EX-99.1 2 ex991-splpq42018earningsre.htm EXHIBIT 99.1 Exhibit


EXHIBIT 99.1

PRESS RELEASE
Source: Steel Partners Holdings L.P.


Steel Partners Holdings Reports Financial Results for 2018 and Fourth Quarter;
Provides Outlook for 2019

Company Posts Record Revenue of $1.6 Billion

NEW YORK, N.Y., February 28, 2019 - Steel Partners Holdings L.P. (NYSE: SPLP), a diversified global holding company, today announced operating results for the year and fourth quarter ended December 31, 2018.

Revenue for the year ended December 31, 2018 increased to a record $1.6 billion from $1.4 billion in 2017. Loss before income taxes and equity method investments was $9.4 million in 2018, compared with income of $40.4 million in 2017. Net loss attributable to the Company's common unitholders for the year was $32.6 million, or $1.25 per diluted common unit, compared with breakeven, a year ago.

Steel Partners generated a 12.0% increase in Adjusted EBITDA to $183.8 million for 2018 from $164.0 million in 2017. 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.

Revenue for the 2018 fourth quarter increased to $378.6 million from $335.3 million for the same period in 2017. Loss before income taxes and equity method investments was $11.8 million for the 2018 fourth quarter, compared with a loss of $1.6 million in the comparable 2017 period. Net loss attributable to the Company's common unitholders for the 2018 fourth quarter was $30.5 million, or $1.19 per diluted common unit, compared with a net loss of $14.2 million, or $0.55 per diluted common unit, a year ago.

Steel Partners posted $38.7 million in Adjusted EBITDA for the fourth quarters of both 2018 and 2017. The 2018 quarter's Adjusted EBITDA reflected higher contributions from the Company's Financial Services and Energy segments, partially offset by a decline from the Diversified Industrial segment, along with higher corporate expenses principally related to financing activities, information technology transformations and other costs to enhance efficiencies.

2018 Highlights

Book value at year-end was $516 million, equal to $20.39 per unit.
Net operating loss carryforwards for 2018 amounted to $397 million.
Two acquisitions were completed, Dunmore Corporation for $70 million and PST Group for $5 million; Steel Partners purchased the minority interest in WebFinancial for $21 million.
The board of directors authorized expansion of the Company's unit buy-back program by an additional one million units; thus far under the program, a total of 1.6 million common units have been purchased for $27 million.
The Company entered into amendments to its senior secured revolving credit facility to increase availability, allowing for continued growth through strategic acquisitions and other investments.
The Company's pension deficit has been reduced to $206 million from $268 million.
Capital expenditures for the year totaled $47 million, of which $21 million was for maintenance and the balance was for growth.
Total debt and preferred stock, net of holding company cash and investments, increased to $350 million from $182 million.
At year-end 2018, Steel Partners had 5,300 employees, working from 32 manufacturing plants and 38 other locations in North America, Europe and Asia.

"Our principal business segment, Diversified Industrial, which represents approximately 81.2 percent of 2018 revenues, had a mixed year and negatively impacted our operating results," said Warren Lichtenstein, Executive Chairman of Steel Partners. "Three of our industrial businesses missed their plans due to ERP implementations, unexpected lost customers and major plant moves, including footprint consolidation; the four other industrial businesses performed above plan. WebBank posted an excellent year, with increased revenues, the addition of new partners and strong financial returns. Steel Energy improved its results for the year and maintained its excellent safety record.






"As 2019 unfolds, we expect to focus on, and achieve, further progress with our strategic initiatives, which include continuing the passionate implementation of LEAN processes in all our businesses; finishing the implementation of our new ERP systems; following through on SteelGrow and aggressively recruiting new people; improving working capital; achieving organic sales growth; and continuing to buy back our common units, which we believe hold significant intrinsic worth. Additionally, we diligently monitor each of the companies in which we invest, and as appropriate, engage with the management teams and boards to help enhance their businesses. This includes our recent investment in Babcock & Wilcox, which has not performed to our expectations. Our objective remains aligned with the interests of all our stakeholders, namely, to enhance long-term value," Lichtenstein added.

2019 Outlook

Based on current information, Steel Partners expects 2019 first quarter revenue between $375 million and $395 million and Adjusted EBITDA between $31 million and $39 million. The Company anticipates revenue for the full 2019 year between $1.6 billion and $1.7 billion and Adjusted EBITDA between $209 million and $232 million.

(Financial Tables on Following Pages)





Financial Summary (unaudited)
(in thousands, except per common unit)
Three Months Ended December 31,
 
Year Ended December 31,
 
2018
 
2017
 
2018
 
2017
Revenue
$
378,613

 
$
335,277

 
$
1,584,614

 
$
1,372,027

Costs and expenses, excluding realized and unrealized losses (gains) on securities
375,890

 
336,807

 
1,531,450

 
1,332,394

Realized and unrealized losses (gains) on securities, net
14,557

 
45

 
62,586

 
(790
)
Total costs and expenses
390,447

 
336,852

 
1,594,036

 
1,331,604

(Loss) income before income taxes and equity method investments
(11,834
)
 
(1,575
)
 
(9,422
)
 
40,423

Income tax provision
3,519

 
24,124

 
12,559

 
51,299

Loss (income) of associated companies, net of taxes
14,650

 
(8,186
)
 
9,509

 
(16,888
)
Net (loss) income
(30,003
)
 
(17,513
)
 
(31,490
)
 
6,012

Net (income) loss attributable to noncontrolling interests in consolidated entities
(470
)
 
3,313

 
(1,114
)
 
(6,028
)
Net loss attributable to common unitholders
$
(30,473
)
 
$
(14,200
)
 
$
(32,604
)
 
$
(16
)
 
 
 
 
 
 
 
 
Net loss per common unit - basic and diluted
$
(1.19
)
 
$
(0.55
)
 
$
(1.25
)
 
$

 
 
 
 
 
 
 
 
Capital expenditures
$
13,488

 
$
16,822

 
$
47,085

 
$
54,737


Balance Sheet Data (unaudited)
(in thousands, except common and preferred units)
December 31,
 
2018
 
2017
Cash and cash equivalents
$
334,884

 
$
418,755

WebBank cash and cash equivalents
281,566

 
303,883

Cash and cash equivalents, excluding WebBank
53,318

 
114,872

Marketable securities
1,439

 
58,313

Long-term investments
258,044

 
236,144

Total debt
481,989

 
414,667

Preferred unit liability
180,340

 
176,512

Common units outstanding
25,294,003

 
26,348,420

Preferred units outstanding
7,927,288

 
7,952,660







Supplemental Non-GAAP Disclosures (unaudited)
Adjusted EBITDA Reconciliation:
 
 
 
 
 
 
 
(in thousands)
Three Months Ended December 31,
 
Year Ended December 31,
 
2018
 
2017
 
2018
 
2017
Net (loss) income
$
(30,003
)
 
$
(17,513
)
 
$
(31,490
)
 
$
6,012

Income tax provision
3,519

 
24,124

 
12,559

 
51,299

(Loss) income before income taxes
(26,484
)
 
6,611

 
(18,931
)
 
57,311

Add (Deduct):
 
 
 
 
 
 
 
Loss (income) of associated companies, net of taxes
14,650

 
(8,186
)
 
9,509

 
(16,888
)
Realized and unrealized losses (gains) on securities, net
14,557

 
45

 
62,586

 
(790
)
Interest expense
10,920

 
8,358

 
39,234

 
22,804

Depreciation
13,297

 
10,676

 
50,465

 
42,193

Amortization
7,094

 
7,047

 
29,858

 
29,743

Non-cash asset impairment charges
8,108

 
2,028

 
8,108

 
2,028

Non-cash pension expense
834

 
5,787

 
2,923

 
9,647

Non-cash equity-based compensation
137

 
5,781

 
644

 
11,477

Amortization of fair value adjustments to acquisition-date inventories
128

 

 
1,019

 

Other items, net
(4,584
)
 
574

 
(1,638
)
 
6,523

Adjusted EBITDA
$
38,657

 
$
38,721

 
$
183,777

 
$
164,048







Segment Results (unaudited)
(in thousands)
Three Months Ended December 31,
 
Year Ended December 31,
 
2018
 
2017
 
2018
 
2017
Revenue:
 
 
 
 
 
 
 
Diversified industrial
$
298,078

 
$
276,672

 
$
1,286,665

 
$
1,156,187

Energy
41,942

 
36,151

 
175,950

 
135,461

Financial services
38,593

 
22,454

 
121,999

 
80,379

Total revenue
$
378,613

 
$
335,277

 
$
1,584,614

 
$
1,372,027

 
 
 
 
 
 
 
 
(Loss) income before income taxes:
 
 
 
 
 
 
 
Diversified industrial
$
(5,599
)
 
$
3,116

 
$
42,661

 
$
50,104

Energy
(1,663
)
 
(8,555
)
 
(6,342
)
 
(21,514
)
Financial services
19,011

 
13,192

 
54,544

 
41,328

Corporate and other
(38,233
)
 
(1,142
)
 
(109,794
)
 
(12,607
)
(Loss) income before income taxes
(26,484
)
 
6,611

 
(18,931
)
 
57,311

Income tax provision
3,519

 
24,124

 
12,559

 
51,299

Net (loss) income
$
(30,003
)
 
$
(17,513
)
 
$
(31,490
)
 
$
6,012

 
 
 
 
 
 
 
 
(Loss) income of associated companies, net of taxes:
 
 
 
 
 
 
 
Energy
$
(2,004
)
 
$
(1,359
)
 
$
(1,685
)
 
$
593

Corporate and other
(12,646
)
 
9,545

 
(7,824
)
 
16,295

Total
$
(14,650
)
 
$
8,186

 
$
(9,509
)
 
$
16,888

 
 
 
 
 
 
 
 
Segment depreciation and amortization:
 
 
 
 
 
 
 
Diversified industrial
$
15,262

 
$
12,627

 
$
59,582

 
$
50,741

Energy
5,002

 
4,982

 
20,214

 
20,735

Financial services
94

 
82

 
397

 
294

Corporate and other
33

 
32

 
130

 
166

Total depreciation and amortization
$
20,391

 
$
17,723

 
$
80,323

 
$
71,936

 
 
 
 
 
 
 
 
Segment Adjusted EBITDA:
 
 
 
 
 
 
 
Diversified industrial
$
21,811

 
$
26,105

 
$
131,218

 
$
128,650

Energy
1,815

 
522

 
11,219

 
4,098

Financial services
19,213

 
13,343

 
56,202

 
41,742

Corporate and other
(4,182
)
 
(1,249
)
 
(14,862
)
 
(10,442
)
Total Adjusted EBITDA
$
38,657

 
$
38,721

 
$
183,777

 
$
164,048







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.

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, 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 a number of 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 subsidiaries 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.

Investor contact:    PondelWilkinson Inc.
Roger S. Pondel, 310-279-5965
rpondel@pondel.com