Fourth Quarter 2023 Results
- Revenue totaled $466.9 million
- Net income was $42.7 million
- Net income attributable to common unitholders was $41.3
million, or $1.75 per diluted common unit
- Adjusted EBITDA* totaled $59.4 million; Adjusted EBITDA margin*
was 12.7%
- Net cash provided by operating activities was $9.5 million
- Adjusted free cash flow* totaled $87.6 million
- Total debt was $191.4 million; net cash,* which also includes
our pension and preferred unit liabilities, less cash and
investments, totaled $56.4 million
Full Year 2023 Results
- Revenue totaled $1.9 billion
- Net income was $154.0 million
- Net income attributable to common unitholders was $150.8
million, or $6.43 per diluted common unit
- Adjusted EBITDA* totaled to $240.6 million; Adjusted EBITDA
margin* was 12.6%
- Net cash provided by operating activities was $21.2
million
- Adjusted free cash flow* totaled $236.0 million
Steel Partners Holdings L.P. (NYSE: SPLP), a diversified global
holding company, today announced operating results for the fourth
quarter and year ended December 31, 2023. The financial results of
Steel Connect, Inc. ("Steel Connect" or "STCN") have been included
in the Company's consolidated financial statements since the
exchange transaction on May 1, 2023.
Unaudited
Q4 2023
Q4 2022
($ in thousands)
FY 2023
FY 2022
$466,907
$422,615
Revenue
$1,905,457
$1,695,441
42,697
73,083
Net income
154,002
206,165
41,261
73,012
Net income attributable to common
unitholders
150,829
205,972
59,358
44,649
Adjusted EBITDA*
240,559
228,434
12.7%
10.6%
Adjusted EBITDA margin*
12.6%
13.5%
14,784
17,353
Purchases of property, plant and
equipment
51,451
47,541
87,587
30,260
Adjusted free cash flow*
235,980
146,272
* See reconciliations to the nearest GAAP
measure included in the financial tables. See "Note Regarding Use
of Non-GAAP Financial Measurements" below for the definition of
these non-GAAP measures.
Results of Operations
Comparisons of the Three Months and
Years Ended December 31, 2023 and 2022
Unaudited
(Dollar amounts in table in thousands,
unless otherwise indicated)
Three Months Ended December
31,
Year Ended December
31,
2023
2022
2023
2022
Revenue
$
466,907
$
422,615
$
1,905,457
$
1,695,441
Cost of goods sold
269,040
266,296
1,103,017
1,096,936
Selling, general and administrative
expenses
128,708
102,778
504,960
383,377
Asset impairment charges
536
278
865
3,162
Interest expense
2,466
6,197
18,400
20,649
Realized and unrealized gains on
securities, net
(923
)
(57,361
)
(7,074
)
(34,791
)
Gains from sales of businesses
(58
)
(203
)
(58
)
(85,683
)
All other expenses, net *
27,474
20,237
124,141
36,293
Total costs and expenses
427,243
338,222
1,744,251
1,419,943
Income before income taxes and equity
method investments
39,664
84,393
161,206
275,498
Income tax provision (benefit)
33
17,688
(1,674
)
73,944
(Income) loss of associated companies, net
of taxes
(3,066
)
(6,378
)
8,878
(4,611
)
Net income
42,697
73,083
154,002
206,165
Net income attributable to
noncontrolling interests in consolidated entities
(1,436
)
(71
)
(3,173
)
(193
)
Net income attributable to common
unitholders
$
41,261
$
73,012
$
150,829
$
205,972
* includes finance interest,
provision (benefit) for credit losses, and other expenses (income)
from the consolidated statements of operations
Revenue
Revenue for the three months ended December 31, 2023 increased
$44.3 million , or 10.5%, as compared to the same period last year.
The increase was driven primarily by favorable impact of the
recently added Supply Chain segment and higher revenue for the
Financial Services segment, partially offset by lower sales from
the Diversified Industrial segment and lower revenue from the
Energy segment.
Revenue in the year ended December 31, 2023 increased $210.0
million, or 12.4%, as compared to 2022, as a result of higher
revenue from the Financial Services segment and favorable impact of
the recently added Supply Chain segment, partially offset by lower
sales from the Diversified Industrial segment and lower revenue
from the Energy segment.
Cost of Goods Sold
Cost of goods sold for the three months ended December 31, 2023
increased $2.7 million, or 1.0%, as compared to the same period
last year. The increase was primarily due to the recently added
Supply Chain segment, partially offset by lower revenue for the
Diversified Industrial and Energy segments, discussed above.
Cost of goods sold in the year ended December 31, 2023 increased
$6.1 million, or 0.6%, as compared to 2022, resulting from the
recently added Supply Chain segment, partially offset by lower
revenue for the Diversified Industrial and Energy segments
discussed above.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") for
the three months ended December 31, 2023 increased $25.9 million,
or 25.2%, as compared to the same period last year. The SG&A
increase was primarily driven by: (1) $18.1 million increase in the
Financial Services segment primarily due to higher credit
performance fees due to higher credit risk transfer ("CRT")
balances and higher personnel expenses related to incremental
headcount and (2) $9.3 million for the recently added Supply Chain
segment. The increases were partially offset by $3.7 million lower
Corporate SG&A expenses primarily due to lower legal expenses
as compared to the last year period.
SG&A in 2023 increased $121.6 million, or 31.7%, as compared
to 2022. The SG&A increase was primarily driven by: (1) $86.8
million increase in the Financial Services segment primarily due to
higher credit performance fees due to higher CRT balances and
higher personnel expenses related to incremental headcount, (2)
$25.2 million increase for the Supply Chain segment, and (3) $24.1
million increase for the Diversified Industrial segment primarily
due to net pension expense, despite the impact of the divestiture
of the SLPE business of $5.0 million. These increases were
partially offset by lower Corporate SG&A expenses of $15.4
million due primarily to lower legal fees as compared to the last
year period.
Asset Impairment Charges
The Company recorded asset impairment charges of $0.5 million
and $0.3 million for the three months ended December 31, 2023 and
2022, respectively. These charges were primarily related to idle
machinery and equipment from the Diversified Industrial
segment.
The Company recorded asset impairment charges of $0.9 million
and $3.2 million for the twelve months ended December 31, 2023 and
2022, respectively. The 2023 charges were primarily driven by idle
machinery and equipment associated with the Building Materials and
Electrical Products business units within the Diversified
Industrial segment. The 2022 charges were primarily related to the
implementation costs of an ERP project associated with the Kasco
business within the Diversified Industrial segment.
Interest Expense
Interest expense for the three months ended December 31, 2023
and 2022 was $2.5 million and $6.2 million, respectively. Interest
expense for the years ended December 31, 2023 and 2022 was $18.4
million and $20.6 million, respectively. The lower interest expense
for the three months and the year ended December 31, 2023 was
primarily due to lower average debt levels, partially offset by
higher average interest rates.
Realized and Unrealized Gains on Securities, Net
The Company recorded gains of $0.9 million for the three months
ended December 31, 2023, as compared to $57.4 million in 2022, and
gains of $7.1 million and $34.8 million for the years ended
December 31, 2023 and 2022, respectively. The changes in realized
and unrealized gains on securities, net over the respective periods
are primarily due to mark-to-market adjustments on the Company's
portfolio of securities.
All Other Expenses, Net
All other expense, net totaled $27.5 million for the three
months ended December 31, 2023, as compared to $20.2 million for
the year ended December 31, 2022. The incremental all other
expense, net for the three months ended December 31, 2023 was
primarily due to higher finance interest expense of $16.6 million,
partially offset by lower provisions for credit losses of $7.6
million related to the Financial Service segment, as compared to
2022.
All other expense, net totaled $124.1 million for the year ended
December 31, 2023, as compared to $36.3 million for the year ended
December 31, 2022. The incremental all other expense, net for the
years ended December 31, 2023 was primarily due to higher finance
interest expense of $63.5 million and higher provisions for credit
losses of $28.6 million related to the Financial Service segment,
as compared to 2022.
Income Taxes
The Company recorded income tax provisions of $0.03 million and
$17.7 million for the three months ended December 31, 2023 and
2022, respectively. The lower effective tax rate for the three
months ended December 31, 2023, is primarily due to a decrease in
U.S. tax expense related to unrealized gains on investment from
related parties which are eliminated for financial statement
purposes, as well as the partial release of valuation allowances on
the Company's deferred tax assets.
For the year ended December 31, 2023, a tax benefit of $1.7
million was recorded, as compared to a tax provision of $73.9
million in 2022. The Company's effective tax rate for the year
ended December 31, 2023 was a benefit of 1.0% as compared to a
provision of 26.8% for the year ended December 31, 2022. The lower
effective tax rate for the year ended December 31, 2023, was
primarily due to certain tax-deferred transactions associated with
internal restructurings undertaken by the Company and the partial
release of valuation allowances on the Company's deferred tax
assets, partially offset by increased state and foreign income
taxes associated with the Company's operations.
As a limited partnership, we are generally not responsible for
federal and state income taxes, and our profits and losses are
passed directly to our limited partners for inclusion in their
respective income tax returns. The Company's tax provision
represents the income tax expense or benefit of its consolidated
corporate subsidiaries.
(Income) Loss of Associated Companies, Net of Taxes
The Company recorded income from associated companies, net of
taxes of $3.1 million for the three months ended December 31, 2023,
as compared to $6.4 million for the same period of 2022. The
Company recorded loss from associated companies, net of taxes, of
$8.9 million in 2023 as compared to income, net of taxes of $4.6
million in 2022.
Net Income
Net income for the three months ended December 31, 2023 was
$42.7 million, as compared to $73.1 million for the same period in
2022. The decrease in net income was primarily due to lower
realized and unrealized gains on securities, net, partially offset
by higher income from the Financial Service segment resulting from
higher revenue and favorable impact of added Supply Chain segment,
as well as lower income tax expense. See above explanations for
further details.
Net income for the year ended December 31, 2023 was $154.0
million, as compared to $206.2 million for the year ended December
31, 2022. The decrease in net income for the year ended December
31, 2023 was primarily due to a pre-tax gain of $85.7 million in
2022, primarily related to the divestiture of the SLPE business
from the Diversified Industrial segment and lower realized and
unrealized gains on securities, net, partially offset by higher
income from the Financial Services segment resulting from higher
revenue and favorable impact of the recently added Supply Chain
segment, as well as lower income tax expense. See above
explanations for further details.
Purchases of Property, Plant and Equipment (Capital
Expenditures)
Capital expenditures for the three months ended December 31,
2023 totaled $14.8 million, or 3.2% of revenue, as compared to
$17.4 million, or 4.1% of revenue, in the three months ended
December 31, 2022. For the year ended December 31, 2023, capital
expenditures were $51.5 million, or 2.7% of revenue, as compared to
$47.5 million, or 2.8% of revenue, for the year ended December 31,
2022.
Additional Non-GAAP Financial Measures
Adjusted EBITDA for the three months ended December 31, 2023 was
$59.4 million, as compared to $44.6 million for the same period in
2022. Adjusted EBITDA margin increased to 12.7% in the quarter from
10.6% in the three months ended December 31, 2022, primarily due to
the higher revenue impact of the Financial Services segment,
favorable impact from the newly acquired Supply Chain segment, and
lower SG&A costs from Corporate as compared to the same period
of 2022. Adjusted free cash flow was $87.6 million for the three
months ended December 31, 2023, as compared to $30.3 million for
the same period in 2022.
For the year ended December 31, 2023, Adjusted EBITDA and
Adjusted EBITDA margin were $240.6 million and 12.6%, respectively,
as compared to $228.4 million and 13.5% in 2022. Adjusted EBITDA
increased by $12.1 million primarily due to increases in the
Financial Service segment due to higher revenue, favorable impact
from the newly acquired Supply Chain segment, and lower SG&A
costs from Corporate, partially offset by lower revenue from the
Diversified Industrial segment. Adjusted free cash flow was $236.0
million, as compared to $146.3 million for the same period in
2022.
Liquidity and Capital Resources
As of December 31, 2023, the Company had $399.3 million in
available liquidity under its senior credit agreement, as well as
$407.6 million in cash and cash equivalents, excluding WebBank
cash, and $41.2 million in long-term investments.
As of December 31, 2023, total debt was $191.4 million, an
increase of $11.0 million, as compared to December 31, 2022. As of
December 31, 2023, net cash totaled $56.4 million, an increase of
$104.0 million, as compared to December 31, 2022. Net cash position
in 2023 was primarily due to higher cash balance of $347.5 million
and $38.8 million lower accrued pension liabilities, partially
offset by $268.5 million of lower investment balances and $11.0
million increase of total debt due to additional borrowing of debt,
as compared to the net debt position in 2022. Total leverage (as
defined in the Company's senior credit agreement) was approximately
1.5x as of December 31, 2023 versus 1.4x as of December 31,
2022.
About Steel Partners Holdings L.P.
Steel Partners Holdings L.P. (www.steelpartners.com) is a
diversified global holding company that owns and operates
businesses and has significant interests in various companies,
including diversified industrial products, energy, defense, supply
chain management and logistics, banking and youth sports. At Steel
Partners, our culture and core values of Teamwork, Respect,
Integrity, and Commitment guide our Kids First purpose, which is to
forge a path of success for the next generation by instilling
values, building character, and teaching life lessons through
sports.
(Financial Tables Follow)
Consolidated Balance Sheets
December 31, 2023
December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
577,928
$
234,448
Trade and other receivables - net of
allowance for doubtful accounts of $2,481 and $2,414,
respectively
216,429
183,861
Receivables from related parties
234
961
Loans receivable, including loans held for
sale of $868,884 and $602,675, respectively, net
1,582,536
1,131,745
Inventories, net
202,294
214,084
Prepaid expenses and other current
assets
47,935
40,129
Total current assets
2,627,356
1,805,228
Long-term loans receivable, net
386,072
423,248
Goodwill
148,838
125,813
Other intangible assets, net
114,177
94,783
Other non-current assets
342,046
195,859
Property, plant and equipment, net
253,980
238,510
Operating lease right-of-use assets
76,746
42,711
Long-term investments
41,225
309,697
Total Assets
$
3,990,440
$
3,235,849
LIABILITIES AND CAPITAL
Current liabilities:
Accounts payable
$
131,922
$
109,572
Accrued liabilities
117,943
112,744
Deposits
1,711,585
1,360,477
Payables to related parties
2,529
2,881
Short-term debt
—
685
Current portion of long-term debt
67
67
Other current liabilities
101,086
62,717
Total current liabilities
2,065,132
1,649,143
Long-term deposits
370,107
208,004
Long-term debt
191,304
179,572
Other borrowings
15,065
41,682
Preferred unit liability
154,925
152,247
Accrued pension liabilities
46,195
84,948
Deferred tax liabilities
18,353
41,055
Long-term operating lease liabilities
61,790
35,512
Other non-current liabilities
62,161
42,226
Total Liabilities
2,985,032
2,434,389
Commitments and Contingencies
Capital:
Partners' capital common units: 21,296,067
and 21,605,093 issued and outstanding (after deducting 18,367,307
and 17,904,679 units held in treasury, at cost of $329,297 and
$309,257, respectively
1,079,853
952,094
Accumulated other comprehensive loss
(121,223
)
(151,874
)
Total Partners' Capital
958,630
800,220
Noncontrolling interests in consolidated
entities
46,778
1,240
Total Capital
1,005,408
801,460
Total Liabilities and Capital
$
3,990,440
$
3,235,849
Consolidated Statements of
Operations
Unaudited
Three Months Ended December
31,
Year Ended December
31,
2023
2022
2023
2022
Revenue:
Diversified Industrial net sales
$
275,394
$
299,553
$
1,193,964
$
1,285,666
Energy net revenue
34,218
45,061
179,438
181,811
Financial Services revenue
112,341
78,001
416,911
227,964
Supply Chain revenue
44,954
—
115,144
—
Total revenue
466,907
422,615
1,905,457
1,695,441
Costs and expenses:
Cost of goods sold
269,040
266,296
1,103,017
1,096,936
Selling, general and administrative
expenses
128,708
102,778
504,960
383,377
Asset impairment charges
536
278
865
3,162
Finance interest expense
25,938
9,301
80,432
16,907
Provision for credit losses
3,845
11,419
51,824
23,177
Interest expense
2,466
6,197
18,400
20,649
Gains from sales of businesses
(58
)
(203
)
(58
)
(85,683
)
Realized and unrealized gains on
securities, net
(923
)
(57,361
)
(7,074
)
(34,791
)
Other income, net
(2,309
)
(483
)
(8,115
)
(3,791
)
Total costs and expenses
427,243
338,222
1,744,251
1,419,943
Income from operations before income
taxes and equity method investments
39,664
84,393
161,206
275,498
Income tax provision (benefit)
33
17,688
(1,674
)
73,944
(Income) loss of associated companies, net
of taxes
(3,066
)
(6,378
)
8,878
(4,611
)
Net income
42,697
73,083
154,002
206,165
Net income attributable to
noncontrolling interests in consolidated entities
(1,436
)
(71
)
(3,173
)
(193
)
Net income attributable to common
unitholders
$
41,261
$
73,012
$
150,829
$
205,972
Net income per common unit -
basic
Net income attributable to common
unitholders
$
1.94
$
3.17
$
7.04
$
9.03
Net income per common unit -
diluted
Net income attributable to common
unitholders
$
1.75
$
2.82
$
6.43
$
8.12
Weighted-average number of common units
outstanding - basic
21,250,547
23,038,179
21,433,900
22,813,588
Weighted-average number of common units
outstanding - diluted
25,348,229
27,020,358
25,356,796
26,869,440
Consolidated Statements of Cash
Flows
(in thousands)
Year Ended December
31,
2023
2022
Cash flows from operating
activities:
Net income
$
154,002
$
206,165
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for credit losses
51,824
23,177
Loss (income) of associated companies, net
of taxes
8,878
(4,611
)
Realized and unrealized gains on
securities, net
(7,074
)
(34,791
)
Gains from sale of businesses
(58
)
(85,683
)
Gain on sale of property, plant and
equipment
—
(940
)
Derivative gains on economic interests in
loans
(4,713
)
(5,294
)
Non-cash pension expense (income)
11,806
(7,042
)
Deferred income taxes
(30,069
)
48,546
Depreciation and amortization
56,565
53,755
Non-cash lease expense
18,377
10,461
Equity-based compensation
1,617
1,280
Asset impairment charges
865
3,162
Other
4,166
2,843
Net change in operating assets and
liabilities:
Trade and other receivables
4,802
(710
)
Inventories
19,247
(41,086
)
Prepaid expenses and other assets
(7,718
)
(10,431
)
Accounts payable, accrued and other
liabilities
4,914
35,012
Net increase in loans held for sale
(266,209
)
(404,043
)
Net cash provided by (used in) operating
activities
21,222
(210,230
)
Cash flows from investing
activities:
Purchases of investments
(208,836
)
(310,798
)
Proceeds from maturities of
investments
45,731
156,050
Proceeds from sales of investments
213,319
19,828
Principal repayment on Steel Connect
Convertible Note
1,000
—
Loan originations, net of collections
(208,571
)
(90,030
)
Purchases of property, plant and
equipment
(51,451
)
(47,541
)
Proceeds from sale of property, plant and
equipment
1,846
1,241
Proceeds from sale of businesses
—
142,426
Acquisitions, net of cash acquired
—
(47,280
)
Increase in cash upon consolidation of
Steel Connect
65,896
—
Other
(1,136
)
(454
)
Net cash used in investing activities
(142,202
)
(176,558
)
Cash flows from financing
activities:
Net revolver borrowings (repayments)
11,115
(90,616
)
Repayments of term loans
(67
)
(82
)
Purchases of the Company's common
units
(20,040
)
(44,973
)
Net decrease in other borrowings
(26,486
)
(291,117
)
Distribution to preferred unitholders
(9,633
)
(9,633
)
Purchase of subsidiary shares from
noncontrolling interests
(2,934
)
(8,606
)
Tax withholding related to vesting of
restricted units
(605
)
(1,394
)
Net increase in deposits
513,211
743,593
Net cash provided by financing
activities
464,561
297,172
Net change for the period
343,581
(89,616
)
Effect of exchange rate changes on cash
and cash equivalents
(101
)
(1,299
)
Cash and cash equivalents at beginning of
period
234,448
325,363
Cash and cash equivalents at end of
period
$
577,928
$
234,448
Supplemental Balance Sheet Data
(in thousands, except common and
preferred units)
December 31,
December 31,
2023
2022
Cash and cash equivalents
$
577,928
$
234,448
WebBank cash and cash equivalents
170,286
174,257
Cash and cash equivalents, excluding
WebBank
$
407,642
$
60,191
Common units outstanding
21,296,067
21,605,093
Preferred units outstanding
6,422,128
6,422,128
Supplemental Non-GAAP
Disclosures
Adjusted EBITDA Reconciliation:
Unaudited
(in thousands)
Three Months Ended December
31,
Year Ended December
31,
2023
2022
2023
2022
Net income from continuing
operations
$
42,697
$
73,083
$
154,002
$
206,165
Income tax provision (benefit)
33
17,688
(1,674
)
73,944
Income from continuing operations
before income taxes
42,730
90,771
152,328
280,109
Add (Deduct):
(Income) loss of associated companies, net
of taxes
(3,066
)
(6,378
)
8,878
(4,611
)
Realized and unrealized gains on
securities, net
(923
)
(57,361
)
(7,074
)
(34,791
)
Interest expense
2,466
6,197
18,400
20,649
Depreciation
10,756
9,758
39,978
38,394
Amortization
4,376
3,785
16,587
15,361
Non-cash asset impairment charges
536
278
865
3,162
Non-cash pension expense
2,858
(1,637
)
11,806
(7,042
)
Non-cash equity-based compensation
610
438
1,617
1,280
Gains from sales of businesses
(58
)
(203
)
(58
)
(85,683
)
Other items, net
(927
)
(999
)
(2,768
)
1,606
Adjusted EBITDA
$
59,358
$
44,649
$
240,559
$
228,434
Total revenue
$
466,907
$
422,615
$
1,905,457
$
1,695,441
Adjusted EBITDA margin
12.7
%
10.6
%
12.6
%
13.5
%
Net Cash (Debt) Reconciliation:
(in thousands)
December 31,
December 31,
2023
2022
Total debt
$
(191,371
)
$
(180,324
)
Accrued pension liabilities
(46,195
)
(84,948
)
Preferred unit liability, including
current portion
(154,925
)
(152,247
)
Cash and cash equivalents, excluding
WebBank
407,642
60,191
Long-term investments
41,225
309,697
Net cash (debt)
$
56,376
$
(47,631
)
Adjusted Free Cash Flow
Reconciliation:
Unaudited
(in thousands)
Three Months Ended December
31,
Year Ended December
31,
2023
2022
2023
2022
Net cash provided by (used in) operating
activities of continuing operations
$
9,547
$
(151,706
)
$
21,222
$
(210,230
)
Purchases of property, plant and
equipment
(14,784
)
(17,353
)
(51,451
)
(47,541
)
Net increase in loans held for sale
92,824
199,319
266,209
404,043
Adjusted free cash flow
$
87,587
$
30,260
$
235,980
$
146,272
Segment Results
Unaudited
(in thousands)
Three Months Ended December
31,
Year Ended December
31,
2023
2022
2023
2022
Revenue:
Diversified Industrial
$
275,394
$
299,553
$
1,193,964
$
1,285,666
Energy
34,218
45,061
179,438
181,811
Financial Services
112,341
78,001
416,911
227,964
Supply Chain
44,954
—
115,144
—
Total revenue
$
466,907
$
422,615
$
1,905,457
$
1,695,441
Income (loss) before interest expense
and income taxes:
Diversified Industrial
$
9,922
$
17,095
$
70,937
$
200,629
Energy
1,008
(404
)
16,247
13,608
Financial Services
26,002
18,706
74,248
63,477
Supply Chain
2,880
—
8,726
—
Corporate and other
5,384
61,571
570
23,044
Income before interest expense and
income taxes
45,196
96,968
170,728
300,758
Interest expense
2,466
6,197
18,400
20,649
Income tax provision (benefit)
33
17,688
(1,674
)
73,944
Net income
$
42,697
$
73,083
$
154,002
$
206,165
(Income) loss of associated companies,
net of taxes:
Corporate and other
$
(3,066
)
$
(6,378
)
$
8,878
$
(4,611
)
Total
$
(3,066
)
$
(6,378
)
$
8,878
$
(4,611
)
Segment depreciation and
amortization:
Diversified Industrial
$
11,091
$
10,177
$
41,424
$
41,805
Energy
2,333
2,846
10,065
10,546
Financial Services
205
358
835
750
Supply Chain
1,335
—
3,569
—
Corporate and other
168
162
672
654
Total depreciation and amortization
$
15,132
$
13,543
$
56,565
$
53,755
Segment Adjusted EBITDA:
Diversified Industrial
$
24,376
$
23,639
$
124,746
$
153,120
Energy
2,113
2,367
24,630
23,905
Financial Services
26,207
19,199
73,780
63,499
Supply Chain
4,373
—
13,179
—
Corporate and other
2,289
(556
)
4,224
(12,090
)
Total Adjusted EBITDA
$
59,358
$
44,649
$
240,559
$
228,434
Note Regarding Use of Non-GAAP Financial Measurements
The financial data contained in this press release includes
certain non-GAAP financial measurements as defined by the U.S.
Securities and Exchange Commission ("SEC,"), including "Adjusted
EBITDA," "Net Cash (Debt)" and "Adjusted Free Cash Flow." The
Company is presenting these non-GAAP financial measurements because
it believes that these measures provide useful information to
investors about the Company's business and its financial condition.
The Company believes these measures are useful to investors because
they are measures used by the Company's Board of Directors and
management to evaluate its ongoing business, including in internal
management reporting, budgeting and forecasting processes, in
comparing operating results across the business, as internal
profitability measures, as components in assessing liquidity and
evaluating the ability and the desirability of making capital
expenditures and significant acquisitions, and as elements in
determining executive compensation.
The Company defines Adjusted EBITDA as net income or loss from
continuing operations before the effects of income or loss from
investments in associated companies and other investments held at
fair value, interest expense, taxes, depreciation and amortization,
non-cash pension expense or income, and realized and unrealized
gains or losses on investments, and excludes certain non-recurring
and non-cash items.
The Company defines Net Cash (Debt) as the sum of total debt,
loan guarantee liability, accrued pension liabilities and preferred
unit liability, less the sum of cash and cash equivalents
(excluding those used in WebBank's banking operations), marketable
securities, and long-term investments.
The Company defines Adjusted Free Cash Flow as net cash provided
by or used in operating activities of continuing operations less
the sum of purchases of property, plant and equipment, and net
increases or decreases in loans held for sale.
However, the measures are not measures of financial performance
under generally accepted accounting principles in the U.S. ("U.S.
GAAP"), and the items excluded from these measures are significant
components in understanding and assessing financial performance.
Therefore, these non-GAAP financial measurements should not be
considered substitutes for net income or loss, total debt, or cash
flows from operating, investing, or financing activities. Because
Adjusted EBITDA is calculated before recurring cash charges,
including realized losses on investments, interest expense, and
taxes, and is not adjusted for capital expenditures or other
recurring cash requirements of the business, it should not be
considered as a measure of discretionary cash available to invest
in the growth of the business. There are a number of material
limitations to the use of Adjusted EBITDA as an analytical tool,
including the following:
- Adjusted EBITDA does not reflect the Company's tax provision or
the cash requirements to pay its taxes;
- Adjusted EBITDA does not reflect income or loss from the
Company's investments in associated companies and other investments
held at fair value;
- Adjusted EBITDA does not reflect the Company's interest
expense;
- Although depreciation and amortization are non-cash expenses in
the period recorded, the assets being depreciated and amortized may
have to be replaced in the future, and Adjusted EBITDA does not
reflect the cash requirements for such replacement;
- Adjusted EBITDA does not reflect the Company's net realized and
unrealized gains and losses on its investments;
- Adjusted EBITDA does not include non-cash charges for pension
expense and equity-based compensation;
- Adjusted EBITDA does not include amounts related to
noncontrolling interests in consolidated entities;
- Adjusted EBITDA does not include certain other non-recurring
and non-cash items; and
- Adjusted EBITDA does not include the Company's discontinued
operations.
In addition, Net Cash (Debt) assumes the Company's cash and cash
equivalents (excluding those used in WebBank's banking operations),
marketable securities, and long-term investments are immediately
convertible in cash and can be used to reduce outstanding debt
without restriction at their recorded fair value, while Adjusted
Free Cash Flow excludes net increases or decreases in loans held
for sale, which can vary significantly from period-to-period since
these loans are typically sold after origination and thus represent
a significant component in WebBank's operating cash flow
requirements.
The Company compensates for these limitations by relying
primarily on its U.S. GAAP financial measures and using these
measures only as supplemental information. The Company believes
that consideration of Adjusted EBITDA, Net Cash (Debt), and
Adjusted Free Cash Flow, together with a careful review of its U.S.
GAAP financial measures, is a well-informed method of analyzing
SPLP. Because Adjusted EBITDA, Net Cash (Debt), and Adjusted Free
Cash Flow are not measurements determined in accordance with U.S.
GAAP and are susceptible to varying calculations, Adjusted EBITDA,
Net Cash (Debt), and Adjusted Free Cash Flow, as presented, may not
be comparable to other similarly titled measures of other
companies.
Forward-Looking Statements
This press release contains certain "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, that reflect SPLP's current expectations and projections
about its future results, performance, prospects and opportunities.
SPLP identifies these forward-looking statements by using words
such as "expect," "anticipate," "intend," "plan," "believe,"
"seek," "estimate," and similar expressions. These forward-looking
statements are only predictions based upon the Company's current
expectations and projections about future events, and are based on
information currently available to the Company and are subject to
risks, uncertainties, and other factors that could cause its actual
results, performance, prospects, or opportunities in 2024 and
beyond to differ materially from those expressed in, or implied by,
these forward-looking statements. These factors include, without
limitation: disruptions to the Company’s business as a result of
economic downturns; the negative impact of inflation, and supply
chain disruptions; the significant volatility of crude oil and
commodity prices, including from the ongoing Russia-Ukraine war or
the disruptions caused by the ongoing conflict between Israel and
Hamas; the effects of rising interest rates; the Company’s
subsidiaries’ sponsor defined pension plans, which could subject
the Company to future cash flow requirements; the ability to comply
with legal and regulatory requirements, including environmental,
health and safety laws and regulations, banking regulations and
other extensive requirements to which the Company and its
businesses are subject; risks associated with the Company’s
wholly-owned subsidiary, WebBank, as a result of its Federal
Deposit Insurance Corporation ("FDIC") status, highly-regulated
lending programs, and capital requirements; the ability to meet
obligations under the Company's senior credit facility through
future cash flows or financings; the risk of recent events
affecting the financial services industry, including the closures
or other failures of several large banks; the risk of management
diversion, increased costs and expenses, and impact on
profitability in connection with the Company's business strategy to
make acquisitions, including in connection with the Company’s
recent majority investment in the Supply Chain segment; the impact
of losses in the Company's investment portfolio; the Company’s
ability to protect its intellectual property rights and obtain or
retain licenses to use others' intellectual property on which the
Company relies; the Company’s exposure to risks inherent to
conducting business outside of the U.S.; the impact of any changes
in U.S. trade policies; the adverse impact of litigation or
compliance failures on the Company's profitability; a significant
disruption in, or breach in security of, the Company’s technology
systems or protection of personal data; the loss of any significant
customer contracts; the Company’s ability to maintain effective
internal control over financial reporting; the rights of
unitholders with respect to voting and maintaining actions against
the Company or its affiliates; potential conflicts of interest
arising from certain interlocking relationships amount us and
affiliates of the Company’s Executive Chairman; the Company’s
dependence on the Manager and impact of the management fee on the
Company’s total partners’ capital; the impact to the development of
an active market for the Company’s units due to transfer
restrictions and other factors; the Company’s tax treatment and its
subsidiaries’ ability to fully utilize their tax benefits; the
potential negative impact on our operations of changes in tax
rates, laws or regulations, including U.S. government tax reform;
the loss of essential employees; and other risks detailed from time
to time in filings we make with the SEC. These statements involve
significant risks and uncertainties, and no assurance can be given
that the actual results will be consistent with these
forward-looking statements. Investors should read carefully the
factors described in the "Risk Factors" section of the Company's
filings with the SEC, including the Company's Form 10-K for the
year ended December 31, 2023 and subsequent quarterly reports on
Form 10-Q and annual reports on Form 10-K, for information
regarding risk factors that could affect the Company's results. Any
forward-looking statement made in this press release speaks only as
of the date hereof, and investors should not rely upon
forward-looking statements as predictions of future events. Except
as otherwise required by law, the Company undertakes no obligation
to publicly update or revise any forward-looking statements,
whether as a result of new information, future events, changed
circumstances or any other reason.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240307290427/en/
Investor Relations Jennifer Golembeske 212-520-2300
jgolembeske@steelpartners.com
Steel Partners (NYSE:SPLP)
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