Second Quarter 2020 Highlights
- Revenue totaled $295.4 million, a decrease of 23.4%
- Net loss from continuing operations was $0.4 million
- Net loss attributable to common unitholders was $1.9 million,
or $0.07 per common unit
- Adjusted EBITDA* decreased to $38.9 million; Adjusted EBITDA
margin* was 13.2%
- Net cash provided by operating activities from continuing
operations was $93.8 million
- Adjusted free cash flow* totaled $92.4 million
- Total debt was $365.0 million; net debt* totaled $475.9
million
First Half 2020 Highlights
- Revenue totaled $643.3 million, a decrease of 13.2%
- Net loss from continuing operations was $36.9 million
- Net loss attributable to common unitholders was $63.6 million,
or $2.55 per common unit
- Adjusted EBITDA* decreased to $75.9 million; Adjusted EBITDA
margin* was 11.8%
- Net cash provided by operating activities from continuing
operations was $259.9 million
- Adjusted free cash flow* totaled $95.2 million
Steel Partners Holdings L.P. (NYSE: SPLP), a diversified global
holding company, today announced operating results for the second
quarter and six months ended June 30, 2020. We encourage investors
to read our 2020 Mid-Year Update Letter, which is posted under the
"Investor Relations" section of our website
(www.steelpartners.com).
Q2 2020
Q2 2019
($ in thousands)
H1 2020
H1 2019
$295,437
$385,715
Revenue
$643,337
$741,528
(417)
23,952
Net (loss) income from continuing
operations
(36,876)
43,714
(1,868)
21,063
Net (loss) income attributable to
common unitholders
(63,605)
36,741
38,941
51,280
Adjusted EBITDA*
75,862
93,202
13.2%
13.3%
Adjusted EBITDA margin*
11.8%
12.6%
4,041
9,753
Purchases of property, plant and
equipment
11,035
16,410
92,427
14,252
Adjusted free cash flow*
95,222
27,218
* 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.
The spread of the COVID-19 outbreak has caused significant
disruptions in the U.S. and global economies. The Company continues
to evaluate the global risks and the slowdown in business activity
related to COVID-19, including the potential impacts on its
employees, customers, suppliers, and financial results. As the
situation surrounding COVID-19 remains fluid, it is expected to
continue having a negative impact to the Company, however, it is
difficult to predict the duration of the pandemic and its continued
impact on the Company's business, operations, financial condition,
and cash flows. As the COVID-19 pandemic progressed, the Company
initiated cost reduction actions, including the waiver of
management and board fees, hiring freezes, employee furloughs,
staffing and force reductions, salary reductions, bonus payment
deferrals, and 401(k) match suspension to help mitigate the
financial impact of the COVID-19 pandemic. The Company also froze
all discretionary spend, implemented strict approvals for capital
expenditures, and is aggressively managing working capital. The
Company continues to evaluate further actions as circumstances
warrant.
The COVID-19 pandemic has adversely affected our consolidated
financial results for the first six months of 2020. We anticipate
COVID-19 may continue to have an adverse impact on our business
through the third quarter and potentially beyond. While the Company
developed and implemented, and continues to develop and implement,
health and safety protocols, business continuity plans, and crisis
management protocols in an effort to try to mitigate the negative
impact of COVID-19 to its employees and business, the severity of
the impact of the COVID-19 pandemic on the Company's business in
the remaining quarters of 2020 and beyond will depend on a number
of factors, including, but not limited to, the duration and
severity of the pandemic, governmental actions that have been
taken, or may be taken in the future, in response to the pandemic,
and the extent and severity of the impact on the Company's
customers and suppliers, all of which are uncertain and cannot be
predicted.
"Our top priorities are the health and safety of our employees
and fulfilling customer commitments," said Warren Lichtenstein,
Executive Chairman of Steel Partners. "Throughout the COVID-19
pandemic and economic slowdown, our teams have remained flexible,
positive and focused."
"The pandemic had significant adverse impacts across each of our
segments; however, as we exited the second quarter, overall demand
in our Diversified Industrial segment has returned to near
pre-crisis levels. Our Energy business continues to generate
positive operating results, despite the significant headwinds from
the decline in energy prices and storage issues. And, WebBank's
results for June showed year-over-year improvement, despite the
loan performance deterioration associated with the pandemic during
the second quarter. We remain confident that the actions we have
taken to control expenses and maintain liquidity will position our
business to withstand a potentially prolonged economic
downturn."
Results of Operations
Comparison of the Three and Six Months
Ended June 30, 2020 and 2019
(in thousands)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Revenue
$
295,437
$
385,715
$
643,337
$
741,528
Cost of goods sold
195,199
252,548
416,278
491,015
Selling, general and administrative
expenses
74,936
97,430
151,600
179,753
Asset impairment charges
—
190
617
190
Interest expense
7,722
10,272
16,037
20,477
Realized and unrealized losses (gains) on
securities, net
8,482
(36,377
)
26,484
(38,486
)
All other expenses, net
15,728
15,784
44,332
29,328
Total costs and expenses
302,067
339,847
655,348
682,277
(Loss) income from continuing
operations before income taxes and equity method
investments
(6,630
)
45,868
(12,011
)
59,251
Income tax (benefit) provision
(1,320
)
14,798
(4,749
)
17,800
(Income) loss of associated companies, net
of taxes
(4,893
)
7,118
29,614
(2,263
)
Net (loss) income from continuing
operations
$
(417
)
$
23,952
$
(36,876
)
$
43,714
Revenue
Revenue for the three months ended June 30, 2020 decreased $90.3
million, or 23.4%, as compared to the same period last year, due to
lower sales volume across all the operating segments, primarily due
to the impact of COVID-19.
Revenue for the six months ended June 30, 2020 decreased $98.2
million, or 13.2%, as compared to the same period last year. The
decrease was primarily driven by the Diversified Industrial and
Energy segments due to the impact of COVID-19 during the second
quarter of 2020.
Cost of Goods Sold
Cost of goods sold for the three months ended June 30, 2020
decreased $57.3 million, or 22.7%, as compared to the same period
last year, due to decreases in the Diversified Industrial and
Energy segments. The decreases in the Diversified Industrial and
Energy segments in the three months ended June 30, 2020 were
primarily due to the lower sales volume discussed above, and the
Company's cost reduction efforts to offset the impact of
COVID-19.
Cost of goods sold for the six months ended June 30, 2020
decreased $74.7 million, or 15.2%, as compared to the same period
last year, due to decreases in the Diversified Industrial and
Energy segments. The decreases in the Diversified Industrial and
Energy segments in the six months ended June 30, 2020 were
primarily due to the lower sales volume discussed above, and the
Company's cost reduction efforts to offset the impact of
COVID-19.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") for
the three months ended June 30, 2020 decreased $22.5 million, or
23.1%, as compared to the same period last year. The decrease was
primarily due to lower sales volume and cost reduction initiatives
from all the segments, partially offset by an environmental reserve
charge of $14.0 million in the Diversified Industrial segment
related to a legacy, non-operating site. There was also a $12.5
million expense associated with a legal settlement in the Corporate
segment during the 2019 period.
SG&A for the six months ended June 30, 2020 decreased $28.2
million, or 15.7%, as compared to the same period last year,
primarily due to the lower sales volume and cost reduction
initiatives from all the segments, partially offset by the
environmental reserve charge in the Diversified Industrial segment
noted above. There was also an expense associated with a legal
settlement in the Corporate segment during the 2019 period as noted
above.
Asset Impairment Charges
As a result of COVID-19 related declines in our youth sports
business within the Energy segment, intangible assets of $0.6
million, primarily customer relationships, were fully impaired
during the first quarter of 2020.
Interest Expense
Interest expense for the three months ended June 30, 2020
decreased $2.6 million, or 24.8%, as compared to the same period
last year. The lower interest expense for the three months ended
June 30, 2020 was primarily due to lower interest rates during the
second quarter of 2020, partially offset by higher borrowing
levels.
Interest expense for the six months ended June 30, 2020
decreased $4.4 million, or 21.7%, as compared to the same period
last year. The lower interest expense for the six months ended June
30, 2020 was primarily due to lower interest rates during the first
half of 2020, partially offset by higher borrowing levels.
Realized and Unrealized Losses (Gains) on Securities,
Net
The Company recorded losses of $8.5 million for the three months
ended June 30, 2020, as compared to gains of $36.4 million in the
same period of 2019 and losses of $26.5 million for the six months
ended June 30, 2020, as compared to gains of $38.5 million in 2019.
The change in realized and unrealized losses (gains) on securities
was primarily due to a realized loss on the sale of securities in
the 2020 period, as well as mark-to-market adjustments on the
Company's portfolio of securities in both periods.
All Other Expenses, Net
All other expenses were relatively flat for the three months
ended June 30, 2020, as compared to the same period of 2019. Higher
provision for loan losses were offset by lower finance interest
expense and higher investment income, as compared to the prior
period.
All other expenses increased $15.0 million for the six months
ended June 30, 2020, as compared to the same period of 2019. Higher
provision for loan losses were partially offset by lower finance
interest expense and higher investment income, as compared to the
prior period.
Income Tax (Benefit) Provision
The Company recorded an income tax benefit of $1.3 million and
income tax provision of $14.8 million for the three months ended
June 30, 2020 and 2019, respectively, and an income tax benefit of
$4.7 million and income tax provision of $17.8 million for the six
months ended June 30, 2020 and 2019, respectively. 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. Provision has been made for federal, state, local, or
foreign income taxes on the results of operations generated by our
consolidated subsidiaries that are taxable entities. The difference
between the effective tax rate and statutory federal rate of 21% is
principally due to partnership losses for which no tax benefit is
recognized, as well as changes in certain deferred tax valuation
allowances and various other permanent differences.
(Income) Loss of Associated Companies, Net of Taxes
The Company recorded income from associated companies, net of
taxes of $4.9 million and a loss from associated companies, net of
taxes of $29.6 million for the three and six months ended June 30,
2020, respectively, as compared to a loss of $7.1 million and
income of $2.3 million in the same periods of 2019.
Purchases of Property, Plant and Equipment (Capital
Expenditures)
Capital expenditures for the second quarter of 2020 totaled $4.0
million, or 1.4% of net sales, compared to $9.8 million, or 2.5% of
net sales, in the second quarter of 2019. For the six months ended
June 30, 2020, capital expenditures were $11.0 million, or 1.7% of
net sales, compared to $16.4 million, or 2.2% of net sales, for the
six months ended June 30, 2019.
Additional Non-GAAP Financial Measures
Adjusted EBITDA for the second quarter of 2020 was $38.9 million
versus $51.3 million for the same period in 2019. The Adjusted
EBITDA margin decreased to 13.2% in the quarter from 13.3% in the
second quarter of 2019 primarily due to lower volumes stemming from
the impact of COVID-19. Adjusted free cash flow was $92.4 million
for the second quarter of 2020 versus $14.3 million for the same
period in 2019.
For the six months ended June 30, 2020, Adjusted EBITDA and
Adjusted EBITDA margin were $75.9 million and 11.8%, respectively,
compared to $93.2 million and 12.6% for the same period in 2019.
For the six months ended June 30, 2020, adjusted free cash flow was
$95.2 million versus $27.2 million for the same period in 2019.
Liquidity and Capital Resources
As of June 30, 2020, the Company had $231.5 million in available
liquidity under its senior credit agreement, as well as $56.5
million in cash and cash equivalents, excluding WebBank cash, and
approximately $214.9 million in marketable securities and long-term
investments.
As of June 30, 2020, consolidated debt was $365.0 million, an
increase of approximately $27.0 million compared to December 31,
2019. As of June 30, 2020, net debt totaled $475.9 million, a
decrease of approximately $61.0 million compared to December 31,
2019. Total leverage (as defined in the Company's senior credit
agreement) was 2.83x as of June 30, 2020 versus 3.17x as of
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," "will," 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 financial condition and 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
fluctuations in 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 U.S. Securities and Exchange Commission
("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 each of the 2020 quarterly periods, 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.
Consolidated Balance Sheets
(unaudited)
(in thousands, except common and
units)
June 30, 2020
December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents
$
107,083
$
139,467
Marketable securities
155
220
Trade and other receivables - net of
allowance for doubtful accounts of $3,232 and $2,512,
respectively
163,486
175,043
Receivables from related parties
2,875
2,221
Loans receivable, including loans held for
sale of $71,378 and $225,013, respectively, net
321,987
546,908
Inventories, net
143,923
151,641
Prepaid expenses and other current
assets
32,172
33,689
Assets of discontinued operations
—
41,012
Total current assets
771,681
1,090,201
Long-term loans receivable, net
2,250,656
196,145
Goodwill
151,931
149,626
Other intangible assets, net
148,643
158,593
Deferred tax assets
94,552
88,645
Other non-current assets
45,000
70,616
Property, plant and equipment, net
238,109
250,225
Operating lease right-of-use assets
31,756
34,324
Long-term investments
214,719
275,836
Assets of discontinued operations
—
18,143
Total Assets
$
3,947,047
$
2,332,354
LIABILITIES AND CAPITAL
Current liabilities:
Accounts payable
$
107,936
$
85,817
Accrued liabilities
72,739
114,941
Deposits
362,286
615,495
Payables to related parties
687
481
Short-term debt
357
1,800
Current portion of long-term debt
14,035
14,208
Current portion of preferred unit
liability
—
39,782
Other current liabilities
88,806
42,041
Liabilities of discontinued operations
—
21,256
Total current liabilities
646,846
935,821
Long-term deposits
95,717
139,222
Long-term debt
350,653
322,081
Other borrowings
2,032,236
—
Preferred unit liability
145,544
144,247
Accrued pension liabilities
183,230
183,228
Deferred tax liabilities
—
2,497
Long-term operating lease liabilities
24,649
26,458
Other non-current liabilities
38,883
14,556
Liabilities of discontinued operations
—
87,825
Total Liabilities
3,517,758
1,855,935
Commitments and Contingencies
Capital:
Partners' capital common units: 24,929,253
and 25,023,128 issued and outstanding (after deducting 12,647,864
and 12,647,864 units held in treasury, at cost of $198,781 and
$198,781), respectively
600,578
664,035
Accumulated other comprehensive loss
(175,504
)
(191,422
)
Total Partners' Capital
425,074
472,613
Noncontrolling interests in consolidated
entities
4,215
3,806
Total Capital
429,289
476,419
Total Liabilities and Capital
$
3,947,047
$
2,332,354
Consolidated Statements of Operations
(unaudited)
(in thousands, except common units and
per common unit data)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Revenue:
Diversified industrial net sales
$
252,172
$
300,049
$
514,472
$
580,970
Energy net revenue
14,302
43,532
52,904
82,518
Financial services revenue
28,963
42,134
75,961
78,040
Total revenue
295,437
385,715
643,337
741,528
Costs and expenses:
Cost of goods sold
195,199
252,548
416,278
491,015
Selling, general and administrative
expenses
74,936
97,430
151,600
179,753
Asset impairment charges
—
190
617
190
Finance interest expense
3,475
4,201
6,909
8,125
Provision for loan losses
14,253
12,715
40,390
21,185
Interest expense
7,722
10,272
16,037
20,477
Realized and unrealized losses (gains) on
securities, net
8,482
(36,377
)
26,484
(38,486
)
Other (income) expense, net
(2,000
)
(1,132
)
(2,967
)
18
Total costs and expenses
302,067
339,847
655,348
682,277
(Loss) income from continuing
operations before income taxes and equity method
investments
(6,630
)
45,868
(12,011
)
59,251
Income tax (benefit) provision
(1,320
)
14,798
(4,749
)
17,800
(Income) loss of associated companies, net
of taxes
(4,893
)
7,118
29,614
(2,263
)
Net (loss) income from continuing
operations
(417
)
23,952
(36,876
)
43,714
Discontinued operations
Loss from discontinued operations, net of
taxes
(280
)
(2,918
)
(2,581
)
(7,058
)
Net loss on deconsolidation of
discontinued operations
(980
)
—
(23,827
)
—
Loss from discontinued operations, net of
taxes
(1,260
)
(2,918
)
(26,408
)
(7,058
)
Net (loss) income
(1,677
)
21,034
(63,284
)
36,656
Net (income) loss attributable to
noncontrolling interests in consolidated entities (continuing
operations)
(191
)
29
(321
)
85
Net (loss) income attributable to
common unitholders
$
(1,868
)
$
21,063
$
(63,605
)
$
36,741
Net (loss) income per common unit -
basic
Net (loss) income from continuing
operations
$
(0.02
)
$
0.96
$
(1.49
)
$
1.75
Net loss from discontinued operations
(0.05
)
(0.12
)
(1.06
)
(0.28
)
Net (loss) income attributable to common
unitholders
$
(0.07
)
$
0.84
$
(2.55
)
$
1.47
Net (loss) income per common unit -
diluted
Net (loss) income from continuing
operations
$
(0.02
)
$
0.69
$
(1.49
)
$
1.27
Net loss from discontinued operations
(0.05
)
(0.08
)
(1.06
)
(0.18
)
Net (loss) income attributable to common
unitholders
$
(0.07
)
$
0.61
$
(2.55
)
$
1.09
Weighted-average number of common units
outstanding - basic
24,958,026
24,982,728
24,989,440
24,915,446
Weighted-average number of common units
outstanding - diluted
24,958,026
39,138,599
24,989,440
39,158,510
Supplemental Balance Sheet Data (June
30, 2020 unaudited)
(in thousands, except common and
preferred units)
June 30,
December 31,
2020
2019
Cash and cash equivalents
$
107,083
$
139,467
WebBank cash and cash equivalents
50,583
125,047
Cash and cash equivalents, excluding
WebBank
$
56,500
$
14,420
Common units outstanding
24,929,253
25,023,128
Preferred units outstanding
6,422,128
7,927,288
Supplemental Non-GAAP Disclosures
(unaudited)
Adjusted EBITDA Reconciliation:
(in thousands)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Net (loss) income from continuing
operations
$
(417
)
$
23,952
$
(36,876
)
$
43,714
Income tax (benefit) provision
(1,320
)
14,798
(4,749
)
17,800
(Loss) income from continuing
operations before income taxes
(1,737
)
38,750
(41,625
)
61,514
Add (Deduct):
(Income) loss of associated companies, net
of taxes
(4,893
)
7,118
29,614
(2,263
)
Realized and unrealized losses (gains) on
securities, net
8,482
(36,377
)
26,484
(38,486
)
Interest expense
7,722
10,272
16,037
20,477
Depreciation
11,133
10,990
22,086
21,956
Amortization
5,112
5,438
10,394
10,703
Non-cash asset impairment charges
—
190
617
190
Non-cash pension expense
623
1,980
1,175
3,949
Non-cash equity-based compensation
50
227
256
391
Other items, net
12,449
12,692
10,824
14,771
Adjusted EBITDA
$
38,941
$
51,280
$
75,862
$
93,202
Total revenue
$
295,437
$
385,715
$
643,337
$
741,528
Adjusted EBITDA margin
13.2
%
13.3
%
11.8
%
12.6
%
Net Debt Reconciliation:
(in thousands)
June 30,
December 31,
2020
2019
Total debt
$
365,045
$
338,089
Loan guarantee liability
53,464
—
Accrued pension liabilities
183,230
183,228
Preferred unit liability, including
current portion
145,544
184,029
Cash and cash equivalents, excluding
WebBank
(56,500
)
(14,420
)
Marketable securities
(155
)
(220
)
Long-term investments
(214,719
)
(275,836
)
Net debt
$
475,909
$
414,870
Adjusted Free Cash Flow
Reconciliation:
(in thousands)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Net cash provided by operating activities
of continuing operations
$
93,846
$
15,764
$
259,892
$
53,700
Purchases of property, plant and
equipment
(4,041
)
(9,753
)
(11,035
)
(16,410
)
Net increase (decrease) in loans held for
sale
2,622
8,241
(153,635
)
(10,072
)
Adjusted free cash flow
$
92,427
$
14,252
$
95,222
$
27,218
Segment Results (unaudited)
(in thousands)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Revenue:
Diversified industrial
$
252,172
$
300,049
$
514,472
$
580,970
Energy
14,302
43,532
52,904
82,518
Financial services
28,963
42,134
75,961
78,040
Total revenue
$
295,437
$
385,715
$
643,337
$
741,528
Income (loss) from continuing
operations before interest expense and income taxes:
Diversified industrial
$
13,162
$
15,606
$
28,036
$
30,651
Energy
(5,352
)
329
(5,150
)
(1,426
)
Financial services
(815
)
14,344
3,191
27,576
Corporate and other
(1,010
)
18,743
(51,665
)
25,190
Income (loss) from continuing
operations before interest expense and income taxes
5,985
49,022
(25,588
)
81,991
Interest expense
7,722
10,272
16,037
20,477
Income tax (benefit) provision
(1,320
)
14,798
(4,749
)
17,800
Net (loss) income from continuing
operations
$
(417
)
$
23,952
$
(36,876
)
$
43,714
(Income) loss of associated companies,
net of taxes:
Corporate and other
$
(4,893
)
$
7,118
$
29,614
$
(2,263
)
Total
$
(4,893
)
$
7,118
$
29,614
$
(2,263
)
Segment depreciation and
amortization:
Diversified industrial
$
12,383
$
11,868
$
24,650
$
23,522
Energy
3,731
4,420
7,487
8,865
Financial services
92
101
263
199
Corporate and other
39
39
80
73
Total depreciation and amortization
$
16,245
$
16,428
$
32,480
$
32,659
Segment Adjusted EBITDA:
Diversified industrial
$
39,194
$
30,657
$
66,447
$
60,216
Energy
(1,820
)
5,052
2,703
7,497
Financial services
(373
)
14,376
3,801
27,701
Corporate and other
1,940
1,195
2,911
(2,212
)
Total Adjusted EBITDA
$
38,941
$
51,280
$
75,862
$
93,202
For the six months ended June 30, 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 SEC,
including "Adjusted EBITDA," "Net 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 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 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. 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.
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 the Company's discontinued
operations;
- 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; and
- Adjusted EBITDA does not include certain other non-recurring
and non-cash items.
In addition, Net 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 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 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 Debt, and
Adjusted Free Cash Flow, as presented, may not be comparable to
other similarly titled measures of other companies.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200810005202/en/
Investor contact: Steel Partners Holdings L.P. Jennifer
Golembeske, 212-520-2300 jgolembeske@steelpartners.com
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