product Segment operating income:
Reported operating income - Consumer Products Segment			$	68.2					$	83.7
Add: Other expense not included above				(1.6	)				(2.2		)
Add back:
Net loss attributable to non-controlling interest				0.5					—
HHI Business inventory fair value adjustment				5.2					—
Restructuring and related charges				6.6					7.7
Acquisition and integration related charges				20.8					7.6
Adjusted EBIT - consumer products segment				99.7					96.8
Depreciation and amortization, net of accelerated depreciation
Depreciation of properties				10.7					9.3
Amortization of intangibles				17.1					14.6
Stock-based compensation				3.2					4.4
Adjusted EBITDA - Consumer Products Segment			$	130.7					$	125.1

The table below shows the adjustments made to the reported operating income (loss) of the insurance segment to calculate its pretax adjusted operating income:
	Three months ended
	December 30, 2012						January 1, 2012
	(Unaudited)
Reconciliation to reported operating income:
Reported operating income - insurance segment	$	165.3					$	36.4
Effect of investment gains, net of offsets	(125.7		)				(18.2		)
Effect of change in FIA embedded derivative discount rate, net of offsets	(6.6		)				2.8
Effects of transaction-related reinsurance	—						3.1
Adjusted operating income	$33.0						$	24.1

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