EXHIBIT 99.1
Steel Partners Holdings Reports Fourth Quarter and Full Year Results
Fourth Quarter 2022 Results
•Revenue totaled $422.6 million, a decrease of 2.1%, as compared to the same period in the prior year
•Net income from continuing operations was $73.1 million
•Net income attributable to common unitholders was $73.0 million, or $2.82 per diluted common unit
•Adjusted EBITDA* totaled $44.6 million; Adjusted EBITDA margin* was 10.6%
•Net cash used in operating activities from continuing operations was $151.7 million
•Adjusted free cash flow* totaled $30.3 million
•Total debt was $180.3 million; net debt,* which also includes our pension and preferred unit liabilities, less cash and investments, totaled $47.6 million
Full Year 2022 Results
•Revenue totaled $1.7 billion, an increase of 11.2%, as compared to the same period in the prior year
•Net income from continuing operations was $206.2 million
•Net income attributable to common unitholders was $206.0 million, or $8.12 per diluted common unit
•Adjusted EBITDA* totaled to $228.4 million; Adjusted EBITDA margin* was 13.5%
•Net cash used in operating activities from continuing operations was $210.2 million
•Adjusted free cash flow* totaled $146.3 million
NEW YORK, N.Y., March 8, 2023 - Steel Partners Holdings L.P. (NYSE: SPLP), a diversified global holding company, today announced operating results for the fourth quarter and year ended December 31, 2022.
| Unaudited | ||||||||||||||||||||||||||
| Q4 2022 | Q4 2021 | ($ in thousands) | FY 2022 | FY 2021 | ||||||||||||||||||||||
| $422,615 | $431,857 | Revenue | $1,695,441 | $1,524,896 | ||||||||||||||||||||||
| 73,083 | 29,565 | Net income from continuing operations | 206,165 | 132,440 | ||||||||||||||||||||||
| 73,012 | 28,917 | Net income attributable to common unitholders | 205,972 | 131,408 | ||||||||||||||||||||||
| 44,649 | 63,202 | Adjusted EBITDA* | 228,434 | 259,833 | ||||||||||||||||||||||
| 10.6% | 14.6% | Adjusted EBITDA margin* | 13.5% | 17.0% | ||||||||||||||||||||||
| 17,353 | 32,770 | Purchases of property, plant and equipment | 47,541 | 52,326 | ||||||||||||||||||||||
| 30,260 | 25,370 | Adjusted free cash flow* | 146,272 | 135,768 | ||||||||||||||||||||||
* 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.
"Steel Partners had a good 2022 with strong operating results continuing from 2021 despite margins being impacted by higher material and labor costs,” said Executive Chairman Warren Lichtenstein. “We were able to significantly reduce our debt, repurchase our units, and fund facility upgrades which will allow us to attract the talent and customers we need for the future. Our commitment to delivering cost effective solutions for our customers and thoughtfully allocating our capital has produced strong results for all our stakeholders. I want to thank the entire team at Steel Partners for their continued dedication and contributions, without which, these strong results would not have been possible."
Results of Operations
Comparisons of the Three Months and Years Ended December 31, 2022 and 2021
| Unaudited | |||||||||||||||||||||||||||||
| (Dollar amounts in table and commentary in thousands, unless otherwise indicated) | Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||
| Revenue | $ | 422,615 | $ | 431,857 | $ | 1,695,441 | $ | 1,524,896 | |||||||||||||||||||||
| Cost of goods sold | 266,296 | 291,992 | 1,096,936 | 1,004,093 | |||||||||||||||||||||||||
| Selling, general and administrative expenses | 102,778 | 80,220 | 383,377 | 304,013 | |||||||||||||||||||||||||
| Asset impairment charges | 278 | — | 3,162 | — | |||||||||||||||||||||||||
| Interest expense | 6,197 | 6,191 | 20,649 | 22,250 | |||||||||||||||||||||||||
| Realized and unrealized (gains) losses on securities, net | (57,361) | (16,188) | (34,791) | 24,044 | |||||||||||||||||||||||||
| Gains from sales of businesses | (203) | — | (85,683) | (8,096) | |||||||||||||||||||||||||
| All other expenses (income), net * | 20,237 | 1,811 | 36,293 | (22,273) | |||||||||||||||||||||||||
| Total costs and expenses | 338,222 | 364,026 | 1,419,943 | 1,324,031 | |||||||||||||||||||||||||
| Income before income taxes and equity method investments | 84,393 | 67,831 | 275,498 | 200,865 | |||||||||||||||||||||||||
| Income tax provision | 17,688 | 27,654 | 73,944 | 84,089 | |||||||||||||||||||||||||
| (Income) loss of associated companies, net of taxes | (6,378) | 10,612 | (4,611) | (15,664) | |||||||||||||||||||||||||
| Net income from continuing operations | 73,083 | 29,565 | 206,165 | 132,440 | |||||||||||||||||||||||||
| Net gains from discontinued operations, net of taxes | — | 3 | — | 138 | |||||||||||||||||||||||||
| Net income | 73,083 | 29,568 | 206,165 | 132,578 | |||||||||||||||||||||||||
| Net income attributable to noncontrolling interests in consolidated entities (continuing operations) | (71) | (651) | (193) | (1,170) | |||||||||||||||||||||||||
| Net income attributable to common unitholders | $ | 73,012 | $ | 28,917 | $ | 205,972 | $ | 131,408 | |||||||||||||||||||||
| * includes finance interest, provision (benefit) for loan losses, and other expenses (income) from the consolidated statements of operations | |||||||||||||||||||||||||||||
Revenue
Revenue for the three months ended December 31, 2022 decreased $9.2 million, or 2.1%, as compared to the same period last year. The decrease was driven primarily by $46.9 million lower sales in the Diversified Industrial segment due primarily to lower sales volume from its Building Material business and the impact from the divestiture of SL Power Electronics Corporation ("SLPE") business, which was largely offset by $36.9 million higher revenue from the Financial Services segment.
Revenue in the year ended December 31, 2022 increased $170.5 million, or 11.2%, as compared to 2021, as a result of higher sales across all the reportable segments despite the divestiture of the SLPE business in April 2022. The increase of $78.5 million from the Diversified Industrial segment was primarily due to: (1) $59.6 million higher sales for the Building Materials business primarily due to the impact of favorable pricing, and to a lesser extent increased demand for its roofing products, (2) $19.4 million higher sales for the Performance Materials business primarily due to favorable product mix and pricing, and (3) $16.2 million higher sales from the Tubing business primarily due to favorable pricing and growth from the aerospace & defense and energy sectors. These increases were partially offset by: (1) $46.6 million decrease in sales due to the SLPE disposal and (2) $13.5 million decrease for the Joining Materials business, primarily driven by lower average precious metal prices in 2022, as compared to 2021. The increase of $17.8 million from the Energy segment was primarily due to higher service volume and favorable pricing driven by higher demand and from the energy sector as a result of higher energy prices. The increase of $74.3 million from the Financial Services segment was primarily due to increased interest income on higher credit risk transfer balances, asset based lending and held for sale balances, partially offset by lower non-interest income due to fewer warrant sales as compared to 2021.
Cost of Goods Sold
Cost of goods sold for the three months ended December 31, 2022 decreased $25.7 million, or 8.8%, as compared to the same period last year. The decrease was primarily due to the Diversified Industrial segment, driven by lower sales volume and the impact from the SLPE divestiture as mentioned above.
Cost of goods sold in the year ended December 31, 2022 increased $92.8 million, or 9.2%, as compared to 2021, primarily driven by higher sales discussed above, as well as higher material and labor costs in the Diversified Industrial and Energy segments, partially offset by the impact of the SLPE divestiture.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") for the three months ended December 31, 2022 increased $22.6 million, or 28.1%, as compared to the same period last year. The increase was primarily due to: (1) approximately $16.0 million higher expenses for the Financial Service segment driven by higher credit performance fees due to higher credit risk transfer ("CRT") balances and higher personnel costs, and (2) approximately $15.6 million higher expenses for Corporate primarily due to higher legal and professional fees, as well as higher personnel costs in the 2022 period. SG&A expenses for corporate included a gain as a result of a litigation settlement of $8.8 million in the 2021 period. These increases were partially offset by the impact of the divestiture of SLPE business.
SG&A in in 2022 increased $79.4 million, or 26.1%, as compared to 2021. The increase was primarily due to: (1) approximately $58.1 million higher expenses from the Financial Service segment driven by higher credit performance fees due to higher CRT balances and higher personnel costs, and (2) approximately $37.3 million higher expenses for Corporate due to higher legal and professional fees, as well as higher personnel costs in 2022, partially offset by a gain as a result of a litigation settlement of $8.8 million in 2021. These increases were partially offset by approximately $11.4 million lower expenses from the Diversified Industrial segment, primarily due to the impact of SLPE divestiture.
Asset Impairment Charges
The Company recorded asset impairment charges of $3.2 million in 2022 primarily related to the implementation costs of an ERP project associated with the Kasco business from the Diversified Industrial segment. There were no impairment charges in 2021.
Interest Expense
Interest expense for both the three months ended December 31, 2022 and 2021 was $6.2 million. Interest expense for the years ended December 31, 2022 and 2021 was $20.6 million and $22.3 million, respectively. The lower interest expense during the year ended December 31, 2022 was primarily due to lower average debt levels, partially offset by higher average interest rates.
Realized and Unrealized (Gains) Losses on Securities, Net
The Company recorded gains of $57.4 million for the three months ended December 31, 2022, as compared to $16.2 million in 2021, and gains of $34.8 million and losses of $24.0 million for the years ended December 31, 2022 and 2021, respectively.
Gains from Sales of Businesses
The Company recorded a pre-tax gain of $85.7 million for the twelve months ended December 31, 2022, primarily related to the divestiture of the SLPE business from the Diversified Industrial segment. The sales price of SLPE was $144.5 million, subject to working capital adjustments. The Company recorded a pre-tax gain of $8.1 million for the twelve months ended December 31, 2021 related to the divestiture of the Edge business from the Diversified Industrial segment.
All Other Expenses (Income), Net
All other expenses, net increased $18.4 million, primarily driven by higher provision for loan losses and finance interest expense for the three months ended December 31, 2022. All other expenses, totaled $36.3 million for the year ended December 31, 2022 and is primarily comprised of: (1) $23.2 million provision for loan losses and (2) $16.9 million for finance interest expense. All other income, net totaled $22.3 million for the year ended December 31, 2021 and is primarily comprised of a $19.7 million one-time dividend from Aerojet and a pre-tax gain of $6.6 million on the sale of an idle facility in the Joining Materials business, partially offset by (3) finance interest expense of $7.7 million.
Income Taxes
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. For the year ended December 31, 2022, a tax provision of $73.9 million was recorded, as compared to $84.1 million in 2021. The Company's effective tax rate was 26.8% and 41.9% for the years ended December 31, 2022 and 2021, respectively. The lower effective tax rate for the year
ended December 31, 2022 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.
(Income) Loss of Associated Companies, Net of Taxes
The Company recorded income from associated companies, net of taxes of $6.4 million for the three months ended December 31, 2022, as compared to a loss, net of taxes, of $10.6 million for the same period of 2021. The Company recorded income from associated companies, net of taxes, of $4.6 million in 2022 as compared to $15.7 million in 2021.
Purchases of Property, Plant and Equipment (Capital Expenditures)
Capital expenditures for the three months ended December 31, 2022 totaled $17.4 million, or 4.1% of revenue, as compared to $32.8 million, or 7.6% of revenue, in the three months ended December 31, 2021. For the year ended December 31, 2022, capital expenditures were $47.5 million, or 2.8% of revenue, as compared to $52.3 million, or 3.4% of revenue, for the year ended December 31, 2021.
Additional Non-GAAP Financial Measures
Adjusted EBITDA for the three months ended December 31, 2022 was $44.6 million, as compared to $63.2 million for the same period in 2021. Adjusted EBITDA margin decreased to 10.6% in the quarter from 14.6% in the three months ended December 31, 2021, primarily due to lower profitability from the Diversified Industrial segment driven by lower sales volume from its Building Materials business and the impact from the divestiture of SLPE business, as well as higher professional fees and personnel costs from Corporate in the fourth quarter of 2022. Adjusted free cash flow was $30.3 million for the three months ended December 31, 2022, as compared to $25.4 million for the same period in 2021.
For the year ended December 31, 2022, Adjusted EBITDA and Adjusted EBITDA margin were $228.4 million and 13.5%, respectively, as compared to $259.8 million and 17.0% in 2021. Adjusted EBITDA decreased by $31.4 million primarily due to decreases in the Financial Service segment due to higher loan loss provisions and higher credit performance fees as a result of higher CRT balances as well as higher personnel costs and in Corporate driven by higher legal and other professional fees, as well as higher personnel costs, partially offset by strong revenue impact from the Diversified Industrial and Energy segments, primarily due to favorable pricing. Adjusted free cash flow was $146.3 million, as compared to $135.8 million for the same period in 2021.
Liquidity and Capital Resources
As of December 31, 2022, the Company had $410.7 million in available liquidity under its senior credit agreement, as well as $60.2 million in cash and cash equivalents, excluding WebBank cash, and $309.7 million in long-term investments.
As of December 31, 2022, total debt was $180.3 million, a decrease of $90.7 million, as compared to December 31, 2021, primarily driven by payments on Company's senior credit facility using proceeds from the sale of SLPE. As of December 31, 2022, net debt totaled $47.6 million, a decrease of $177.5 million, as compared to December 31, 2021. Net debt decreased from the prior year primarily due to: (1) a $90.7 million decrease of total debt due to the paydown of debt and (2) $48.6 million of higher investment balances compared to the prior year, as well as higher cash balance of $43.4 million. Total leverage (as defined in the Company's senior credit agreement) was approximately 1.4x as of December 31, 2022 versus 1.6x as of December 31, 2021.
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, 2022 | December 31, 2021 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 234,448 | $ | 325,363 | |||||||
| Trade and other receivables - net of allowance for doubtful accounts of $2,414 and $3,510, respectively | 183,861 | 193,976 | |||||||||
| Receivables from related parties | 961 | 2,944 | |||||||||
| Loans receivable, including loans held for sale of $602,675 and $198,632, respectively, net | 1,131,745 | 529,529 | |||||||||
| Inventories, net | 214,084 | 184,271 | |||||||||
| Prepaid expenses and other current assets | 40,129 | 48,019 | |||||||||
| Total current assets | 1,805,228 | 1,284,102 | |||||||||
| Long-term loans receivable, net | 423,248 | 511,444 | |||||||||
| Goodwill | 125,813 | 148,018 | |||||||||
| Other intangible assets, net | 94,783 | 119,830 | |||||||||
| Deferred tax assets | — | — | |||||||||
| Other non-current assets | 195,859 | 79,143 | |||||||||
| Property, plant and equipment, net | 238,510 | 234,976 | |||||||||
| Operating lease right-of-use assets | 42,711 | 36,636 | |||||||||
| Long-term investments | 309,697 | 261,080 | |||||||||
| Total Assets | $ | 3,235,849 | $ | 2,675,229 | |||||||
| LIABILITIES AND CAPITAL | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 109,572 | $ | 123,282 | |||||||
| Accrued liabilities | 112,744 | 86,848 | |||||||||
| Deposits | 1,360,477 | 447,152 | |||||||||
| Payables to related parties | 2,881 | 1,885 | |||||||||
| Short-term debt | 685 | 100 | |||||||||
| Current portion of long-term debt | 67 | 1,071 | |||||||||
| Other current liabilities | 62,717 | 54,674 | |||||||||
| Total current liabilities | 1,649,143 | 715,012 | |||||||||
| Long-term deposits | 208,004 | 377,735 | |||||||||
| Long-term debt | 179,572 | 269,850 | |||||||||
| Other borrowings | 41,682 | 333,963 | |||||||||
| Preferred unit liability | 152,247 | 149,570 | |||||||||
| Accrued pension liabilities | 84,948 | 82,376 | |||||||||
| Deferred tax liabilities | 41,055 | 13,674 | |||||||||
| Long-term operating lease liabilities | 35,512 | 27,511 | |||||||||
| Other non-current liabilities | 42,226 | 36,490 | |||||||||
| Total Liabilities | 2,434,389 | 2,006,181 | |||||||||
| Commitments and Contingencies | |||||||||||
| Capital: | |||||||||||
| Partners' capital common units: 21,605,093 and 21,018,009 issued and outstanding (after deducting 17,904,679 and 16,810,932 units held in treasury, at cost of $309,257 and $264,284, respectively | 952,094 | 795,140 | |||||||||
| Accumulated other comprehensive loss | (151,874) | (131,803) | |||||||||
| Total Partners' Capital | 800,220 | 663,337 | |||||||||
| Noncontrolling interests in consolidated entities | 1,240 | 5,711 | |||||||||
| Total Capital | 801,460 | 669,048 | |||||||||
| Total Liabilities and Capital | $ | 3,235,849 | $ | 2,675,229 | |||||||
Consolidated Statements of Operations
| Unaudited | |||||||||||||||||||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||
| Diversified industrial net sales | $ | 299,553 | $ | 346,464 | $ | 1,285,666 | $ | 1,207,183 | |||||||||||||||||||||
| Energy net revenue | 45,061 | 44,312 | 181,811 | 164,028 | |||||||||||||||||||||||||
| Financial services revenue | 78,001 | 41,081 | 227,964 | 153,685 | |||||||||||||||||||||||||
| Total revenue | 422,615 | 431,857 | 1,695,441 | 1,524,896 | |||||||||||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||||||||
| Cost of goods sold | 266,296 | 291,992 | 1,096,936 | 1,004,093 | |||||||||||||||||||||||||
| Selling, general and administrative expenses | 102,778 | 80,220 | 383,377 | 304,013 | |||||||||||||||||||||||||
| Asset impairment charges | 278 | — | 3,162 | — | |||||||||||||||||||||||||
| Finance interest expense | 9,301 | 1,044 | 16,907 | 7,693 | |||||||||||||||||||||||||
| Provision for loan losses | 11,419 | 1,968 | 23,177 | 123 | |||||||||||||||||||||||||
| Interest expense | 6,197 | 6,191 | 20,649 | 22,250 | |||||||||||||||||||||||||
| Gains from sale of businesses | (203) | — | (85,683) | (8,096) | |||||||||||||||||||||||||
| Realized and unrealized (gains) losses on securities, net | (57,361) | (16,188) | (34,791) | 24,044 | |||||||||||||||||||||||||
| Other income, net | (483) | (1,201) | (3,791) | (30,089) | |||||||||||||||||||||||||
| Total costs and expenses | 338,222 | 364,026 | 1,419,943 | 1,324,031 | |||||||||||||||||||||||||
| Income before income taxes and equity method investments | 84,393 | 67,831 | 275,498 | 200,865 | |||||||||||||||||||||||||
| Income tax provision | 17,688 | 27,654 | 73,944 | 84,089 | |||||||||||||||||||||||||
| (Income) loss of associated companies, net of taxes | (6,378) | 10,612 | (4,611) | (15,664) | |||||||||||||||||||||||||
| Net income from continuing operations | 73,083 | 29,565 | 206,165 | 132,440 | |||||||||||||||||||||||||
| Discontinued operations | |||||||||||||||||||||||||||||
| Net gains from discontinued operations, net of taxes | — | 3 | — | 138 | |||||||||||||||||||||||||
| Net income | 73,083 | 29,568 | 206,165 | 132,578 | |||||||||||||||||||||||||
| Net income attributable to noncontrolling interests in consolidated entities (continuing operations) | (71) | (651) | (193) | (1,170) | |||||||||||||||||||||||||
| Net income attributable to common unitholders | $ | 73,012 | $ | 28,917 | $ | 205,972 | $ | 131,408 | |||||||||||||||||||||
| Net income per common unit - basic | |||||||||||||||||||||||||||||
| Net income from continuing operations | $ | 3.17 | $ | 1.39 | $ | 9.03 | $ | 6.09 | |||||||||||||||||||||
| Net income attributable to common unitholders | $ | 3.17 | $ | 1.39 | $ | 9.03 | $ | 6.09 | |||||||||||||||||||||
| Net income per common unit - diluted | |||||||||||||||||||||||||||||
| Net income from continuing operations | $ | 2.82 | $ | 1.25 | $ | 8.12 | $ | 4.96 | |||||||||||||||||||||
| Net income attributable to common unitholders | $ | 2.82 | $ | 1.25 | $ | 8.12 | $ | 4.97 | |||||||||||||||||||||
| Weighted-average number of common units outstanding - basic | 23,038,179 | 20,802,636 | 22,813,588 | 21,561,200 | |||||||||||||||||||||||||
| Weighted-average number of common units outstanding - diluted | 27,020,358 | 25,682,447 | 26,869,440 | 28,920,258 | |||||||||||||||||||||||||
Consolidated Statements of Cash Flows
| (in thousands) | Year Ended December 31, | ||||||||||
| 2022 | 2021 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | 206,165 | $ | 132,578 | |||||||
| Gain (loss) from discontinued operations | — | 138 | |||||||||
| Net income from continuing operations | 206,165 | 132,440 | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Provision for loan losses | 23,177 | 123 | |||||||||
| (Income) loss of associated companies, net of taxes | (4,611) | (15,664) | |||||||||
| Realized and unrealized losses (gains) on securities, net | (34,791) | 24,044 | |||||||||
| Gain on sales of businesses | (85,683) | (8,096) | |||||||||
| Gain on sale of property, plant and equipment | (940) | (6,646) | |||||||||
| Derivative gains on economic interests in loans | (5,294) | (4,862) | |||||||||
| Deferred income taxes | 48,546 | 72,798 | |||||||||
| Depreciation and amortization | 53,755 | 60,521 | |||||||||
| Non-cash lease expense | 10,461 | 10,237 | |||||||||
| Equity-based compensation | 1,280 | 1,462 | |||||||||
| Asset impairment charges | 3,162 | — | |||||||||
| Other | (4,199) | (397) | |||||||||
| Net change in operating assets and liabilities: | |||||||||||
| Trade and other receivables | (710) | (33,158) | |||||||||
| Inventories | (41,086) | (48,344) | |||||||||
| Prepaid expenses and other assets | (10,431) | (4,875) | |||||||||
| Accounts payable, accrued and other liabilities | 35,012 | 8,511 | |||||||||
| Net (increase) decrease in loans held for sale | (404,043) | (110,461) | |||||||||
| Net cash (used in) provided by operating activities - continuing operations | (210,230) | 77,633 | |||||||||
| Net cash provided by operating activities - discontinued operations | — | 138 | |||||||||
| Total cash (used in) provided by operating activities | (210,230) | 77,771 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Purchases of investments | (310,798) | (50,074) | |||||||||
| Proceeds from sales of investments | 19,828 | 24,667 | |||||||||
| Proceeds from maturities of investments | 156,050 | 11,916 | |||||||||
| Loan originations, net of collections | (90,030) | 1,029,093 | |||||||||
| Proceeds from sales of loans | — | 530,969 | |||||||||
| Purchases of property, plant and equipment | (47,541) | (52,326) | |||||||||
| Proceeds from sale of property, plant and equipment | 1,241 | 6,979 | |||||||||
| Proceeds from sale of Edge business | 142,426 | 16,000 | |||||||||
| Acquisitions, net of cash acquired | (47,280) | — | |||||||||
| Other | (454) | — | |||||||||
| Net cash (used in) provided by investing activities | (176,558) | 1,517,224 | |||||||||
| Cash flows from financing activities: | |||||||||||
| Net revolver borrowings (repayments) | (90,616) | 119,703 | |||||||||
| Repayments of term loans | (82) | (182,832) | |||||||||
| Purchases of the Company's common units | (44,973) | (45,039) | |||||||||
| Net (decrease) increase in other borrowings | (291,117) | (1,753,478) | |||||||||
| Distribution to preferred unitholders | (9,633) | (9,633) | |||||||||
| Purchase of subsidiary shares from noncontrolling interests | (8,606) | — | |||||||||
| Deferred finance charges | — | (2,712) | |||||||||
| Tax withholding related to vesting of restricted units | (1,394) | — | |||||||||
| Net increase in deposits | 743,593 | 469,228 | |||||||||
| Net cash provided by (used in) financing activities | 297,172 | (1,404,763) | |||||||||
| Net change for the period | (89,616) | 190,232 | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | (1,299) | (657) | |||||||||
| Cash and cash equivalents at beginning of period | 325,363 | 135,788 | |||||||||
| Cash and cash equivalents at end of period | $ | 234,448 | $ | 325,363 | |||||||
Supplemental Balance Sheet Data
| (in thousands, except common and preferred units) | December 31, | December 31, | |||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| Cash and cash equivalents | $ | 234,448 | $ | 325,363 | |||||||||||||||||||
| WebBank cash and cash equivalents | 174,257 | 308,589 | |||||||||||||||||||||
| Cash and cash equivalents, excluding WebBank | $ | 60,191 | $ | 16,774 | |||||||||||||||||||
| Common units outstanding | 21,605,093 | 21,018,009 | |||||||||||||||||||||
| 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, | |||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net income from continuing operations | $ | 73,083 | $ | 29,565 | $ | 206,165 | $ | 132,440 | |||||||||||||||
| Income tax provision | 17,688 | 27,654 | 73,944 | 84,089 | |||||||||||||||||||
| Income from continuing operations before income taxes | 90,771 | 57,219 | 280,109 | 216,529 | |||||||||||||||||||
| Add (Deduct): | |||||||||||||||||||||||
| (Income) loss of associated companies, net of taxes | (6,378) | 10,612 | (4,611) | (15,664) | |||||||||||||||||||
| Realized and unrealized (gains) losses on securities, net | (57,361) | (16,188) | (34,791) | 24,044 | |||||||||||||||||||
| Interest expense | 6,197 | 6,191 | 20,649 | 22,250 | |||||||||||||||||||
| Depreciation | 9,758 | 10,815 | 38,394 | 42,055 | |||||||||||||||||||
| Amortization | 3,785 | 4,514 | 15,361 | 18,466 | |||||||||||||||||||
| Non-cash asset impairment charges | 278 | — | 3,162 | — | |||||||||||||||||||
| Non-cash pension expense | (1,637) | 462 | (7,042) | (3,972) | |||||||||||||||||||
| Non-cash equity-based compensation | 438 | 346 | 1,280 | 1,462 | |||||||||||||||||||
| Gains from sales of businesses | (203) | — | (85,683) | (8,096) | |||||||||||||||||||
| Other items, net * | (999) | (10,769) | 1,606 | (37,241) | |||||||||||||||||||
| Adjusted EBITDA | $ | 44,649 | $ | 63,202 | $ | 228,434 | $ | 259,833 | |||||||||||||||
| Total revenue | $ | 422,615 | $ | 431,857 | $ | 1,695,441 | $ | 1,524,896 | |||||||||||||||
| Adjusted EBITDA margin | 10.6% | 14.6% | 13.5% | 17.0% | |||||||||||||||||||
| *Other items, net for the year ended December 31, 2021 primarily includes (1) $19,740 one-time dividend from Aerojet, (2) a gain of $8,827 from a recent litigation settlement, and (3) a pre-tax gain of $6,646 on the sale of an idle facility in the Joining Materials business. | |||||||||||||||||||||||
| Net Debt Reconciliation: | |||||||||||
| (in thousands) | December 31, | December 31, | |||||||||
| 2022 | 2021 | ||||||||||
| Total debt | $ | 180,324 | $ | 271,021 | |||||||
| Accrued pension liabilities | 84,948 | 82,376 | |||||||||
| Preferred unit liability, including current portion | 152,247 | 149,570 | |||||||||
| Cash and cash equivalents, excluding WebBank | (60,191) | (16,774) | |||||||||
| Long-term investments | (309,697) | (261,080) | |||||||||
| Net debt | $ | 47,631 | $ | 225,113 | |||||||
| Adjusted Free Cash Flow Reconciliation: | |||||||||||||||||||||||
| Unaudited | |||||||||||||||||||||||
| (in thousands) | Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net cash (used in) provided by operating activities of continuing operations | $ | (151,706) | $ | 18,749 | $ | (210,230) | $ | 77,633 | |||||||||||||||
| Purchases of property, plant and equipment | (17,353) | (32,770) | (47,541) | (52,326) | |||||||||||||||||||
| Net increase in loans held for sale | 199,319 | 39,391 | 404,043 | 110,461 | |||||||||||||||||||
| Adjusted free cash flow | $ | 30,260 | $ | 25,370 | $ | 146,272 | $ | 135,768 | |||||||||||||||
Segment Results
| Unaudited | |||||||||||||||||||||||
| (in thousands) | Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Diversified Industrial | $ | 299,553 | $ | 346,464 | $ | 1,285,666 | $ | 1,207,183 | |||||||||||||||
| Energy | 45,061 | 44,312 | 181,811 | 164,028 | |||||||||||||||||||
| Financial Services | 78,001 | 41,081 | 227,964 | 153,685 | |||||||||||||||||||
| Total revenue | $ | 422,615 | $ | 431,857 | $ | 1,695,441 | $ | 1,524,896 | |||||||||||||||
| Income (loss) before interest expense and income taxes: | |||||||||||||||||||||||
| Diversified Industrial | $ | 17,095 | $ | 26,083 | $ | 200,629 | $ | 123,329 | |||||||||||||||
| Energy | (404) | 2,178 | 13,608 | 14,982 | |||||||||||||||||||
| Financial Services | 18,706 | 14,922 | 63,477 | 79,165 | |||||||||||||||||||
| Corporate and other | 61,571 | 20,227 | 23,044 | 21,303 | |||||||||||||||||||
| Income before interest expense and income taxes | 96,968 | 63,410 | 300,758 | 238,779 | |||||||||||||||||||
| Interest expense | 6,197 | 6,191 | 20,649 | 22,250 | |||||||||||||||||||
| Income tax provision | 17,688 | 27,654 | 73,944 | 84,089 | |||||||||||||||||||
| Net income from continuing operations | $ | 73,083 | $ | 29,565 | $ | 206,165 | $ | 132,440 | |||||||||||||||
| Loss (income) of associated companies, net of taxes: | |||||||||||||||||||||||
| Corporate and other | $ | (6,378) | $ | 10,612 | $ | (4,611) | $ | (15,664) | |||||||||||||||
| Total | $ | (6,378) | $ | 10,612 | $ | (4,611) | $ | (15,664) | |||||||||||||||
| Segment depreciation and amortization: | |||||||||||||||||||||||
| Diversified Industrial | $ | 10,177 | $ | 11,929 | $ | 41,805 | $ | 47,568 | |||||||||||||||
| Energy | 2,846 | 3,142 | 10,546 | 12,212 | |||||||||||||||||||
| Financial Services | 358 | 120 | 750 | 485 | |||||||||||||||||||
| Corporate and other | 162 | 138 | 654 | 256 | |||||||||||||||||||
| Total depreciation and amortization | $ | 13,543 | $ | 15,329 | $ | 53,755 | $ | 60,521 | |||||||||||||||
| Segment Adjusted EBITDA: | |||||||||||||||||||||||
| Diversified Industrial | $ | 23,639 | $ | 35,744 | $ | 153,120 | $ | 153,791 | |||||||||||||||
| Energy | 2,367 | 6,723 | 23,905 | 25,615 | |||||||||||||||||||
| Financial Services | 19,199 | 16,024 | 63,499 | 80,618 | |||||||||||||||||||
| Corporate and other | (556) | 4,711 | (12,090) | (191) | |||||||||||||||||||
| Total Adjusted EBITDA | $ | 44,649 | $ | 63,202 | $ | 228,434 | $ | 259,833 | |||||||||||||||
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 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 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 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.
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 2023 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 significant volatility of crude oil and commodity prices; 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 management diversion, increased costs and expenses, and impact on profitability in connection with the Company's business strategy to make acquisitions; 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; adverse impacts of the ongoing COVID-19 pandemic on business, results of operations, financial condition, and cash flows; 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 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, 2022 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.
Investor Relations Contact
Jennifer Golembeske
212-520-2300
jgolembeske@steelpartners.com