Steel Partners Holdings L.P. (NYSE: SPLP), a diversified global
holding company, today announced operating results for the first
quarter ended March 31, 2020.
Financial Overview
First quarter of 2020 compared with first quarter of 2019
- Revenue for the 2020 first quarter decreased to $347.9 million
from $355.8 million for the same period in 2019.
- Net loss from continuing operations for the 2020 first quarter
was $36.5 million, as compared to income of $19.8 million for the
same period in 2019.
- Net loss attributable to the Company's common unitholders for
the 2020 first quarter was $61.7 million, or $2.47 per common unit,
as compared to income of $15.7 million, or $0.48 per diluted common
unit, for the same period in 2019.
- The Company generated $36.9 million in Adjusted EBITDA for the
quarter, as compared to $41.9 million for the same period in
2019.
The Company is presenting Adjusted EBITDA to assist investors
with their understanding of Steel Partners' results of operations
and financial condition. See "Note Regarding Use of Non-GAAP
Financial Measurements" below for the definition of Adjusted
EBITDA.
"Our top priorities include the health and safety of our
employees and fulfilling customer commitments. I am extremely proud
of how our company has responded to the uncertainty created by the
COVID-19 crisis," said Warren Lichtenstein, Executive Chairman of
Steel Partners. "Our businesses have proved to be resilient during
these challenging times. However, we have seen and expect to
continue to see a reduction in demand across our business
operations during the second quarter, including significant impacts
in our Energy and Financial Services segments. We remain confident
that the actions we have taken to control expenses and maintain
liquidity will position our businesses to withstand a potentially
prolonged economic downturn."
Prioritizing People
Steel Partners has implemented a variety of measures to promote
the health and safety of its employees and their families during
this pandemic. These measures include business travel restrictions,
remote work capabilities, social distancing practices, increased
cleaning frequency and thoroughness, temperature screenings, and
quarantine protocols. The Company's practices and policies are
informed by recommendations from public health authorities, such as
the Centers for Disease Control and Prevention and the World Health
Organization, which are being closely monitored by Steel Partners'
COVID-19 Task Force.
Maintaining Operations
Our management teams are working closely with customers to
maintain visibility of market developments. Steel Partners
continually aligns its global manufacturing resources as customer
needs and market conditions change. The majority of Steel Partners'
business lines are considered "critical" or "essential" by
governmental agencies, so the Company has maintained operations at
nearly all its facilities. With its global footprint, reliable
network of high-quality suppliers, and diverse business
composition, Steel Partners has avoided lengthy operational
disruptions and continues to support its customers around the
world.
In our Energy segment, operating results improved by $2.0
million during the first quarter on a year-over-year basis.
However, oil prices fell significantly in March and reached
historic lows in the second quarter, primarily due to excess supply
and limited storage capacity resulting from the COVID-19 pandemic.
We continue to scale the business to near-term demand.
Financial Position and Liquidity
The Company has initiated cost reduction actions, including
deferral of management and board fees, hiring freezes, employee
furloughs, staffing and force reductions, and salary reductions to
mitigate the financial impact of the COVID-19 pandemic. The Company
continues its focus on cash management and liquidity, which
includes the elimination of discretionary spending and strict
approvals for capital expenditures. As of March 31, 2020, the
Company maintained cash and investments totaling $398.6 million,
excluding cash associated with our WebBank operations.
The Company continues to monitor the roll-out of federal
assistance programs designed for mid-sized businesses and is taking
advantage of existing federal assistance programs, which include
pension contribution deferrals, interest limitation modifications
for federal income tax reporting, alternative minimum tax credit
refunds, and payroll tax deferrals.
2020 Outlook
Due to the continued uncertainty of the impact of COVID-19 on
the global economy, it is difficult to predict the duration of the
pandemic and its impact on the Company's business, operations, and
financial condition. There is no certainty that federal, state, or
local regulations regarding safety measures to address the spread
of COVID-19 will not adversely impact the Company's operations.
Accordingly, the Company is not able to provide 2020 guidance at
this time. The Company will reconsider its ability to provide 2020
guidance in connection with its second quarter earnings
release.
Financial Tables
Financial Summary (unaudited)
(in thousands, except per common
unit)
Three Months Ended March
31,
2020
2019
Revenue
$
347,900
$
355,813
Costs and expenses, excluding realized and
unrealized losses (gains) on securities
335,279
344,539
Realized and unrealized losses (gains) on
securities, net
18,002
(2,109
)
Total costs and expenses
353,281
342,430
(Loss) income from continuing operations
before income taxes and equity method investments
(5,381
)
13,383
Income tax (benefit) provision
(3,429
)
3,002
Loss (income) of associated companies, net
of taxes
34,507
(9,381
)
Net (loss) income from continuing
operations
(36,459
)
19,762
Loss from discontinued operations, net
of taxes
(25,148
)
(4,140
)
Net (loss) income
(61,607
)
15,622
Net (income) loss attributable to
noncontrolling interests in consolidated entities
(130
)
56
Net (loss) income attributable to
common unitholders
$
(61,737
)
$
15,678
Net (loss) income per common unit -
basic
$
(2.47
)
$
0.63
Net (loss) income per common unit -
diluted
$
(2.47
)
$
0.48
Capital expenditures
$
(6,994
)
$
(6,657
)
Balance Sheet Data (March 31, 2020
unaudited)
(in thousands, except common and
preferred units)
March 31,
December 31,
2020
2019
Cash and cash equivalents
$
395,822
$
139,467
WebBank cash and cash equivalents
218,223
125,047
Cash and cash equivalents, excluding
WebBank
$
177,599
$
14,420
Marketable securities
$
123
$
220
Long-term investments
$
220,832
$
275,836
Total debt
$
565,407
$
338,089
Preferred unit liability, including
current portion of $39,782 as of December, 31, 2019
$
143,347
$
184,029
Total partners' capital
$
425,523
$
472,613
Common units outstanding
25,013,274
25,023,128
Preferred units outstanding
6,327,288
7,927,288
Supplemental Non-GAAP Disclosures
(unaudited)
Adjusted EBITDA Reconciliation:
(in thousands)
Three Months Ended March
31,
2020
2019
Net (loss) income from continuing
operations
$
(36,459
)
$
19,762
Income tax (benefit) provision
(3,429
)
3,002
(Loss) income from continuing
operations before income taxes
(39,888
)
22,764
Add (Deduct):
Loss (income) of associated companies, net
of taxes
34,507
(9,381
)
Realized and unrealized losses (gains) on
securities, net
18,002
(2,109
)
Interest expense
8,315
10,205
Depreciation
10,953
10,966
Amortization
5,282
5,265
Non-cash asset impairment charges
617
—
Non-cash pension expense
552
1,969
Non-cash equity-based compensation
206
164
Other items, net
(1,625
)
2,079
Adjusted EBITDA
$
36,921
$
41,922
Segment Results (unaudited)
(in thousands)
Three Months Ended March
31,
2020
2019
Revenue:
Diversified industrial
$
262,300
$
280,921
Energy
38,602
38,986
Financial services
46,998
35,906
Total revenue
$
347,900
$
355,813
Income (loss) from continuing
operations before interest expense and income taxes:
Diversified industrial
$
14,874
$
15,045
Energy
202
(1,755
)
Financial services
4,006
13,232
Corporate and other
(50,655
)
6,447
(Loss) income from continuing
operations before interest expense and income taxes
(31,573
)
32,969
Interest expense
8,315
10,205
Income tax (benefit) provision
(3,429
)
3,002
Net (loss) income from continuing
operations
$
(36,459
)
$
19,762
Loss (income) of associated companies,
net of taxes:
Corporate and other
$
34,507
$
(9,381
)
Total
$
34,507
$
(9,381
)
Segment depreciation and
amortization:
Diversified industrial
$
12,267
$
11,654
Energy
3,756
4,445
Financial services
171
98
Corporate and other
41
34
Total depreciation and amortization
$
16,235
$
16,231
Segment Adjusted EBITDA:
Diversified industrial
$
27,253
$
29,559
Energy
4,523
2,445
Financial services
4,174
13,325
Corporate and other
971
(3,407
)
Total Adjusted EBITDA
$
36,921
$
41,922
During the first quarter of 2020, the Company changed the
methods used to measure reported segment income or loss by
allocating additional expenses from the Corporate and Other segment
to the Diversified Industrial, Energy, and Financial Services
segments. In addition, the Company recast all 2019 financial
information associated with API Group Limited and certain of its
affiliates, which were deconsolidated during the first quarter of
2020 and previously included in the Diversified Industrial segment,
to discontinued operations. The 2019 financial information has been
recast to reflect these changes on a comparable basis.
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." The Company is presenting Adjusted EBITDA because it
believes that it provides useful information to investors about the
Company's business and its financial condition. 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 believes Adjusted EBITDA is useful to investors because
it is one of the 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
an internal profitability measure, as a component in evaluating the
ability and the desirability of making capital expenditures and
significant acquisitions, and as an element in determining
executive compensation.
However, Adjusted EBITDA is not a measure of financial
performance under generally accepted accounting principles in the
U.S. ("U.S. GAAP"), and the items excluded from Adjusted EBITDA are
significant components in understanding and assessing financial
performance. Therefore, Adjusted EBITDA should not be considered a
substitute for net income or loss, 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 the Company's discontinued
operations;
- Adjusted EBITDA does not include non-cash charges for pension
expense and equity-based compensation; and
- Adjusted EBITDA does not include certain other non-recurring
and non-cash items.
The Company compensates for these limitations by relying
primarily on its U.S. GAAP financial measures and by using Adjusted
EBITDA only as supplemental information. The Company believes that
consideration of Adjusted EBITDA, together with a careful review of
its U.S. GAAP financial measures, is a well-informed method of
analyzing SPLP.
The Company reconciles Adjusted EBITDA to net income or loss
from continuing operations, which does not include amounts reported
under U.S. GAAP related to noncontrolling interests in consolidated
entities, and that reconciliation is set forth above. Because
Adjusted EBITDA is not a measurement determined in accordance with
U.S. GAAP and is susceptible to varying calculations, Adjusted
EBITDA, as presented, may not be comparable to other similarly
titled measures of other companies. Revenue and expenses are
measured in accordance with the policies and procedures described
in the Company's Annual Report on Form 10-K for the year ended
December 31, 2019.
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, direct marketing, banking, and
youth sports.
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 "may," "should," "expect," "hope,"
"anticipate," "believe," "intend," "plan," "estimate," and similar
expressions. These forward-looking statements 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 2020 and
beyond to differ materially from those expressed in, or implied by,
these forward-looking statements. These factors include, without
limitation, the impact of COVID-19 on business activity generally
and on the Company's operations including whether facilities
considered to be essential retain that designation, the continued
decline of crude oil prices, customers' acceptance of our new and
existing products, our ability to deploy our capital in a manner
that maximizes unitholder value, the ability to consolidate and
manage the Company's newly acquired businesses, the potential
fluctuation in the Company's operating results, the Company's
ongoing cash flow requirements for defined benefit pension plans,
the cost of compliance with extensive federal and state regulatory
requirements and any potential liability thereunder, the Company's
need for additional financing and the terms and conditions of any
financing that is consummated, the ability to identify suitable
acquisition candidates or investment opportunities for our core
businesses, the impact of losses in the Company's investment
portfolio, the effect of rising interest rates and the phase-out of
LIBOR, our ability to protect the Company's intellectual property
rights, the Company's ability to manage risks inherent to
conducting business internationally, the outcome of litigation or
other legal proceedings in which we are involved from time to time,
a significant disruption in, or breach in security of, our
technology systems, labor disputes and the ability to recruit and
retain experienced personnel, general economic conditions,
fluctuations in demand for our products and services, the inability
to realize the benefits of net operating losses of our affiliates
and subsidiaries, the possible volatility of our common or
preferred unit trading prices, 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, 2019 and Form 10-Q for the quarterly period
ended March 31, 2020, 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.
Except as otherwise required by law, SPLP 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/20200507005854/en/
Investor contact: Steel Partners Holdings L.P. Jennifer
Golembeske, 212-520-2300 jgolembeske@steelpartners.com
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