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Steel Partners Holdings L.P. Reports Full Year 2011 Financial Results

March 26, 2012 at 8:35 PM EDT

NEW YORK, March 26, 2012 /PRNewswire/ -- Steel Partners Holdings L.P. (SPNHU.PK.) ("SPH" or the "Company") reported revenues of $712.2 million for the year ended December 31, 2011 as compared to approximately $424.7 million for the same period in 2010.  Net income attributable to the Company's common unitholders for 2011 was $35.5 million, or $0.99 per diluted LP unit, as compared to $31.7 million, or $1.16 per diluted LP unit, for 2010.

"SPH had a very productive 2011," said Warren Lichtenstein, Chairman and CEO of Steel Partners Holdings GP Inc. "Our companies saw growth through both acquisitions and improved demand in core markets, while SPH worked to create a continuous improvement culture and implemented operational excellence programs. These gains put SPH in a strong position as we complete our transition into a global, publicly-traded diversified holding company."

Financial Summary ($000s)



Year Ended December 31,


2011

2010

Revenue

$ 712,222

$ 424,665

Costs and Expenses

666,084

410,777

Income before taxes and equity method

46,138

13,888

Income tax benefit (provision)

63,965

(2,657)

(Loss) income from equity method investments

(13,823)

10,305

Loss from other investments - related party

(15,743)

(3,220)

Income from continuing operations

80,537

18,316

Income from discontinued operations

740

28,130

Net income

81,277

46,446

Income attributable to noncontrolling interests

(45,808)

(14,699)

Net income attributable to common unitholders

$   35,469

$   31,747

Net income per common unit - basic

$        1.41

$        1.26

Net income per common unit - diluted

$        0.99

$        1.16

Total Partners' Capital, end of year

$ 415,797

$ 405,732



Total revenue for 2011 includes $700,969 for the Diversified Industrial segment, as compared to $385,805 in the prior year period.  This results from the consolidation of Handy & Harman Ltd. ("HNH") effective May 7, 2010, the acquisition of SWH, Inc. ("SWH") by BNS Holding, Inc. on February 2, 2011 and the acquisition of DGT Holdings Corp. on July 5, 2011. HNH's revenues of $664,017 in 2011 increased 16.9% over the full year 2010, relating principally to higher silver prices and increased units sold. SWH owns Sun Well Services, Inc., ("Sun Well") a provider of premium well services to exploration and production companies. Revenues of Sun Well for the period February 2, 2011 through December 31, 2011 of $32,984 grew by 26.8% as compared to the full year ended December 31, 2010, resulting from an increase in the average number of rigs in operation and an increase in the revenue per rig hour.  

Revenues for 2011 include $14,921 for the Financial Services segment, a 38.1% increase over the 2010 period. Interest and noninterest income increased due primarily to a new lending program. The program began in the third quarter of 2010.

Income from continuing operations, net of tax, in 2011 includes a net tax benefit of approximately $83,000 which was principally generated by a non-cash tax benefit related to the reversal of deferred tax valuation allowances. Of this amount, approximately $73,000 was related to HNH and approximately $9,000 was related to BNS. The recognition of this non-cash tax benefit follows an assessment of the profitability of the Company's domestic operations and the likelihood that the deferred tax assets will be realized.

(Loss) income from equity method investments primarily relates to net changes in the market value of the investments held by the Company in Steel Excel Inc. and API Group plc.

Loss from other investments – related party represents the changes in the market value of the investments held by the SPII Liquidating Series Trust, whose holdings include interests in Barbican Group Holdings Limited and Fox & Hound Restaurant Group, among other investments. The Company has a 43.75% interest in the SPII Liquidating Series Trust.

Noncontrolling interests primarily represent the minority ownership's share of the net income relating to HNH. As of December 31, 2011, the Company owned 55.5% of HNH.

Liquidity

In addition to cash and cash equivalents, the Company considers investments at fair value included in its consolidated balance sheet as being generally available to meet its liquidity needs.  Investments at fair value are not as liquid as cash and cash equivalents, but they are generally convertible into cash within a reasonable period of time.  As of December 31, 2011, the Company had cash and cash equivalents of $13,417 and investments at fair value of $120,734.  In addition, the Company had $23,736 of restricted cash which serves as collateral with respect to foreign currency financial instruments.  The Company is not able to use these funds for other purposes, and the Company does not consider this amount to be available to meet its liquidity needs.

Our Company

SPH is a global diversified holding company that engages in multiple businesses through consolidated subsidiaries, associated companies and other interests.  We own and operate businesses and have significant interests in leading companies in various industries, including diversified industrial products, energy, defense, banking, insurance, food products and services, oilfield services, sports, training, education, and the entertainment and lifestyle industries.

For additional information, please refer to our Annual Report on Form 10-K which we filed with the Securities and Exchange Commission on March 26, 2012. This Form 10-K, current reports on Form 8-K, and all amendments to those reports, are available free of charge through our website www.steelpartners.com as soon as reasonably practicable after those materials have been electronically filed with, or furnished to, the Securities and Exchange Commission.

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 SPH's current expectations and projections about its future results, performance, prospects and opportunities.  SPH 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 2012 and beyond to differ materially from those expressed in, or implied by, these forward-looking statements.  These factors include, without limitation, SPH'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 will not be able to compete successfully, and the possible volatility of the Company's stock price and the potential fluctuation in its operating results.  Although SPH 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, 2011 for information regarding risk factors that could affect the Company's results.  Except as otherwise required by Federal securities laws, SPH 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: Steel Partners Holdings GP Inc.
James F. McCabe, Jr., Chief Financial Officer
212-520-2300

Steel Partners Holdings L.P.

Consolidated Balance Sheets

(in thousands except common units)

December 31,


2011

2010

ASSETS


Current Assets:


Cash and cash equivalents

$  127,027

$  180,684

Restricted cash

23,736

143,698

Financial Instruments

-

13,772

Trade and other receivables (net of allowance for doubtful

  accounts of $2,504 in 2011 and $2,198 in 2010)

90,239

67,747

Receivable from related party

116

1,463

Loans receivable, net

34,820

16,408

Inventories

53,776

50,822

Deferred income taxes

20,038

4,700

Prepaid and other current assets

16,123

10,087

Assets of discontinued operations

35,387

33,306

       Total current assets

401,262

522,687




Long-term loans receivable, net

8,942

11,919

Goodwill

42,797

16,212

Other intangibles, net

135,341

124,541

Deferred income taxes

70,625

-

Other non-current assets

22,143

19,518

Investments at fair value

150,020

79,540

Property, plant and equipment, net

127,842

91,625

Investment in associated companies

128,218

163,270

Other investments at fair value - related party

42,653

62,553

  Total Assets

$  1,129,843

$  1,091,865



Steel Partners Holdings L.P.

Consolidated Balance Sheets

(in thousands except common units)

December 31,


2011

2010

LIABILITIES AND CAPITAL


Accounts payable

$  37,843

$  37,959

Accrued liabilities

40,944

37,527

Current portion of distribution payable

-

29,869

Financial instruments

23,736

143,917

Deposits

38,293

29,102

Payable to related parties

4,930

6,330

Current portion of deferred fee liability

1,107

-

Short-term debt

24,168

42,890

Current portion of long-term debt

8,531

4,452

Other current liabilities

3,975

5,721

Liabilities of discontinued operations

15,310

9,997

    Total current liabilities

198,837

347,764

Long-term deposits

56,589

32,690

Deferred fee liability to related parties

57,640

64,854

Long-term debt

130,955

91,984

Accrued pension liability

186,212

113,004

Deferred income taxes

6,231

3,333

Other liabilities

12,959

7,924

     Total Liabilities

649,423

661,553




Commitments and Contingencies






Partner's capital (common units: 25,183,039 in 2011

and 25,251,554 in 2010 issued and outstanding, after deducting

2,808,725 and 2,726,030 held in treasury, at cost of $48,099

and $47,107 in 2011 and 2010, respectively.

427,534

397,970

Accumulated other comprehensive (loss) income

(11,737)

7,762

Total Partners' Capital

415,797

405,732

Noncontrolling interests in consolidated entities

64,623

24,580

    Total Capital

480,420

430,312

    Total Liabilities and Capital

$  1,129,843

$  1,091,865







Steel Partners Holdings L.P.

Consolidated Statements of Operations

(in thousands except units and per unit data)







Year Ended December 31,


2011

2010

Revenue:




Diversified Industrial, Financial Services and Other:




  Diversified industrial net sales

$  700,969

$  385,805

  Financial services revenue

14,921

10,803

  Investment and other income

684

4,007

  Net investment (losses) gain

(4,352)

24,050













Total revenue

712,222

424,665








Costs and Expenses




Diversified Industrial, Financial Services and Other:




  Diversified industrial cost of goods sold

513,741

289,839

  Selling, general and administrative

142,031

88,250

  Asset impairment charges

1,505

-

  Finance interest

1,571

2,022

  Provision for loan losses (gains)

8

(420)

  Interest expense

12,424

12,123

  Realized and unrealized loss on derivatives

397

5,164

  Management fees - related party

8,169

7,531

 (Decrease) Increase in deferred fee liability to related party

(6,107)

6,268

  Other income

(7,655)

-

Total costs and expenses

666,084

410,777





























Income from continuing operations before income taxes and equity

method income (loss)

46,138

13,888

Income tax benefit (provision)

63,965

(2,657)





(Loss) income from equity method investments:



  (Loss) income of associated companies, net of tax

(13,823)

10,305

  Loss from other investments-related party

(15,743)

(3,220)

Net income from continuing operations

80,537

18,316





Discontinued Operations:



 Loss from discontinued operations, net of taxes

(231)

(3,162)

 Gain on sale of discontinued operations, net of taxes

971

31,292

 Income from discontinued operations

740

28,130





Net income

81,277

46,446










Net income attributable to noncontrolling interests in consolidated entities:



  Continuing operations

(45,461)

(997)

  Discontinued operations

(347)

(13,702)

(45,808)

(14,699)





Net income attributable to common unitholders

$  35,469

$  31,747










Net income per common unit - basic



Net income from continuing operations

$  1.39

$  0.69

Net income from discontinued operations

0.02

0.57

Net income attributable to common unitholders

$  1.41

$  1.26





Net income per common unit - diluted



Net income from continuing operations

$  0.98

$  0.63

Net income from discontinued operations

0.01

0.53

Net income attributable to common unitholders

$  0.99

$  1.16





Weighted average number of common units outstanding - basic

25,232,985

25,234,827





Weighted average number of common units outstanding - diluted

29,669,582

27,482,804



Steel Partners Holdings L.P.

Consolidated Statements of Cash Flows

(in thousands)






Year Ended December 31,

2011

2010





Cash flows from operating activities:



Net income

$  81,277

$  46,446

Adjustments to reconcile net income to net cash provided by (used in) operating activities:



Investment losses (gains) and other than temporary impairment losses

4,352

(24,050)

Provision for loan losses

8

(420)

Loss (Income) of associated companies

13,823

(10,305)

Loss from other investments - related party

15,743

3,220

Gain on sale of discontinued operations

(1,372)

(31,292)

Long-term interest on related party debt

-

4,275

Deferred income tax provision (benefit)

15,845

(9)

Income tax benefit from release of deferred tax valuation allowance

(82,731)

-

Non-cash interest and dividend income

-

(1,876)

Non-cash income from derivatives

(811)

-

Accrued interest not paid in cash

2,275

-

Depreciation and amortization

23,983

14,029

(Gain) Loss on extinguishment of debt

(189)

1,210

Amortization of debt related costs

1,743

1,226

Reclassification of net cash settlements on derivative instruments

1,047

5,124

Stock based compensation

4,509

528

Asset impairment charges

1,505

-

Bargain purchase gain

(8,978)

-

Other

(230)

(854)

Net change in operating assets and liabilities:



Trade and other receivables

(12,172)

27,400

Receivable from related party

1,347

-

Inventories

(23)

8,577

Dividends and interest receivable

-

1,379

Prepaid and other assets

571

(1,350)

Accounts payable, accrued and other liabilities

(29,253)

(6,779)

Payable to related parties

51

606

Dividends and interest payable

-

(319)

(Decrease) increase in deferred fee liability to related party

(6,107)

6,267

Net increase in loans held for sale

(18,460)

(3,499)

Net cash (used in) provided by operating activities of discontinued operations

(2,265)

7,127

Net cash provided by operating activities

5,488

46,661



Steel Partners Holdings L.P.

Consolidated Statements of Cash Flows

(in thousands)






Year Ended December 31,

2011

2010

Cash flows from investing activities:



Purchases of investments

(187,459)

(359,575)

Proceeds from sale of investments

46,220

501,067

Net increase in time deposits placed and other short-term investments

851

-

Proceeds from sale of loans

-

2,054

Net decrease in loans receivable

2,447

3,616

Purchases of property and equipment

(22,137)

(7,296)

Reclassification of restricted cash

119,962

(19,493)

Net cash settlements on derivative instruments

(1,047)

(5,124)

Proceeds from sales of assets

1,648

457

Acquisitions, net of cash acquired

(35,751)

2,115

Purchase of subsidiary shares from noncontrolling interests

(8,827)

(14,134)

Investments in associated companies

(23,072)

(51,675)

Proceeds from sale of discontinued operations

26,532

64,693

Net cash (used in) provided by investing activities of discontinued operations

(41)

1,520

Other

(388)

-

Net cash (used in) provided by investing activities

(81,062)

118,225





Cash flows from financing activities:



Common unit cash distributions

(29,868)

(49,102)

Proceeds from term loans – domestic

67,981

46,000

Net revolver borrowings

(18,785)

11,136

Repayments of term loans – foreign

(707)

(1,970)

Repayments of term loans – domestic

(26,874)

(86,018)

Repayments of term loans – related party

-

(5,563)

Deferred finance charges

(2,395)

(3,842)

Net change in overdrafts

95

2,088

Net increase in deposits

33,189

11,604

Repayment of debt of discontinued operations

-

(22,772)

Net cash used in financing activities of discontinued operations

(219)

-

Other

(225)

-

Net cash provided by (used in) financing activities

22,192

(98,439)





Net change for the period

(53,382)

66,447





Effect of exchange rate changes on cash and cash equivalents

(275)

(10)

Cash and cash equivalents at beginning of period/year

180,684

114,247

Cash and cash equivalents at end of period/year

$  127,027

$  180,684



SOURCE Steel Partners Holdings L.P.

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