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Divestitures | 3 Months Ended
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Dec. 30, 2018
Divestitures [Abstract] |
Divestitures | NOTE 3 – DIVESTITURES ﻿ The following table summarizes the components of Income From Discontinued Operations, Net of Tax in the accompanying Condensed Consolidated Statement of Income for the three months ended December 30, 2018 and December 31, 2017. ﻿
﻿ |  |  |  |  |  |
﻿ |  | Three Month Periods Ended
﻿(in millions) |  | December 30, 2018 |  | December 31, 2017
﻿Income from discontinued operations before income taxes - GBL |  | $ | 15.9 |  | $ | 23.7
﻿(Loss) Income from discontinued operations before income taxes - GAC |  |  | (108.8) |  |  | 5.9
﻿Income from discontinued operations before income taxes - HRG Insurance Operations |  |  | — |  |  | 476.4
﻿(Loss) Income from discontinued operations before income taxes |  |  | (92.9) |  |  | 506.0
﻿Income tax (benefit) expense from discontinued operations |  |  | (10.1) |  |  | 24.4
﻿(Loss) Income from discontinued operations, net of tax |  |  | (82.8) |  |  | 481.6
﻿Income from discontinued operations, net of tax attributable to noncontrolling interest |  |  | — |  |  | 14.2
﻿(Loss) Income from discontinued operations, net of tax attributable to controlling interest |  | $ | (82.8) |  | $ | 467.4
﻿ GBL ﻿ On January 15, 2018 Spectrum entered into a definitive acquisition agreement (the “GBL Acquisition Agreement”) with Energizer Holdings, Inc. (“Energizer”) where Energizer will acquire from Spectrum its GBL business for an aggregate purchase price of $2.0 billion in cash, subject to working capital and other typical closing adjustments. The GBL Acquisition Agreement provides that Energizer will purchase the equity of certain subsidiaries of Spectrum and acquire certain assets and assume certain liabilities of other subsidiaries used or held for the purpose of the GBL business. ﻿ Spectrum and Energizer have agreed to indemnify each other for losses arising from certain breaches of the GBL Acquisition Agreement and for certain other matters. In particular, Spectrum has agreed to indemnify Energizer for certain liabilities relating to the assets retained by Spectrum, and Energizer has agreed to indemnify Spectrum for certain liabilities assumed by Energizer, in each case as described in the GBL Acquisition Agreement. ﻿ Spectrum and Energizer have agreed to enter into related agreements ancillary to the acquisition that will become effective upon the consummation of the acquisition, including a customary transition services agreement and reverse transition services agreement. The transition services agreement and reverse transition services agreement will be recognized as a component of continuing operations for periods following the completion of the GBL sale. ﻿ Subsequently, on November 15, 2018, the Company entered into an amended acquisition agreement (the “GBL Amended Acquisition Agreement”) to address a proposed remedy submitted by Energizer to the European Commission, which provided for conditional approval from the commission provided the Varta® consumer battery, chargers, portable power and portable lighting business in the EMEA region be divested by Energizer subsequent to the GBL acquisition, including manufacturing and distribution facilities in Germany. Approval from the commission was received on December 11, 2018. The GBL Amended Acquisition Agreement provides for a purchase price adjustment that is contingent upon the completion of the divestiture by Energizer, including a potential downward adjustment equal to 75% of the difference between the divestiture sale price and the target sale price of $600 million, not to exceed $200 million; or a potential upward adjustment equal to 25% of the excess purchase price. Energizer anticipates that it will complete the divestiture in the 2019 fiscal year. ﻿ The GBL divestiture closed on January 2, 2019, subsequent to the balance sheet date of December 30, 2018. ﻿ NOTE 3 – DIVESTITURES (continued) ﻿ As previously discussed in Note 1 - Basis of Presentation and Nature of Operations, GBL was classified as held for sale in the accompanying Condensed Consolidated Balance Sheets and as discontinued operations in the accompanying Condensed Consolidated Statements of Income. The following table summarizes the assets and liabilities of GBL classified as held for sale as of December 30, 2018 and September 30, 2018. ﻿
﻿ |  |  |  |  |  |
﻿(in millions) |  | December 30, 2018 |  | September 30, 2018
﻿Assets |  |  |  |  |  |
﻿Trade receivables, net |  | $ | 119.6 |  | $ | 99.5
﻿Other receivables |  |  | 15.7 |  |  | 17.7
﻿Inventories |  |  | 105.3 |  |  | 127.8
﻿Prepaid expenses and other current assets |  |  | 22.1 |  |  | 23.0
﻿Property, plant and equipment, net |  |  | 162.6 |  |  | 161.5
﻿Deferred charges and other |  |  | 16.5 |  |  | 12.9
﻿Goodwill |  |  | 224.8 |  |  | 226.6
﻿Intangible assets, net |  |  | 302.3 |  |  | 304.0
﻿Total assets of business held for sale |  | $ | 968.9 |  | $ | 973.0
﻿Liabilities |  |  |  |  |  |
﻿Current portion of long-term debt |  |  | 6.3 |  |  | 6.3
﻿Accounts payable |  |  | 85.8 |  |  | 123.8
﻿Accrued wages and salaries |  |  | 25.2 |  |  | 24.9
﻿Other current liabilities |  |  | 74.3 |  |  | 83.2
﻿Long-term debt, net of current portion |  |  | 42.7 |  |  | 44.2
﻿Deferred income taxes |  |  | 19.5 |  |  | 19.4
﻿Other long-term liabilities |  |  | 59.8 |  |  | 60.6
﻿Total liabilities of business held for sale |  | $ | 313.6 |  | $ | 362.4
﻿ The following table summarizes the components of income from discontinued operations before income taxes associated with the GBL divestiture in the accompanying Condensed Consolidated Statements of Operations for the three month periods ended December 30, 2018 and December 31, 2017.
﻿ |  |  |  |  |  |
﻿ |  | Three Month Periods Ended
﻿(in millions) |  | December 30, 2018 |  | December 31, 2017
﻿Net sales |  | $ | 249.0 |  | $ | 261.2
﻿Cost of goods sold |  |  | 161.0 |  |  | 170.2
﻿Gross profit |  |  | 88.0 |  |  | 91.0
﻿Operating expenses |  |  | 58.3 |  |  | 53.9
﻿Operating income |  |  | 29.7 |  |  | 37.1
﻿Interest expense |  |  | 13.3 |  |  | 13.3
﻿Other non-operating expense, net |  |  | 0.5 |  |  | 0.1
﻿Income from discontinued operations before income taxes |  | $ | 15.9 |  | $ | 23.7
﻿ For the three month period ended December 31, 2017, there was depreciation and amortization expense of $8.3 million. Beginning in January 2018, the Company ceased the recognition of depreciation and amortization of long-lived assets associated with GBL therefore no depreciation and amortization is recognized during the three month period ended December 30, 2018. Interest expense consists of interest from debt directly held by subsidiaries of the business held for sale, including interest from capital leases, and interest on Term Loans required to be paid down using proceeds received on disposal on sale of a business within 365 days with the exception for funds used for capital expenditures and acquisitions. No impairment loss has been recognized as the fair value or expected proceeds from the disposal of the business is in excess of the subsequent payment. During the three month period ended December 30, 2018 and December 31, 2017, the Company incurred transaction costs of $10.6 million and $2.5 million, respectively, associated with the divestiture which has been recognized as a component of Income From Discontinued Operations – GBL on the Condensed Consolidated Statements of Income. Transaction costs are expensed as incurred and include fees for investment banking services, legal, accounting, due diligence, tax, valuation and various other services necessary to complete the transaction. ﻿ GAC ﻿ On November 15, 2018, the Company entered into a definitive Acquisition Agreement (the “GAC Acquisition Agreement”) with Energizer who will acquire from the Company its GAC business for an aggregate purchase price of $1.25 billion, consisting of $937.5 million in cash, plus stock consideration of 5.3 million shares of Energizer common stock with an approximate value of $312.5 million, subject to working capital and other typical closing adjustments. The GAC Acquisition Agreement provides that Energizer will purchase the equity of certain subsidiaries and acquire certain assets and assume certain liabilities of other subsidiaries used or held for the purpose of the GAC business. . ﻿ In the GAC Acquisition Agreement, the Company and Energizer have made representations and warranties and have agreed to covenants relating to the GAC Acquisition. Among other things, prior to the consummation of the GAC Acquisition, the Company will be subject to certain business conduct restrictions with respect to its operation of the GAC Business and Energizer and its subsidiaries will be subject to certain restrictions with respect to the issuance, sale, acquisition or redemption of Energizer’s and its subsidiaries’ securities. ﻿ The Company and Energizer have agreed to indemnify each other for losses arising from certain breaches of the GAC Acquisition Agreement and for certain other matters. In particular, Spectrum has agreed to indemnify Energizer for certain liabilities relating to the assets retained by Spectrum, and Energizer has agreed to indemnify Spectrum for certain liabilities assumed by Energizer, in each case as described in the GAC Acquisition Agreement. Subject to the GAC Acquisition Agreement, the Company will indemnify Energizer for certain losses relating to liabilities arising primarily out of or relating to products sourced, manufactured, sold or distributed prior to the closing or arising out of or relating to pre-closing acts or omissions in connection with such products, subject to certain limits, and Energizer will bear the risk for a portion of those losses. ﻿ ﻿ ﻿ NOTE 3 – DIVESTITURES (continued) ﻿ The Company and Energizer have agreed to enter into related agreements ancillary to the GAC Acquisition that will become effective upon the consummation of the acquisition, including a transition services agreement and reverse transition services agreement, a supply agreement with the Company’s H&G business, as well as a Shareholder Agreement. The transition services agreement and reverse transition services agreement will be recognized as a component of continuing operations for periods following the completion of the GAC sale. ﻿ As previously discussed in Note 1 - Basis of Presentation and Nature of Operations, GAC was classified as held for sale in the accompanying Condensed Consolidated Balance Sheets and as discontinued operations in the accompanying Condensed Consolidated Statements of Income. The following table summarizes the assets and liabilities of GAC classified as held for sale as of December 30, 2018 and September 30, 2018. ﻿ ﻿
﻿ |  |  |  |  |  |
﻿(in millions) |  | December 30, 2018 |  | September 30, 2018
﻿Assets |  |  |  |  |  |
﻿Trade receivables, net |  | $ | 37.8 |  | $ | 55.2
﻿Other receivables |  |  | 4.4 |  |  | 4.1
﻿Inventories |  |  | 77.7 |  |  | 72.8
﻿Prepaid expenses and other current assets |  |  | 2.5 |  |  | 2.9
﻿Property, plant and equipment, net |  |  | 60.4 |  |  | 58.2
﻿Deferred charges and other |  |  | 14.2 |  |  | 13.9
﻿Goodwill |  |  | 734.3 |  |  | 841.8
﻿Intangible assets, net |  |  | 383.2 |  |  | 384.4
﻿Total assets of business held for sale |  | $ | 1,314.5 |  | $ | 1,433.3
﻿Liabilities |  |  |  |  |  |
﻿Current portion of long-term debt |  |  | 0.3 |  |  | 0.4
﻿Accounts payable |  |  | 27.8 |  |  | 50.6
﻿Accrued wages and salaries |  |  | 3.4 |  |  | 3.2
﻿Other current liabilities |  |  | 8.9 |  |  | 13.3
﻿Long-term debt, net of current portion |  |  | 31.8 |  |  | 32.3
﻿Deferred income taxes |  |  | 74.9 |  |  | 74.4
﻿Other long-term liabilities |  |  | 2.5 |  |  | 2.5
﻿Total liabilities of business held for sale |  | $ | 149.6 |  | $ | 176.7
﻿ The following table summarizes the components of income from discontinued operations before income taxes associated with the GAC divestiture in the accompanying Condensed Consolidated Statements of Operations for the three month periods ended December 30, 2018 and December 31, 2017. ﻿ ﻿
﻿ |  |  |  |  |  |
﻿ |  | Three Month Periods Ended
﻿(in millions) |  | December 30, 2018 |  | December 31, 2017
﻿Net sales |  | $ | 65.6 |  | $ | 68.9
﻿Cost of goods sold |  |  | 38.9 |  |  | 37.5
﻿Gross profit |  |  | 26.7 |  |  | 31.4
﻿Operating expenses |  |  | 27.8 |  |  | 25.0
﻿Operating (loss) income |  |  | (1.1) |  |  | 6.4
﻿Interest expense |  |  | 0.5 |  |  | 0.5
﻿Write-down of assets of business held for sale to fair value less cost to sell |  |  | 107.2 |  |  | —
﻿(Loss) income from discontinued operations before income taxes |  | $ | (108.8) |  | $ | 5.9
﻿ During the three month period ended December 31, 2017, there was depreciation and amortization of $3.9 million. Beginning in November 2018, the Company ceased the recognition of depreciation and amortization of long-lived assets associated with GAC therefore only $1.5 million of depreciation and amortization is recognized during the three month period ended December 30, 2018. Interest expense consists of interest from debt directly held by subsidiaries of the business held for sale, including interest from capital leases. During the three month period ended December 30, 2018, the Company recognized a $107.2 million write-down on net assets held for sale associated with the GAC divestiture attributable to the expected fair value to be realized from the sale, net estimated transaction costs, primarily driven by the change in value of stock consideration to be received as a component of the purchase price from Energizer. During the three month period ended December 30, 2018, the Company incurred transaction costs of $5.8 million associated with the divestiture which have been recognized as a component of Income From Discontinued Operations on the Condensed Consolidated Statements of Income. Transaction costs are expensed as incurred and include fees for investment banking services, legal, accounting, due diligence, tax, valuation and various other services necessary to complete the transactions. ﻿ NOTE 3 – DIVESTITURES (continued) ﻿ HRG - Insurance Operations ﻿ On November 30, 2017, Fidelity and Guaranty Life (“FGL”) completed the FGL Merger pursuant to which, except for certain shares specified in the FGL Merger Agreement, each issued and outstanding share of common stock of FGL was automatically canceled and converted into the right to receive $31.10 in cash, without interest. The total consideration received by HRG Group Inc. as a result of the completion of the FGL Merger was $1,448.3 million. Also on November 30, 2017, Front Street Re (Delaware) Ltd. (“Front Street”) sold to CF Corporation and its related entities (collectively, the “CF Entities”) all of the issued and outstanding shares of Front Street for $65 million, which was subject to reduction for customary transaction expenses. In addition, $6.5 million of the purchase price was deposited in escrow for a period of 15 months to support any indemnification claims that might be made (if any) by the CF entities. The operations of FGL were classified as discontinued operations through November 30, 2017 in the accompanying Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Cash Flows. The following table summarizes the components of income from discontinued operations from discontinued operations from the HRG Insurance Operations divestiture in the accompanying Condensed Consolidated Statements of Income for the two month period ended November 30, 2017.
﻿ |  |  |
﻿ |  | Two months ended
﻿(in millions) |  | November 30, 2017
﻿Revenues: |  |  |
﻿Insurance premiums |  | $ | 6.8
﻿Net investment income |  |  | 181.9
﻿Net investment gains |  |  | 154.8
﻿Other |  |  | 35.1
﻿Total revenues |  |  | 378.6
﻿Operating costs and expenses: |  |  |
﻿Benefits and other changes in policy reserves |  |  | 241.3
﻿Selling, acquisition, operating and general expenses |  |  | 52.8
﻿Amortization of intangibles |  |  | 35.8
﻿Total operating costs and expenses |  |  | 329.9
﻿Operating income |  |  | 48.7
﻿Interest expense and other |  |  | 4.0
﻿Write-down of assets of business held for sale to fair value less cost to sell |  |  | (14.2)
﻿Reclassification of accumulated other comprehensive income |  |  | 445.9
﻿Income from discontinued operations before income taxes |  | $ | 476.4
﻿ Property, Plant, and Equipment and long-lived assets classified as held for sale are measured at the lower of their carrying value or fair value less cost to sell. As of September 30, 2017, the carrying value of HRG’s interest in FGL and Front Street exceeded their respective estimated fair value less cost to sell by $402.2 million and $19.0 million, respectively. The higher carrying value of FGL was primarily due to the increase in unrealized gains, net of offsets in FGL’s investment portfolio, with the effects of the unrealized gains, net of offsets, being recorded in accumulated other comprehensive income. Upon the completion of the FGL Merger, HRG deconsolidated its ownership interest in FGL, which resulted in the reclassification of $445.9 million of accumulated other comprehensive income attributable from FGL to income from discontinued operations in the fiscal year 2018. Additionally, subsequent to the close of the FGL Merger, the Company recognized a $5.9 million tax benefit allocated to HRG insurance discontinued operations during the third quarter of fiscal year 2018, associated with the reversal of valuation allowance realized with the completion of the Spectrum Merger. ﻿ HPC ﻿ In December 2017 the Company entered into a plan to divest its HPC division, as a component of its GBA business, and was actively marketing the HPC business including discussions with third parties for the potential sale of the HPC business. As a result, the HPC business met the criteria for recognition as assets held for sale and were reported as held for sale and included as a component of discontinued operations. Subsequently, in November 2018, the Company made a strategic decision to cease marketing and actively pursuing a sale of the HPC division and will continue to manage and operate the business for continued use. As a result, the HPC net assets were reclassified as held for use and the operating results and cash flows are included within the Company’s income from continuing operations for both the three month periods ended December 30, 2018 and December 31, 2017. Upon recognition of the Company’s change in plan to sell HPC, the net assets were measured at the carrying amount before it was classified as held for sale, adjusted for depreciation and amortization expense that would have been recognized had the business been continuously classified as held and used. There was no impairment or loss recognized when the decision not to sell was made. ﻿ NOTE 3 – DIVESTITURES (continued) ﻿ Amounts previously reported as discontinued operations for the three month period ended December 31, 2017 have been reclassified as part of the Company’s income from continuing operations and assets held for use to conform with the current period. The following tables summarize the effect of the change in plan in recognizing HPC from held for sale to held and used on the previously reported condensed consolidated statements of income, including reclassification of GAC business to held for sale for the three month period ended December 31, 2017: ﻿ ﻿
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ |  | Three Month Periods Ended December 31, 2017
﻿(in millions) |  | As Previously Reported |  | Effect of HPC Reclassification From Held For Sale to Held and Used |  | After HPC Reclassification |  | Effect of GAC Reclassification From Used to Held For Sale |  | After GAC Reclassification
﻿Net sales |  | $ | 646.5 |  | $ | 342.0 |  | $ | 988.5 |  | $ | 68.9 |  | $ | 919.6
﻿Cost of goods sold |  |  | 405.6 |  |  | 233.1 |  |  | 638.7 |  |  | 37.5 |  |  | 601.2
﻿Gross profit |  |  | 240.9 |  |  | 108.9 |  |  | 349.8 |  |  | 31.4 |  |  | 318.4
﻿Operating expenses |  |  | 214.3 |  |  | 77.8 |  |  | 292.1 |  |  | 25.0 |  |  | 267.1
﻿Operating income |  |  | 26.6 |  |  | 31.1 |  |  | 57.7 |  |  | 6.4 |  |  | 51.3
﻿Interest expense |  |  | 75.5 |  |  | 0.4 |  |  | 75.9 |  |  | 0.5 |  |  | 75.4
﻿Other non-operating (income) expense, net |  |  | (1.0) |  |  | 0.2 |  |  | (0.8) |  |  | — |  |  | (0.8)
﻿(Loss) income from operations before income taxes |  | $ | (47.9) |  | $ | 30.5 |  | $ | (17.4) |  | $ | 5.9 |  | $ | (23.3)
﻿ During the three month period ended December 30, 2018, the Company recognized $29.0 million of incremental depreciation and amortization expenses included in General and Administrative Expenses on the Company’s Condensed Consolidated Statements of Income associated with long-lived assets that had ceased depreciating or amortizing during the period in which the assets were held for sale in order to reflect the carrying value of HPC net assets as if they had been held for use during that period. During the three month period ended December 30, 2018, the Company had incurred HPC divestiture related transaction costs of $4.7 million which are included in General and Administrative Expenses on the Company’s Condensed Consolidated Statements of Income.

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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