Steel Partners Holdings Reports First Quarter Financial Results

Rhea-AI Summary

Steel Partners Holdings L.P. (NYSE: SPLP) reported Q1 2021 revenue of $314,493, a 9.4% decrease from $347,210 in Q1 2020. Despite lower sales volume, net income from continuing operations improved to $53,342 from a loss of $36,479 a year earlier. Adjusted EBITDA increased to $49,776, with a margin of 15.8%. Notably, the company reduced total debt by approximately $39.5 million, achieving total debt of $294.6 million. Liquidity remains strong at $355.7 million. The executive team emphasizes continued operational improvement and cost reduction strategies.

Positive

• Net income from continuing operations increased to $53,342 from a loss of $36,479.
• Adjusted EBITDA rose to $49,776, up from $37,717, with an improved margin of 15.8%.
• Total debt decreased by approximately $39.5 million, now at $294.6 million.

Negative

• Revenue decreased by $32,717 or 9.4% due to lower sales volume across all segments.
• Financial Services revenue declined by $13,080 primarily due to lower origination volume.

Steel Partners Holdings L.P. (NYSE: SPLP), a diversified global holding company, today announced operating results for the first quarter ended March 31, 2021.

Q1 2021		Q1 2020		($ in thousands)
$314,493		$347,210		Revenue
53,342		(36,479)		Net income (loss) from continuing operations
52,951		(60,878)		Net income (loss) attributable to common unitholders
49,776		37,717		Adjusted EBITDA*
15.8%		10.9%		Adjusted EBITDA margin*
4,901		6,994		Purchases of property, plant and equipment
5,473		2,795		Adjusted free cash flow*
* 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.

"As we head into 2021, we continue to see increased EBITDA and cash flow from our efforts to reduce costs and increase operational performance despite lower sales volume," said Executive Chairman Warren Lichtenstein. "Our team is focused on working safely to deliver quality products on time to our customers as we continue to increase unitholder value."

Results of Operations

Comparison of the Three Months Ended March 31, 2021 and 2020 (unaudited)

(Dollar amounts in table and commentary in thousands, unless otherwise indicated)		Three Months Ended March 31,
		2021				2020
Revenue		$	314,493			$	347,210
Cost of goods sold		208,685				220,848
Selling, general and administrative expenses		68,800				75,928
Asset impairment charges		—				617
Interest expense		5,466				8,627
Realized and unrealized losses on securities, net		23,249				18,002
All other (income) expense, net		(33,522)				28,604
Total costs and expenses		272,678				352,626
Income (loss) from continuing operations before income taxes and equity method
investments		41,815				(5,416)
Income tax provision (benefit)		14,594				(3,444)
(Income) loss of associated companies, net of taxes		(26,121)				34,507
Net income (loss) from continuing operations		$	53,342			$	(36,479)

Revenue

Revenue for the three months ended March 31, 2021 decreased $32,717, or 9.4%, as compared to the same period last year, due to lower sales volume across all the reportable segments. Diversified Industrial net sales decreased $13,121 primarily due to lower sales volume from the Electrical Products business and to a lesser extent the Performance Materials business, partially offset by the Joining Materials business. Energy net revenue decreased by $6,516 primarily due to the lower demand from the energy sector. Financial Services revenue decreased by $13,080 primarily due to decreases in interest income and fees due to lower origination volume, as compared to the same period of 2020.

Cost of Goods Sold

Cost of goods sold for the three months ended March 31, 2021 decreased $12,163, or 5.5%, 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 March 31, 2021 were primarily due to the lower sales volume discussed above, and the Company's cost reduction efforts initiated in the prior year.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") for the three months ended March 31, 2021 decreased $7,128, or 9.4%, 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.

Asset Impairment Charges

No asset impairment charge was recorded for the three months ended March 31, 2021. During the first quarter of 2020, as a result of COVID-19 related declines in our youth sports business within the Energy segment, intangible assets of $617, primarily customer relationships, were fully impaired.

Interest Expense

Interest expense for the three months ended March 31, 2021 decreased $3,161, or 36.6%, as compared to the same period last year. The decrease for the three months ended March 31, 2021 was primarily due to lower interest rates and lower debt levels, as compared to the same period of 2020.

Realized and Unrealized Losses on Securities, Net

The Company recorded losses of $23,249 for the three months ended March 31, 2021, as compared to losses of $18,002 in the same period of 2020. These losses were primarily due to unrealized losses related to the mark-to-market adjustments on the Company's portfolio of securities in both periods, as well as a realized loss on the sale of securities in the 2020 period.

All Other (Income) Expense, Net

All other income, net totaled $33,522 for the three months ended March 31, 2021, as compared to All other expenses, net that totaled $28,604 in the same period of 2020. All other income, net for the three months ended March 31, 2021 is primarily due to: (1) $19,740 one-time dividend from Aerojet, (2) a pre-tax gain of $8,096 on the sale of OMG’s Edge business and (3) a pre-tax gain of $6,646 on the sale of an idle facility in the Joining Materials business. All other expenses, net for the three months ended March 31, 2020 was primarily due to provisions for loan losses.

Income Tax Provision (Benefit)

The Company recorded an income tax provision of $14,594 and a benefit of $3,444 for the three months ended March 31, 2021 and 2020, 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. Provisions have been made for federal, state, local or foreign income taxes on the results of operations generated by our consolidated subsidiaries that are taxable entities. Significant differences between the statutory rate and the effective tax rate include partnership losses for which no tax benefit is recognized, state taxes, changes in deferred tax valuation allowances and other permanent differences.

(Income) Loss of Associated Companies, Net of Taxes

The Company recorded income from associated companies, net of taxes, of $26,121 for the three months ended March 31, 2021, as compared to a loss, net of tax of $34,507 in the same period of 2020.

Purchases of Property, Plant and Equipment (Capital Expenditures)

Capital expenditures for the first three months of 2021 totaled $4,901, or 1.6% of revenue, as compared to $6,994, or 2.0% of revenue, in the first three months of 2020.

Additional Non-GAAP Financial Measures

For the three months ended March 31, 2021, Adjusted EBITDA and Adjusted EBITDA margin were $49,776 and 15.8%, respectively, as compared to $37,717 and 10.9% for the same period in 2020. Adjusted EBITDA increased by $12,059 primarily due to an increase in Financial Services partially offset by a decrease in Diversified Industrial. For the three months ended March 31, 2021, adjusted free cash flow was $5,473 versus $2,795 for the same period in 2020.

Liquidity and Capital Resources

As of March 31, 2021, the Company had $355.7 million in available liquidity under its senior credit agreement, as well as $18.7 million in cash and cash equivalents, excluding WebBank cash, and approximately $273.9 million in marketable securities and long-term investments.

As of March 31, 2021, total debt was $294.6 million, a decrease of approximately $39.5 million, as compared to December 31, 2020. As of March 31, 2021, net debt totaled $295.0 million, a decrease of approximately $59.9 million, as compared to December 31, 2020. Total leverage (as defined in the Company's senior credit agreement) was 2.2x as of March 31, 2021 as compared to 2.4x as of December 31, 2020.

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.

(Financial Tables Follow)

Consolidated Balance Sheets (unaudited)

(in thousands, except common units)	March 31, 2021				December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	200,238			$	135,788
Marketable securities	126				106
Trade and other receivables - net of allowance for doubtful accounts of $3,345 and $3,368, respectively	186,071				164,106
Receivables from related parties	2,883				2,073
Loans receivable, including loans held for sale of $91,316 and $88,171, respectively, net	340,136				306,091
Inventories, net	151,573				137,086
Prepaid expenses and other current assets	56,165				58,053
Total current assets	937,192				803,303
Long-term loans receivable, net	2,549,961				2,183,017
Goodwill	148,030				150,852
Other intangible assets, net	133,416				138,581
Deferred tax assets	52,211				66,553
Other non-current assets	40,829				42,068
Property, plant and equipment, net	221,768				228,992
Operating lease right-of-use assets	28,677				29,715
Long-term investments	273,776				291,297
Total Assets	$	4,385,860			$	3,934,378
LIABILITIES AND CAPITAL
Current liabilities:
Accounts payable	$	136,442			$	100,759
Accrued liabilities	57,661				69,967
Deposits	347,518				285,393
Payables to related parties	4,083				4,080
Short-term debt	853				397
Current portion of long-term debt	10,323				10,361
Other current liabilities	45,468				46,044
Total current liabilities	602,348				517,001
Long-term deposits	85,665				70,266
Long-term debt	283,446				323,392
Other borrowings	2,467,657				2,090,223
Preferred unit liability	147,553				146,892
Accrued pension liabilities	145,458				183,462
Deferred tax liabilities	2,148				2,169
Long-term operating lease liabilities	20,755				21,845
Other non-current liabilities	38,120				39,906
Total Liabilities	3,793,150				3,395,156
Commitments and Contingencies
Capital:
Partners' capital common units: 22,949,392 and 22,920,804 issued and outstanding (after deducting 14,916,635 and
14,916,635 units held in treasury, at cost of $219,245 and $219,245), respectively	760,623				707,309
Accumulated other comprehensive loss	(172,866)				(172,649)
Total Partners' Capital	587,757				534,660
Noncontrolling interests in consolidated entities	4,953				4,562
Total Capital	592,710				539,222
Total Liabilities and Capital	$	4,385,860			$	3,934,378

Consolidated Statements of Operations (unaudited)

(in thousands, except common units and per common unit data)		Three Months Ended March 31,
		2021				2020
Revenue:
Diversified Industrial net sales		$	248,489			$	261,610
Energy net revenue		32,086				38,602
Financial Services revenue		33,918				46,998
Total revenue		314,493				347,210
Costs and expenses:
Cost of goods sold		208,685				220,848
Selling, general and administrative expenses		68,800				75,928
Asset impairment charges		—				617
Finance interest expense		2,232				3,434
(Benefit from) provision for loan losses		(715)				26,137
Interest expense		5,466				8,627
Realized and unrealized losses on securities, net		23,249				18,002
Other income, net		(35,039)				(967)
Total costs and expenses		272,678				352,626
Income (loss) from continuing operations before income taxes and equity
method investments		41,815				(5,416)
Income tax provision (benefit)		14,594				(3,444)
(Income) loss of associated companies, net of taxes		(26,121)				34,507
Net income (loss) from continuing operations		53,342				(36,479)
Discontinued operations
Loss from discontinued operations, net of taxes

FAQ

What were Steel Partners Holdings' earnings results for Q1 2021?

For Q1 2021, Steel Partners reported revenue of $314,493 and net income from continuing operations of $53,342.

How did Steel Partners Holdings' adjusted EBITDA perform in Q1 2021?

Adjusted EBITDA for Q1 2021 was $49,776, reflecting an increase from $37,717 in Q1 2020.

What is the current debt level of Steel Partners Holdings as of March 31, 2021?

Steel Partners Holdings had total debt of $294.6 million as of March 31, 2021, a decrease of approximately $39.5 million from the previous quarter.

How did Steel Partners Holdings' revenue change compared to Q1 2020?

The revenue for Q1 2021 decreased by 9.4%, from $347,210 in Q1 2020 to $314,493.

What is Steel Partners Holdings' outlook for 2021?

The company aims to enhance operational performance and increase unitholder value, despite a decrease in sales volume.