HRG Group, Inc. Reports Fiscal 2018 Second Quarter Results

Our Consumer Products segment reported consolidated net sales of $766.1 million for the Fiscal 2018 Quarter, an increase of $9.7 million, or 1.3%, as compared to the $756.4 million reported in the Fiscal 2017 Quarter. The increase was primarily due to higher organic net sales in the hardware and home improvement product line due to new product introductions and promotional volumes with retail partners, increased volumes through e-commerce channels with Amazon promotions, and expanded distribution through Spectrum Brands' home builder channel. The increase was partially offset by the decreases in the global pet supplies and home and garden control product lines mainly due to the pet safety recall and lower point-of-sale.

Gross profit, representing net sales minus cost of goods sold, decreased $39.5 million, or 12.7%, from $310.8 million in the Fiscal 2017 Quarter to $271.3 million in the Fiscal 2018 Quarter. Gross profit margin, representing gross profit as a percentage of net sales, decreased to 35.4% in the Fiscal 2018 Quarter from 41.1% for the Fiscal 2017 Quarter, primarily due to incremental costs, inflation in raw material costs, and operating inefficiencies from restructuring initiatives in global auto care and hardware and home improvement product lines along with increased production costs associated with startup costs on facilities, weather-driven unfavorable mix and the negative impact by the PET U.S. rawhide product safety recall.

Selling, acquisition, operating and general expenses increased $22.2 million from $206.0 million in the Fiscal 2017 Quarter, or 10.8%, to $228.2 million in the Fiscal 2018 Quarter primarily due to increased transaction costs associated with the Merger, increased restructuring and related charges and acquisition and integration related costs due to integration of the PetMatrix acquisition.

Operating income decreased $61.7 million, or 58.9%, to $43.1 million in the Fiscal 2018 Quarter, as compared to the $104.8 million reported in the Fiscal 2017 Quarter as a result of lower gross margin, incremental restructuring costs and higher operating expenses.

Net income from continuing operations was $0.9 million in the Fiscal 2018 Quarter, a decrease of $38.7 million as compared to $39.6 million reported in the Fiscal 2017 Quarter. The decrease was primarily due to higher production costs and higher operating expenses from incremental transaction costs and restructuring expenses.

Our Consumer Products segment's adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA - Consumer Products") decreased by $44.6 million, or 27.8%, to $115.6 million compared to the Fiscal 2017 Quarter. The decrease was driven by decreases in the global auto care, hardware and home improvement and home and garden product lines, partially offset by an increase in the global pet supplies product line. A reconciliation of net income to Adjusted EBITDA for our Consumer Products segment is included elsewhere in this release.

Adjusted EBITDA margin of 15.1% in the Fiscal 2018 Quarter decreased compared to 21.2% in the Fiscal 2017 Quarter, primarily due to unfavorable product mix, operating inefficiencies and input cost inflation.

After the close of the Fiscal 2018 Quarter, on April 23, 2018, Spectrum Brands announced that its Board of Directors declared a quarterly dividend of $0.42 per share on Spectrum Brands' common stock.

Corporate and Other:

Our Corporate and Other segment's operating loss for the Fiscal 2018 Quarter increased $4.7 million, to $14.2 million from $9.5 million for the Fiscal 2017 Quarter. The increase in loss was primarily due to an increase of $3.6 million in transaction costs associated with the Merger Agreement.

Certain Other Items:

Also, as previously disclosed, HRG, FS Holdco II Ltd. ("FS Holdco") and the CF Corporation and its related entities (collectively, the "CF Entities") entered into an agreement (the "338 Agreement") on May 24, 2017 pursuant to which the CF Entities agreed that FS Holdco may, at its option, cause the relevant CF Entity and FS Holdco to make a joint election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended, with respect to the merger by the CF Entities and FGL (the "FGL Merger") and the deemed share purchases of FGL's subsidiaries (the "338 Tax Election"). On March 8, 2018, FS Holdco exercised the 338 Tax Election. In connection with such election, the CF Entities are required to pay FS Holdco $26.6 million on or before May 21, 2018.

On January 15, 2018, Spectrum Brands entered into a definitive acquisition agreement with Energizer Holdings, Inc. ("Energizer") where Energizer has agreed to acquire from Spectrum Brands its Global Battery and Lighting business for an aggregate purchase price of $2.0 billion in cash, subject to customary purchase price adjustments.

On January 16, 2018, HRG redeemed all $864.4 million outstanding principal amount of its 7.875% Notes at a redemption price equal to 100.0% of the principal amount thereof, plus accrued and unpaid interest to the redemption date.

On February 24, 2018, the Company and Spectrum Brands entered into the Merger Agreement.

Second Quarter Results of Discontinued Operations:

Income from discontinued operations, net of tax for the Fiscal 2018 Quarter was $0.7 million compared to $43.6 million loss for the Fiscal 2017 Quarter. The $44.3 million increase was driven by a $62.7 million increase related to the Insurance Operations offset by a $18.4 million decrease related to the GBA business. The $62.7 million increase related to the Insurance Operations was driven by the completion of the FGL Merger and the Front Street Sale on November 30, 2017. The $18.4 million decrease related to the Consumer Products segment was primarily driven by the incremental transaction costs of $22.3 million related to the GBA sale.

Additional Information:

Spectrum Brands, an HRG subsidiary, files reports with the SEC and makes certain information available on its respective website. For more information on Spectrum Brands, including information in addition to that included in our reports and public announcements, interested parties should read Spectrum Brands' announcements and public filings with the Securities and Exchange Commission, including Spectrum Brands' most recent earnings announcement, which may be accessed at www.spectrumbrands.com.

About HRG Group, Inc.:

HRG Group, Inc. is a holding company that conducts its operations through its operating subsidiaries. As of March 31, 2018, the Company's principal operating subsidiary was Spectrum Brands, a global branded consumer products company. HRG is headquartered in New York and traded on the New York Stock Exchange under the symbol HRG. For more information on HRG, visit: www.HRGgroup.com.

Forward Looking Statements:

"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995: This document contains, and certain oral statements made by our representatives from time to time may contain, forward-looking statements, including those statements regarding the Merger and/or sale of the GBA business, and any expected or anticipated benefits therefrom, as applicable. There can be no assurance that any such transaction will be consummated. Neither HRG nor any of its affiliates intends to disclose any developments with respect to the foregoing until such time that it determines otherwise in its sole discretion or as required by applicable law. Forward-looking statements also include information concerning possible or assumed future distributions from subsidiaries, other actions, events, results, strategies and expectations and are identifiable by use of the words "believes," "expects," "intends," "anticipates," "plans," "seeks," "estimates," "projects," "may," "will," "could," "might," or "continues" or similar expressions. Such forward-looking statements are subject to risks and uncertainties that could cause actual results, events and developments to differ materially from those set forth in or implied by such statements. These statements are based on the beliefs and assumptions of HRG's management and the management of HRG's subsidiaries. Factors that could cause actual results, events and developments to differ include, without limitation: the ability to complete the Merger with Spectrum Brands in a timely manner or at all; the ability of HRG and its subsidiaries to close previously announced transactions, such as the Merger and/or Spectrum Brands' ability to consummate the announced sale of its GBA business, each on the expected terms and within the anticipated time period, or at all, and in the case of the sale of the GBA business on Spectrum Brands' ability to realize the expected benefits of such transaction and to successfully separate such business; the outcome of Spectrum Brands' exploration of strategic options for its Personal Care and Small Appliances businesses, including uncertainty regarding consummation of any such transaction or transactions and the terms of such transaction or transactions, if any, and, if consummated, Spectrum Brands' ability to realize the expected benefits of such transaction or transactions and potential disruption to Spectrum Brands' business or diverted management attention as a result of the exploration or negotiation of such transaction or transactions; the ability of HRG's subsidiaries to generate sufficient net income and cash flows to make upstream cash distributions; the decision of the boards of HRG's subsidiaries to make upstream cash distributions, which is subject to numerous factors such as restrictions contained in applicable financing agreements, and other relevant considerations and restrictions; HRG's liquidity, which may be impacted by a variety of factors, including the capital needs of HRG's subsidiaries; capital market conditions; commodity market conditions; foreign exchange rates; HRG's and its subsidiaries' ability to identify, pursue or complete any suitable future acquisition or disposition opportunities, including realizing such transaction's expected benefits and the timetable for completing applicable financial reporting requirements; litigation; potential and contingent liabilities; management's plans; changes in regulations including recent tax reform; taxes; and the risks identified under the caption "Risk Factors" in HRG's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, and any amendments thereto, as such risks may be updated or supplemented in the Company's subsequently filed Quarterly Reports on Form 10-Q or Current Reports on Form 8-K. We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all forward-looking statements. All forward-looking statements described herein are qualified by these cautionary statements and there can be no assurance that the actual results, events or developments referenced herein will occur or be realized. Neither HRG nor any of its affiliates undertake any obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operation results, except as required by law.

Non-GAAP Measurements:

Spectrum Brands' management believes that certain non-GAAP financial measures may be useful in certain instances to provide additional meaningful comparison between current results and results in prior operating periods. Spectrum Brands' management believes that organic net sales provides for a more complete understanding of underlying business trends of regional and segment performance by excluding the impact of currency exchange rate fluctuations and the impact of acquisitions. In addition, within this release, including the supplemental information attached hereto, reference is made to Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA is a metric used by Spectrum Brands' management to evaluate segment performance and frequently used by the financial community which provides insight into an organization's operating trends and facilitates comparison between peer companies, since interest, taxes, depreciation and amortization can differ greatly between organizations as a result of differing capital structures and tax strategies. Adjusted EBITDA is also one of the measures used for determining Spectrum Brands' debt covenant compliance. Adjusted EBITDA excludes certain items that are unusual in nature or not comparable from period to period. Adjusted EBITDA margin reflects Adjusted EBITDA as a percentage of net sales of Spectrum Brands. Organic Adjusted EBITDA excludes the impact of currency exchange rate fluctuations and the impact of acquisitions. Spectrum Brands provides this information to investors to assist in comparison of past, present and future operating results and to assist in highlighting the results of ongoing operations. While Spectrum Brands' management believes that non-GAAP measurements are useful supplemental information, such adjusted results are not intended to replace Spectrum Brands' GAAP financial results and should be read in conjunction with those GAAP results. Other Supplemental Information has been provided to reconcile the non-GAAP measurements discussed above to the most relevant GAAP financial results.

For further information contact:

HRG Group, Inc.
Investor Relations
Tel: 212.906.8555
Email: investorrelations@HRGgroup.com

(Tables Follow)

HRG GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
	March 31,  2018				September 30,  2017
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	758.8			$	270.1
Trade receivables, net	337.6				266.0
Other receivables, net	62.2				19.7
Inventories, net	610.5				496.3
Prepaid expenses and other current assets	60.2				54.8
Current assets of businesses held for sale	1,976.0				28,929.2
Total current assets	3,805.3				30,036.1
Property, plant and equipment, net	504.5				503.9
Goodwill	2,280.2				2,277.1
Intangibles, net	1,589.5				1,612.0
Deferred charges and other assets	60.8				43.7
Noncurrent assets of businesses held for sale	—				1,376.9
Total assets	$	8,240.3			$	35,849.7
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	70.3			$	161.4
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