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Harbinger Group Inc Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: February 8, 2013 11:36PM
Harbinger Group Inc (HRG) filed Quarterly Report for the period ended 2012-12-30.
Highlight of Business Operations:Consumer Products segment operating income was $68.2 million compared to $83.7 million in the first quarter of Fiscal 2012. The decrease reflects acquisition and integration costs primarily related to the HHI Acquisition Consumer Products segment and adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) increased by $5.6 million, or 4.5%, to $130.7 million versus the Fiscal 2012 Quarter on higher sales, synergy benefits and cost reduction initiatives. Adjusted EBITDA margin represented 15.0% of sales, compared to 14.7% in the Fiscal 2012 Quarter.
Small appliance sales decreased $23.0 million, or 9.5%, during the Fiscal 2013 Quarter compared to the Fiscal 2012 Quarter, driven by decreased North American and Latin American sales of $26 million and $3 million, respectively, partially offset by increased European sales of $5 million. Foreign exchange positively impacted small appliances sales by $1.3 million. Decreased North American sales were attributable to the exit of low margin products, which drove an overall increase in profitability as a percentage of net sales for the product line. Latin American sales decreases were driven by a reduction in sales to customers who export to Venezuela in response to increased challenges to obtain U.S. dollar payments for goods and the timing of holiday shipments. European sales increases were attributable to market growth and promotional activities in the United Kingdom, increased online sales and regional expansion in Eastern and Western Europe.
For the Fiscal 2012 Quarter, insurance and investment product fees and other consists primarily of cost of insurance and surrender charges assessed against policy withdrawals in excess of the policyholders allowable penalty-free amounts (up to 10% of the prior years value, subject to certain limitations). These revenues increased $4.0 million, or 41.2%, to $13.7 million for the Fiscal 2013 Quarter from $9.7 million for the Fiscal 2012 Quarter, primarily due to cost of insurance revenue on new universal life policies issued during the last twelve months and policy rider fees on the Prosperity Elite product line which was introduced during the fourth quarter of the year ended September 30, 2011.
Consumer products cost of goods sold/Gross Profit. Gross profit, representing net consumer products sales minus consumer products cost of goods sold, for the Fiscal 2013 Quarter was $288.2 million compared to $284.1 million for the Fiscal 2012 Quarter. The HHI Business contributed $4.0 million in gross profit. Our gross profit margin, representing gross profit as a percentage of consumer products net sales, for the Fiscal 2013 Quarter decreased to 33.1% from 33.5% in the Fiscal 2012 Quarter. The decrease in gross profit and gross profit margin resulted from increased consumer products cost of goods sold due to the sale of inventory which was revalued in connection with the acquisition of the HHI Business, which more than offset improvements to gross profit resulting from the exit of low margin products in the small appliance category.
Cash used by investing activities was $1,818.5 million for the Fiscal 2013 Quarter, as compared to cash provided of $891.1 million for the Fiscal 2012 Quarter. The $2,709.6 million decrease in cash provided by investing activities is principally due to (i) an increase in net cash used in acquisitions of $1,112.8 million, (ii) an increase in cash used by Salus to originate $26.2 million, net, of asset-backed loans in the Fiscal 2013 Quarter and (iii) a $1,470.9 million decrease in cash provided from sales, maturities and repayments, net of purchases, of fixed maturity securities and other investments principally by FGL. The $1,112.8 million increase in net cash used from acquisitions relates to the $1272.0 million, net of cash acquired, acquisition of the HHI Business, and the $48.7 million acquisition of Shaser in the Fiscal 2013 Quarter (of which $24.4 million was paid during the Fiscal 2013 Quarter), as compared to the $139.4 million of net cash used from the acquisition of FURminator, Inc., net of cash acquired, and the $43.8 million acquisition of Black Flag, net of cash acquired, in the Fiscal 2012 Quarter. The $100.0 million increase in cash used by other investing activities related to a $100.0 million escrow payment for the future acquisition of TLM Taiwan, which is expected to close on or before March 31, 2013.
Stocks Discussed: HRG,