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Harbinger Group Inc Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 10, 2012 06:35PM
Harbinger Group Inc (HRG) filed Quarterly Report for the period ended 2012-04-01. Harbinger Group has a market cap of $769.5 million; its shares were traded at around $4.969 with and P/S ratio of 0.2. Harbinger Group had an annual average earning growth of 7.1% over the past 5 years.
Highlight of Business Operations:For the Fiscal 2012 Quarter, global consumer battery sales increased $7 million, or 4%, primarily driven by increases in European, North American and Latin American sales of $8 million, $2 million and $2 million, respectively, which were tempered by negative foreign exchange impacts of $5 million. Strong European sales were driven by customer gains across the region, whereas increases within North America resulted from distribution gains and new promotional activities at key customers. Latin American gains were attributable to improved volume and price increases in the region. Small appliance sales increased $5 million, or 3%, during the Fiscal 2012 Quarter compared to the Fiscal 2011 Quarter, driven by increases in both Europe and Latin America of $3 million each, coupled with a $1 million increase in North American sales. Foreign exchange negatively affected small appliances sales by $2 million in the Fiscal 2012 Quarter. European sales increases were attributable to regional expansion in Eastern Europe, and timing of shipments which negatively impacted the Fiscal 2011 Quarter sales. Improved Latin American sales resulted from distribution and customer gains. North American gains were driven by increased placement at major customers. Pet supply sales increased $12 million, or 8%, during the Fiscal 2012 Quarter, led by increases in companion animal and aquatics sales of $7 million and $6 million, respectively tempered by $1 million in negative foreign currency impacts. Gains in companion animal sales were due to the FURminator acquisition, whereas gains in aquatics sales resulted from increases in North American starter kits and pond related sales. During the Fiscal 2012 Quarter, electric shaving and grooming product sales increased $4 million, or 8%, led by a $3 million increase in European sales and $1 million increases in sales in both North America and Latin America. Foreign exchange negatively impacted electric shaving and grooming sales by $1 million. The gains across all regions were driven by successful new product launches. Electric personal care sales increased $4 million, or 7%, for the Fiscal 2012 Quarter driven by increased North American and Latin American sales of $4 million and $1 million, respectively. These increases were attributable to continued success in new product categories and distribution gains in Latin America. The sales increases were tempered by $1 million of negative foreign currency exchange. Home and garden control product sales increased $20 million, or 22%, during the Fiscal 2012 Quarter compared to the Fiscal 2011 Quarter. The increase in sales was driven by increases in lawn and garden and household insect control sales of $9 million and $11 million, respectively, resulting from the early spring weather in the United States, the Black Flag acquisition and retail distribution gains. Portable lighting sales were flat for the Fiscal 2012 Quarter compared to the Fiscal 2011 Quarter.
For the Fiscal 2012 Six Months, global consumer batteries sales increased $3 million, or 1%, driven by increased European sales of $16 million due to the reasons discussed above for the Fiscal 2012 Quarter, tempered by decreases in Latin America and North America of $5 million and $1 million, respectively, and negative foreign currency impacts of $7 million. The decreases in Latin America and North America were driven by decreased promotional activities in the first quarter of the fiscal year ending September 30, 2012 (Fiscal 2012) and the timing of holiday shipments, which were slightly offset by the gains discussed in the Fiscal 2012 Quarter. For the Fiscal 2012 Six Months, small appliance sales increased $6 million, or 2%, driven by the factors discussed for the Fiscal 2012 Quarter. For the Fiscal 2012 Six Months, pet supply sales increased $10 million, or 4%, driven by the strong Fiscal 2012 Quarter sales discussed above, which were tempered by lower European aquatics sales in the first quarter of Fiscal 2012. Electric shaving and grooming sales for the Fiscal 2012 Six Months increased $3 million, or 2%, driven by the gains discussed for the Fiscal 2012 Quarter, tempered by the elimination of lower margin North American promotions in the first quarter of Fiscal 2012. For the Fiscal 2012 Six Months, electric personal care sales increased $4 million, or 3%, due to the same factors discussed for the Fiscal 2012 Quarter. Home and garden control product sales for the Fiscal 2012 Six Months increased $16 million, or 14%, due to the factors discussed for the Fiscal 2012 Quarter, which were tempered by sales declines in the first quarter of Fiscal 2012, resulting from customers inventory management. Portable lighting sales for the Fiscal 2012 Six Months decreased $2 million, or 5%, due to decreased European sales of $1 million resulting from the non-recurrence of successful promotions during the first quarter of the fiscal year ended September 30, 2011 (Fiscal 2011), coupled with a slight decrease in Latin American sales and negative foreign currency exchange.
Benefits and Other Changes in Policy Reserves. Benefits and other changes in policy reserves of $242 million and $419 million for the Fiscal 2012 Quarter and Six Months, respectively, include the change in the FIA embedded derivative liability which includes the market value option liability change and the present value of future credits and guarantee liability change. The market value option liability increased $130 million and $168 million for the Fiscal 2012 Quarter and Six Months, respectively, primarily due to the increase in the equity markets during those periods. The present value of future credits and guarantee liability decreased $23 million and $28 million for the Fiscal 2012 Quarter and Six Months, respectively, primarily due to higher risk free rates during the Fiscal 2012 Quarter. Fair value accounting for derivative instruments and the embedded derivatives in the FIA contracts creates differences in the recognition of revenues and expenses from derivative instruments including the embedded derivative liability in our FIA contracts. The change in fair value of the embedded derivatives will not correspond to the change in fair value of the derivatives (purchased call options and futures contracts) because the purchased derivatives cover the next annual index period while the embedded derivative liability covers estimated credits over the expected life of the FIA contracts. Additionally, there were index credits, interest credits and bonuses of $80 million and $178 million, annuity payments of $59 million and $122 million and policy benefits and other reserve movements of $4 million and $21 million during the Fiscal 2012 Quarter and Six Months, respectively. Changes in index credits are attributable to changes in the underlying indices and the amount of funds allocated by policyholders to the respective index options. Benefits also include claims incurred during the period in excess of contractholder fund balances, traditional life benefits and the
Cash provided by operating activities totaled $106 million for the Fiscal 2012 Six Months as compared to a use of $134 million for the Fiscal 2011 Six Months. The $240 million improvement was the result of a $161 million increase in cash provided by HGI corporate operating activities and $106 million of cash provided by FGL, partially offset by a $27 million increase in cash used by Spectrum Brands. The $161 million increase at HGI corporate was primarily due to a $141 million excess of sales over purchases of trading securities acquired for resale and the return to us of $49 million that had been posted as collateral for an FGL subsidiary, both partially offset by a $27 million semi-annual interest payment on our 10.625% Notes. The $27 million increase in cash used at Spectrum Brands was primarily due to a $45 million increased use of cash for working capital and other items driven by higher seasonal increases in inventories and receivables partially offset by lower seasonal decreases in accrued salaries and wages and accounts payable.
Cash provided by investing activities was $793 million for the Fiscal 2012 Six Months, as compared to a use of cash of $37 million for the Fiscal 2011 Six Months. The $830 million increase in cash provided by investing activities is due to a $1,043 million increase in cash provided from sales, maturities and repayments, net of purchases, of fixed maturity securities and other investments principally by FGL, partially offset by an increase in cash used for acquisitions of $175 million, net cash used by Salus in originating $33 million of asset-backed loans in the Fiscal 2012 Six Months and the non-recurrence of a $7 million cash inflow related to the sale of assets held for sale in the Fiscal 2011 Six Months. The $175 million increase in cash used for acquisitions relates to the $139 million, net of cash acquired, acquisition of FURminator, Inc., and the $44 million acquisition of Black Flag in the Fiscal 2012 Six Months, as compared to the $10 million acquisition of Seed Resources, Inc., net of cash acquired, in the Fiscal 2011 Six Months.
Stocks Discussed: HRG,