XML 24 R8.htm IDEA: XBRL DOCUMENT v3.5.0.2
Basis of Preparation and Nature of Operations
12 Months Ended
Sep. 30, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Preparation and Nature of Operations
d herein have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). The financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of such information. All such adjustments are of a normal recurring nature. Although the Company believes that the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures, including a description of significant accounting policies normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Certain prior period amounts have been reclassified or combined to conform to the current year presentation.
Fiscal Year End
The Company’s fiscal year ends on September 30 and the quarters end on the last calendar day of the months of December, March and June. The Company’s significant subsidiary, Spectrum Brands’ fiscal year ends September 30 and its interim fiscal quarters end every thirteenth Sunday, except for its first fiscal quarter which may end on the fourteenth Sunday following September 30. The Company does not adjust for the difference in fiscal periods between Spectrum Brands and itself, as such difference would be less than 93 days, pursuant to Regulation S-X Rule 3A-02. References herein to Fiscal 2016, 2015 and 2014 refer to the fiscal years ended September 30, 2016, 2015 and 2014, respectively.
Reportable Segments
The Company currently presents its operations in two reportable segments: (i) Consumer Products, which consists of Spectrum Brands; and (ii) Insurance, which consists of Front Street. See below for a discussion of the changes to the Company’s reportable segments since Fiscal 2015.
Consumer Products Segment
Through Spectrum Brands, the Company is a diversified global branded consumer products company with positions in seven major product categories: consumer batteries, small appliances, global pet supplies, home and garden control products, personal care products, hardware and home improvement products and global auto care.
Spectrum Brands’ operating performance is influenced by a number of factors including: general economic conditions; foreign exchange fluctuations; trends in consumer markets; consumer confidence and preferences; overall product line mix, including pricing and gross margin, which vary by product line and geographic market; pricing of certain raw materials and commodities; energy and fuel prices; and general competitive positioning, especially as impacted by competitors’ advertising and promotional activities and pricing strategies.
Insurance Segment
As a result of the transaction discussed below, the Insurance segment has been adjusted to exclude FGL and includes only Front Street. Through Front Street and its Bermuda and Cayman-based subsidiaries, we engage in the business of life, annuity and long-term care reinsurance.
On November 8, 2015, Anbang Insurance Group Co., Ltd., a joint-stock insurance company established in the People’s Republic of China (“Anbang”), AB Infinity Holding, Inc., a wholly-owned subsidiary of Anbang (“AB Infinity”), and AB Merger Sub, Inc., a wholly-owned subsidiary of AB Infinity (“Merger Sub”), entered into a definitive merger agreement (which was amended on November 3, 2016, as amended the “FGL Merger Agreement” and such merger, the “FGL Merger”) to acquire FGL for $26.80 per share. As a result of the FGL Merger Agreement, the Company’s ownership interest in FGL has been classified as held for sale in the accompanying Consolidated Balance Sheets and FGL’s operations were classified as discontinued operations in the accompanying Consolidated Statements of Operations and the Consolidated Statements of Cash Flows and reported separately for all periods presented. Prior to the transaction, FGL was included in the Company’s Insurance segment. As a result of classifying FGL as held for sale, all segmented information has been adjusted to exclude FGL from the Insurance segment. See Note 4, Divestitures.
Transactions and Activities during Fiscal 2016
Consumer Products
During Fiscal 2016, Spectrum Brands completed a cash tender offer to purchase any and all of Spectrum Brands’ 6.375% Notes due 2020 (the “6.375% Notes”). As part of the transaction, Spectrum Brands received tenders from the holders of $390.3 of its outstanding 6.375% Notes and has accepted for purchase all 6.375% Notes which were validly tendered. In addition, on October 20, 2016, Spectrum Brands redeemed the remaining $129.7 aggregate principal amount of 6.375% Notes with a call premium of $4.6. See Note 15, Debt.
On September 20, 2016, SBI issued €425.0 aggregate principal amount of 4.00% Notes at par value, due October 1, 2026 (“4.00% Notes”). See Note 15, Debt.
On October 6, 2016, subsequent to the end of the fiscal year, SBI replaced all of its U.S. dollar-denominated term loans with new U.S. dollar-denominated term loans that carry lower interest rate margins, but otherwise are on the same terms as the old term loans, including the maturity date. See Note 15, Debt.
Oil and Gas Properties
During the first quarter of Fiscal 2016, Compass Production Partners (“Compass”), a majority-owned subsidiary of HGI Energy at the time, completed the sale of its Holly, Waskom, and Danville assets (the “Compass Asset Sale”) for a total cash consideration of $153.4. Proceeds were primarily used to reduce Compass’ borrowings under its credit facility (the “Compass Credit Agreement”).
During the fourth quarter of Fiscal 2016, HGI Energy completed the sale of its equity interests in Compass to a third party for a cash purchase price of $145.0 (the “Compass Sale”). The proceeds received by HGI Energy from the Compass Sale were reduced by the outstanding balance of Compass’ existing credit facility of $125.2. Following the completion of the Compass Sale, the Company no longer owns, directly or indirectly, any oil and gas properties and accordingly, the results of Compass are presented as discontinued operations in the accompanying Consolidated Statements of Operations and the operations of HGI Energy are included in the Corporate and Other segment.
Corporate and Other
On November 17, 2016, subsequent to the end of the fiscal year, the Company announced that Mr. Omar Asali, President, Chief Executive Officer and a director of the Company, plans to leave the Company in the second half of the fiscal year ending September 30, 2017 (“Fiscal 2017”). In addition, on November 17, 2016, the Company announced that its Board had initiated a process to explore and evaluate strategic alternatives available to the Company with a view toward enhancing shareholder value. Strategic alternatives may include, but are not limited to, a merger, sale or other business combination involving the Company or its assets. The Company has not set a definitive schedule to complete its review of strategic alternatives and there can be no assurance that this process will result in a transaction, or if a transaction is undertaken, as to its terms or timing.
In connection with Mr. Asali’s anticipated departure, on November 17, 2016, the Company and Mr. Asali entered into a Transition Agreement (the “Transition Agreement”). The Transition Agreement provides that Mr. Asali will, subject to the terms of the Transition Agreement, receive from the Company (i) for Fiscal 2016, a bonus of $8.0 in cash; and (ii) for Fiscal 2017, a bonus for $3.0 in cash, on the earlier of March 31, 2017 and the date on which the Company announces that it has entered into definitive documentation which, if the transactions contemplated thereby were consummated, would result in a sale, merger, change in control or other strategic transaction of or involving the Company and substantially all of its assets; and an additional payment of $3.0 (or such higher amount as determined by the Board of Directors). Mr. Asali will also receive certain other payments and vesting of prior issued equity grants.
During Fiscal 2016, Salus and Front Street received a partial recovery on the loan to a significant borrower of Salus, RadioShack Corporation (“RadioShack”), of $45.4, excluding $22.7 repayment on FGL’s participation on the loan. As a result of the aforementioned partial recovery, the Company also reversed $18.0 of previously recorded allowance for bad debt, excluding $9.0 of realized gains by FGL recorded in(Loss) income from discontinued operations, net of tax” in the accompanying Consolidated Statements of Operations.
During Fiscal 2016, Salus determined to focus its efforts primarily on monitoring, servicing and collecting its existing loans and winding-down its business. Salus may, however, pursue other opportunities that it may consider strategically advantageous or complimentary to its efforts to collect its existing loans.
During the fourth quarter of Fiscal 2016, the Company sold all of its 51.0% interest in CorAmerica Capital, LLC, its former subsidiary engaged in the business of asset management (“CorAmerica”), to a third party for $0.5. During Fiscal 2016, the Company also wound down the operations of Energy & Infrastructure Capital, LLC (“EIC”), its other asset manager. The sale of CorAmerica and the wind down of EIC did not represent a strategic shift for the Company. The operations of Salus, CorAmerica and EIC were historically presented in the Asset Management Segment. As a result of the diminished operations in that segment, starting in the fourth quarter of Fiscal 2016, the Company is presenting the operations of Salus, CorAmerica and EIC within the Corporate and Other segment. All historical results have been recast to reflect this change.