NEW YORK–(BUSINESS WIRE)–Steel Partners Holdings L.P. (NYSE:SPLP), a diversified global
holding company, today announced operating results for the first quarter
ended March 31, 2019.
Revenue for the 2019 first quarter increased to $387.1 million from
$366.2 million for the same period in 2018. Income before income taxes
and equity method investments was $9.2 million for the first quarter of
2019, compared with a loss of $9.5 million in the comparable 2018
period. Net income attributable to the Company’s common unitholders for
the 2019 first quarter was $15.7 million, or $0.48 per diluted common
unit, compared with net loss of $9.1 million, or $0.35 per common unit,
for the same period in 2018.
The Company generated a 12.5% increase in Adjusted EBITDA for the first
quarter of 2019 to $39.6 million from $35.2 million for the same period
in 2018. 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.
2019 Highlights
-
Book value per unit as of March 31, 2019 was $21.10 per unit, as
compared with $20.39 per unit at prior year-end. -
On April 1, 2019, the Company, through its wholly-owned subsidiary,
WebBank, completed the acquisition of National Partners, a national
insurance premium finance company, diversifying its revenue mix with a
secured, low-risk and short-term commercial-based product. -
Steel Partners repurchased 505,336 common units for an aggregate price
of $6.7 million during the first quarter. -
The Company entered into an amendment to its senior secured revolving
credit facility to increase availability, allowing for continued
growth through strategic acquisitions and other investments. -
Investments in affiliated companies and marketable securities provided
pretax gains totaling $12.4 million during the first quarter.
“Each of our business segments registered improved operating results for
the quarter over the comparable prior year period,” said Warren
Lichtenstein, Executive Chairman of Steel Partners. “Within Diversified
Industrial, our building materials, performance materials and electrical
products businesses performed particularly well, and we made excellent
progress implementing our facility consolidation plans and adjusting
staffing levels in our packaging business; WebBank continued its trend
of strong returns, driven by higher interest income due to larger
outstanding loan receivable balances and increased volume in lending
programs; and we experienced strong demand in our Energy segment, based,
in part, on recent increases in oil prices and a larger North American
oil and gas drilling rig count.
“We continue to operate all our companies with a focus on operational
excellence and achieving solid returns on invested capital, with a
collective goal of increasing stakeholder value,” Lichtenstein added.
2019 Outlook
Based on current information, Steel Partners expects 2019 second quarter
revenue between $416 million and $437 million and Adjusted EBITDA
between $52 million and $64 million. The Company anticipates revenue for
the full 2019 year between $1.6 billion and $1.7 billion and Adjusted
EBITDA between $205 million and $222 million.
(Financial Tables on Following Pages)
Financial Summary (unaudited)
| (in thousands, except per common unit) | Three Months Ended March 31, | |||||||||
| 2019 | 2018 | |||||||||
| Revenue | $ | 387,053 | $ | 366,245 | ||||||
|
Costs and expenses, excluding realized and unrealized (gains) losses on securities |
379,960 | 361,932 | ||||||||
| Realized and unrealized (gains) losses on securities, net | (2,109 | ) | 13,789 | |||||||
| Total costs and expenses | 377,851 | 375,721 | ||||||||
| Income (loss) before income taxes and equity method investments | 9,202 | (9,476 | ) | |||||||
| Income tax provision | 2,961 | 1,330 | ||||||||
| Income of associated companies, net of taxes | (9,381 | ) | (1,955 | ) | ||||||
| Net income (loss) | 15,622 | (8,851 | ) | |||||||
|
Net loss (income) attributable to noncontrolling interests in consolidated entities |
56 | (227 | ) | |||||||
| Net income (loss) attributable to common unitholders | $ | 15,678 | $ | (9,078 | ) | |||||
| Net income (loss) per common unit – basic | $ | 0.63 | $ | (0.35 | ) | |||||
| Net income (loss) per common unit – diluted | $ | 0.48 | $ | (0.35 | ) | |||||
| Capital expenditures | $ | 7,353 | $ | 12,010 | ||||||
Balance Sheet Data (March 31, 2019 unaudited)
| (in thousands, except common and preferred units) | March 31, | December 31, | |||||||
| 2019 | 2018 | ||||||||
| Cash and cash equivalents | $ | 212,340 | $ | 334,884 | |||||
| WebBank cash and cash equivalents | 170,813 | 281,566 | |||||||
| Cash and cash equivalents, excluding WebBank | 41,527 | 53,318 | |||||||
| Marketable securities | 1,671 | 1,439 | |||||||
| Long-term investments | 270,613 | 258,044 | |||||||
| Total debt | 488,451 | 481,989 | |||||||
|
Preferred unit liability, including current portion of $37,858 and $0, respectively |
181,416 | 180,340 | |||||||
| Common units outstanding | 24,958,667 | 25,294,003 | |||||||
| Preferred units outstanding | 7,927,288 | 7,927,288 | |||||||
Supplemental Non-GAAP Disclosures (unaudited)
| Adjusted EBITDA Reconciliation: | ||||||||||
| (in thousands) | Three Months Ended March 31, | |||||||||
| 2019 | 2018 | |||||||||
| Net income (loss) | $ | 15,622 | $ | (8,851 | ) | |||||
| Income tax provision | 2,961 | 1,330 | ||||||||
| Income (loss) before income taxes | 18,583 | (7,521 | ) | |||||||
| Add (Deduct): | ||||||||||
| Income of associated companies, net of taxes | (9,381 | ) | (1,955 | ) | ||||||
| Realized and unrealized (gains) losses on securities, net | (2,109 | ) | 13,789 | |||||||
| Interest expense | 10,808 | 8,109 | ||||||||
| Depreciation | 12,069 | 11,351 | ||||||||
| Amortization | 5,466 | 7,351 | ||||||||
| Non-cash pension expense | 1,865 | 908 | ||||||||
| Non-cash equity-based compensation | 164 | 149 | ||||||||
|
Amortization of fair value adjustments to acquisition-date inventories |
— | 603 | ||||||||
| Other items, net | 2,112 | 2,384 | ||||||||
| Adjusted EBITDA | $ | 39,577 | $ | 35,168 | ||||||
Segment Results (unaudited)
| (in thousands) | Three Months Ended March 31, | |||||||||
| 2019 | 2018 | |||||||||
| Revenue: | ||||||||||
| Diversified industrial | $ | 312,161 | $ | 307,618 | ||||||
| Energy | 38,986 | 36,592 | ||||||||
| Financial services | 35,906 | 22,035 | ||||||||
| Total revenue | $ | 387,053 | $ | 366,245 | ||||||
| Income (loss) before interest expense and income taxes: | ||||||||||
| Diversified industrial | $ | 13,785 | $ | 13,448 | ||||||
| Energy | (1,331 | ) | (4,603 | ) | ||||||
| Financial services | 13,026 | 8,530 | ||||||||
| Corporate and other | 3,911 | (16,787 | ) | |||||||
| Income before interest expense and income taxes | 29,391 | 588 | ||||||||
| Interest expense | 10,808 | 8,109 | ||||||||
| Income tax provision | 2,961 | 1,330 | ||||||||
| Net income (loss) | $ | 15,622 | $ | (8,851 | ) | |||||
| Income of associated companies, net of taxes: | ||||||||||
| Corporate and other | $ | 9,381 | $ | 1,955 | ||||||
| Total | $ | 9,381 | $ | 1,955 | ||||||
| Segment depreciation and amortization: | ||||||||||
| Diversified industrial | $ | 12,958 | $ | 13,548 | ||||||
| Energy | 4,445 | 5,022 | ||||||||
| Financial services | 98 | 100 | ||||||||
| Corporate and other | 34 | 32 | ||||||||
| Total depreciation and amortization | $ | 17,535 | $ | 18,702 | ||||||
| Segment Adjusted EBITDA: | ||||||||||
| Diversified industrial | $ | 29,906 | $ | 29,676 | ||||||
| Energy | 2,869 | 367 | ||||||||
| Financial services | 13,119 | 9,494 | ||||||||
| Corporate and other | (6,317 | ) | (4,369 | ) | ||||||
| Total Adjusted EBITDA | $ | 39,577 | $ | 35,168 | ||||||
During the three months ended March 31, 2019, the Company’s investment
gains and losses, including income of associated companies, have been
classified in its Corporate and Other segment and interest expense,
excluding the Financial Services segment’s finance interest expense, has
been removed from the measurement of segment results. Comparable 2018
balances have been reclassified to conform with the current year
presentation.
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 SPLP, its business and its financial
condition. The Company defines Adjusted EBITDA as net income or loss
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
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 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 the most informed method of analyzing SPLP.
The Company reconciles Adjusted EBITDA to net income or loss, 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. Revenues 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,
2018, except for changes made in accordance with the new accounting
pronouncements adopted January 1, 2019, as discussed in Note 1 – “Nature
of the Business and Basis of Presentation” and Note 3 – “Leases” to the
Company’s Form 10-Q filed with the SEC.
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 leading companies in various
industries, 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 has tried to
identify 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 2019 and beyond to
differ materially from those expressed in, or implied by, these
forward-looking statements. These factors include, without limitation,
SPLP’s need for additional financing and the terms and conditions of any
financing that is consummated, customers’ acceptance of its new and
existing products, the risk that the Company and its affiliates will not
be able to compete successfully, the possible volatility of the
Company’s common or preferred unit price and the potential fluctuation
in its operating results. Although SPLP believes that the expectations
reflected in these forward-looking statements are reasonable and
achievable, such 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, 2018, for information regarding risk factors that
could affect the Company’s results. Except as otherwise required by
federal securities laws, 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.
Contacts
Investor:
PondelWilkinson Inc.
Roger S. Pondel, 310-279-5965
[email protected]
