Document
 


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT

PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

Commission File Number: 001-35493

STEEL PARTNERS HOLDINGS L.P.
(Exact name of registrant as specified in its charter)

Delaware
13-3727655
(State of Incorporation)
(I.R.S. Employer Identification No.)
 
 
590 Madison Avenue, 32nd Floor
 
New York, New York
10022
(Address of principal executive offices)
(Zip Code)

(212) 520-2300
(Registrant's telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12-b-2 of the Exchange Act.
Large accelerated filer o
Accelerated filer þ
Non-accelerated filer o
Smaller reporting company o
(Do not check if a smaller reporting company)
 
 
Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes o No þ

The number of shares outstanding of the Registrant's common units as of August 3, 2018 was 26,175,267.

 



STEEL PARTNERS HOLDINGS L.P.
TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
Page
Item 1.
Financial Statements (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 4.
 
 
 
PART II — OTHER INFORMATION
 
 
 
 
Item 1.
 
 
 
Item 2.
 
 
 
Item 6.
 
 
 




PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

STEEL PARTNERS HOLDINGS L.P.
Consolidated Balance Sheets
(unaudited)
(in thousands, except common units)
 
June 30, 2018
 
December 31, 2017
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
324,805

 
$
418,755

Restricted cash
13,496

 
15,629

Marketable securities
3,945

 
58,313

Trade and other receivables - net of allowance for doubtful accounts of $2,441 and $3,633, respectively
247,631

 
188,487

Receivables from related parties
972

 
355

Loans receivable, including loans held for sale of $158,926 and $136,773, respectively, net
242,417

 
182,242

Inventories, net
158,585

 
142,635

Prepaid expenses and other current assets
29,137

 
19,597

Assets held for sale

 
2,549

Total current assets
1,020,988

 
1,028,562

Long-term loans receivable, net
141,796

 
87,826

Goodwill
182,888

 
170,115

Other intangible assets, net
204,868

 
199,317

Deferred tax assets
105,217

 
109,011

Other non-current assets
74,835

 
61,074

Property, plant and equipment, net
300,993

 
271,991

Long-term investments
310,013

 
236,144

Total Assets
$
2,341,598

 
$
2,164,040

LIABILITIES AND CAPITAL
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
125,211

 
$
105,221

Accrued liabilities
78,661

 
74,118

Financial instruments
13,496

 
15,629

Deposits
334,335

 
305,207

Payables to related parties
1,204

 
1,563

Short-term debt
2,756

 
1,624

Current portion of long-term debt
806

 
459

Other current liabilities
14,027

 
10,602

Liabilities of discontinued operations
450

 
450

Total current liabilities
570,946

 
514,873

Long-term deposits
262,309

 
205,793

Long-term debt
494,766

 
412,584

Preferred unit liability
178,008

 
176,512

Accrued pension liabilities
256,931

 
268,233

Deferred tax liabilities
2,197

 
3,007

Other non-current liabilities
21,142

 
16,002

Total Liabilities
1,786,299

 
1,597,004

Commitments and Contingencies


 


Capital:
 
 
 
Partners' capital common units: 26,192,463 and 26,348,420 issued and outstanding (after deducting 11,232,082 and 10,868,367 units held in treasury, at cost of $177,518 and $170,858), respectively
746,834

 
652,270

Accumulated other comprehensive loss
(198,284
)
 
(106,167
)
Total Partners' Capital
548,550

 
546,103

Noncontrolling interests in consolidated entities
6,749

 
20,933

Total Capital
555,299

 
567,036

Total Liabilities and Capital
$
2,341,598

 
$
2,164,040


See accompanying Notes to Consolidated Financial Statements

2


STEEL PARTNERS HOLDINGS L.P.
Consolidated Income Statements
(unaudited)
(in thousands, except common units and per common unit data)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Revenue:
 
 
 
 
 
 
 
Diversified industrial net sales
$
358,398

 
$
303,816

 
$
666,016

 
$
584,030

Energy net revenue
47,073

 
34,035

 
83,665

 
61,351

Financial services revenue
28,966

 
20,540

 
51,001

 
36,329

Total revenue
434,437

 
358,391

 
800,682

 
681,710

Costs and expenses:
 
 
 
 
 
 
 
Cost of goods sold
299,258

 
247,355

 
561,119

 
475,968

Selling, general and administrative expenses
88,183

 
78,529

 
176,565

 
169,051

Finance interest expense
2,332

 
1,060

 
4,110

 
1,941

Provision for loan losses
4,205

 
965

 
7,023

 
1,088

Interest expense
9,590

 
4,893

 
17,699

 
9,299

Realized and unrealized losses (gains) on securities, net
11,824

 
(648
)
 
25,613

 
(433
)
Other (income) expenses, net
(529
)
 
171

 
(1,545
)
 
1,284

Total costs and expenses
414,863

 
332,325

 
790,584

 
658,198

Income before income taxes and equity method investments
19,574

 
26,066

 
10,098

 
23,512

Income tax provision
7,606

 
10,416

 
8,936

 
17,262

Income of associated companies, net of taxes
(1,587
)
 
(68
)
 
(3,542
)
 
(6,370
)
Net income
13,555

 
15,718

 
4,704

 
12,620

Net income attributable to noncontrolling interests in consolidated entities
(513
)
 
(4,465
)
 
(740
)
 
(5,449
)
Net income attributable to common unitholders
$
13,042

 
$
11,253

 
$
3,964

 
$
7,171

Net income per common unit - basic
 
 
 
 
 
 
 
Net income attributable to common unitholders
$
0.50

 
$
0.43

 
$
0.15

 
$
0.27

Net income per common unit - diluted
 
 
 
 
 
 
 
Net income attributable to common unitholders
$
0.42

 
$
0.41

 
$
0.15

 
$
0.27

Weighted-average number of common units outstanding - basic
26,147,125

 
26,038,548

 
26,205,290

 
26,091,833

Weighted-average number of common units outstanding - diluted
37,668,025

 
29,763,796

 
26,239,583

 
26,412,487


See accompanying Notes to Consolidated Financial Statements

3


STEEL PARTNERS HOLDINGS L.P.
Consolidated Statements of Comprehensive Income
(unaudited)
(in thousands)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Net income
$
13,555

 
$
15,718

 
$
4,704

 
$
12,620

Other comprehensive (loss) income, net of tax:
 
 
 
 
 
 
 
Gross unrealized (losses) gains on securities (a)

 
(4,090
)
 

 
13,606

Reclassification of unrealized gains on securities (a),(b)

 
(408
)
 

 
(273
)
Gross unrealized gains on derivative financial instruments
115

 
155

 
300

 
462

Currency translation adjustments
(4,087
)
 
1,786

 
(783
)
 
3,013

Changes in pension liabilities and other post-retirement benefit obligations

 
97

 

 
97

Other comprehensive (loss) income
(3,972
)
 
(2,460
)
 
(483
)
 
16,905

Comprehensive income
9,583

 
13,258

 
4,221

 
29,525

Comprehensive income attributable to noncontrolling interests
(273
)
 
(4,841
)
 
(721
)
 
(6,905
)
Comprehensive income attributable to common unitholders
$
9,310

 
$
8,417

 
$
3,500

 
$
22,620

 
 
 
 
 
 
 
 
Tax provision (benefit) on gross unrealized gains (losses) on securities and derivative financial instruments
$
23

 
$
(752
)
 
$
55

 
$
2,632

Tax benefit on reclassification of unrealized gains on securities
$

 
$
(240
)
 
$

 
$
(160
)
Tax benefit on currency translation adjustments
$
(55
)
 
$
(299
)
 
$
(19
)
 
$
(291
)
Tax provision on changes in pension liabilities and other post-retirement benefit obligations
$

 
$
57

 
$

 
$
57

(a)
Effective January 1, 2018 upon adoption of ASU 2016-01, unrealized gains or losses on equity securities are no longer recorded in Other comprehensive (loss) income, but are instead recorded in Realized and unrealized losses (gains) on securities, net in the consolidated income statements.
(b)
For the three and six months ended June 30, 2017, unrealized pretax gains of $648 and $433, respectively, were reclassified from Accumulated other comprehensive loss to Realized and unrealized losses (gains) on securities, net, in the consolidated income statements due to the sale of the related investments.

See accompanying Notes to Consolidated Financial Statements

4


STEEL PARTNERS HOLDINGS L.P.
Consolidated Statement of Changes in Capital
(unaudited)
(in thousands, except common units and treasury units)
 
Steel Partners Holdings L.P. Common Unitholders
 
 
 
 
 
Common
 
Treasury Units
 
Partners'
 
Accumulated Other Comprehensive
 
Total Partners'
 
Noncontrolling Interests in Consolidated
 
Total
 
Units
 
Units
 
Dollars
 
Capital
 
Loss
 
Capital
 
Entities
 
Capital
Balance at December 31, 2017
37,216,787

 
(10,868,367
)
 
$
(170,858
)
 
$
652,270

 
$
(106,167
)
 
$
546,103

 
$
20,933

 
$
567,036

Net income

 

 

 
3,964

 

 
3,964

 
740

 
4,704

Cumulative effect of adopting ASU 2016-01 relating to net unrealized gains and losses on equity securities (a)

 

 

 
91,078

 
(91,078
)
 

 

 

Cumulative effect of adopting ASC 606 relating to revenue recognition (b)

 

 

 
1,034

 

 
1,034

 

 
1,034

Unrealized gains on derivative financial instruments

 

 

 

 
274

 
274

 
26

 
300

Currency translation adjustments

 

 

 

 
(743
)
 
(743
)
 
(40
)
 
(783
)
Equity compensation - restricted units
22,351

 

 

 
370

 

 
370

 

 
370

Units issued in the acquisition of WFHC noncontrolling interests
185,407

 

 

 
3,159

 

 
3,159

 

 
3,159

Purchases of SPLP common units

 
(363,715
)
 
(6,660
)
 
(6,660
)
 

 
(6,660
)
 

 
(6,660
)
Purchases of subsidiary shares from noncontrolling interests

 

 

 
1,801

 
(575
)
 
1,226

 
(14,905
)
 
(13,679
)
Other, net

 

 

 
(182
)
 
5

 
(177
)
 
(5
)
 
(182
)
Balance at June 30, 2018
37,424,545

 
(11,232,082
)
 
$
(177,518
)
 
$
746,834

 
$
(198,284
)
 
$
548,550

 
$
6,749

 
$
555,299

(a)
Effective January 1, 2018 upon adoption of ASU 2016-01, a cumulative effect reclassification adjustment was made to remove the net unrealized gains and losses on equity securities from Accumulated other comprehensive loss and reclassify them to Partners' capital.
(b)
Effective January 1, 2018, the Company adopted ASC 606 for all contracts with customers using the modified retrospective transition method. The Company recognized a net increase of $1,034 to Partners' capital due to the cumulative impact of adopting ASC 606.

See accompanying Notes to Consolidated Financial Statements

5


STEEL PARTNERS HOLDINGS L.P.
Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
 
Six Months Ended June 30,
 
2018
 
2017
Cash flows from operating activities:
 
 
 
Net income
$
4,704

 
$
12,620

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
Provision for loan losses
7,023

 
1,088

Income of associated companies, net of taxes
(3,542
)
 
(6,370
)
Losses (gains) on securities, net
25,613


(433
)
Deferred income taxes
3,936

 
3,607

Depreciation and amortization
38,321

 
35,708

Equity-based compensation
370

 
6,420

Other
1,398

 
2,150

Net change in operating assets and liabilities:
 
 
 
Trade and other receivables
(48,256
)
 
(40,464
)
Inventories
(6,749
)
 
(11,262
)
Prepaid expenses and other assets
(9,257
)
 
(5,725
)
Accounts payable, accrued and other liabilities
3,462

 
(5,953
)
Net increase in loans held for sale
(22,153
)
 
(57,441
)
Net cash used in operating activities
(5,130
)
 
(66,055
)
Cash flows from investing activities:
 
 
 
Purchases of investments
(119,507
)
 
(22,508
)
Proceeds from sales of investments
46,027

 
14,691

Proceeds from maturities of marketable securities
17,467

 
7,292

Loan originations, net of collections
(99,015
)
 
(25,679
)
Purchases of property, plant and equipment
(21,979
)
 
(24,990
)
Proceeds from sales of assets
3,910

 
22,829

Acquisitions, net of cash acquired
(67,123
)
 
(2,008
)
Proceeds from divestitures

 
1,975

Other
438

 
(19
)
Net cash used in investing activities
(239,782
)
 
(28,417
)
Cash flows from financing activities:
 
 
 
Net revolver borrowings
81,986

 
(3,987
)
Net repayments of term loans – domestic
(229
)
 
(753
)
Net repayments of term loans – foreign
(334
)
 
(1,016
)
Proceeds from equipment lease financing
958

 
5,377

Purchases of the Company's common units
(6,660
)
 
(2,985
)
Purchase of subsidiary shares from noncontrolling interests
(10,666
)
 
(2,086
)
Common unit dividend payment

 
(3,923
)
Deferred finance charges
(1,042
)
 

Net increase (decrease) in deposits
85,644

 
(7,216
)
Other
(821
)
 
(656
)
Net cash provided by (used in) financing activities
148,836

 
(17,245
)
Net change for the period
(96,076
)
 
(111,717
)
Effect of exchange rate changes on cash and cash equivalents
(7
)
 
744

Cash, cash equivalents and restricted cash at beginning of period
434,384

 
462,768

Cash, cash equivalents and restricted cash at end of period
$
338,301

 
$
351,795


See accompanying Notes to Consolidated Financial Statements

6


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

All amounts used in the Notes to Consolidated Financial Statements are in thousands, except common and preferred units, per common and preferred unit, share and per share data.

1. NATURE OF THE BUSINESS AND BASIS OF PRESENTATION

Nature of the Business

Steel Partners Holdings L.P. ("SPLP" or "Company") is a diversified global holding company that engages in multiple businesses through consolidated subsidiaries and other interests. It owns and operates businesses and has significant interests in companies in various industries, including diversified industrial products, energy, defense, supply chain management and logistics, banking and youth sports. SPLP operates through the following segments: Diversified Industrial, Energy, Financial Services, and Corporate and Other, which are managed separately and offer different products and services. For additional details related to the Company's reportable segments see Note 18 - "Segment Information." Steel Partners Holdings GP Inc. ("SPH GP"), a Delaware corporation, is the general partner of SPLP and is wholly-owned by SPLP. The Company is managed by SP General Services LLC ("Manager"), pursuant to the terms of an amended and restated management agreement ("Management Agreement") discussed in further detail in Note 17 - "Related Party Transactions."

Basis of Presentation

The consolidated balance sheet as of December 31, 2017, which has been derived from audited financial statements, and the unaudited consolidated financial statements included herein have been prepared by the Company in accordance with the rules and regulations of the Securities and Exchange Commission for interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") have been condensed or omitted in accordance with those rules and regulations. The Company believes that the disclosures made are adequate to make the information not misleading. This quarterly report on Form 10-Q should be read in conjunction with the Company's audited consolidated financial statements on Form 10-K for the year ended December 31, 2017. Certain amounts for the prior year have been reclassified to conform to the current year presentation, principally to conform with changes made in accordance with new accounting pronouncements adopted January 1, 2018, as discussed further below.

In the opinion of management, the interim financial statements reflect all normal and recurring adjustments necessary to present fairly the consolidated financial position and the results of operations and changes in cash flows for the interim periods. The preparation of the consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Estimates are based on historical experience, expected future cash flows and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The results of operations for the three and six months ended June 30, 2018 are not necessarily indicative of the operating results for the full year.

New or Recently Adopted Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606), and has since issued amendments thereto (collectively referred to herein as "ASC 606"). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, and the guidance defines a five-step process to achieve this core principle. ASC 606 also requires additional disclosure about the nature, amount, timing and uncertainty of revenues and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The Company adopted ASC 606 as of January 1, 2018 using the modified retrospective transition method. For additional information, see Note 2 - "Revenues."

In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10), which eliminates the requirement to classify equity securities with readily determinable market values as either available-for-sale securities or trading securities, and requires that equity investments, other than those accounted for under the traditional equity method of accounting, be measured at their fair value with changes in fair value recognized in net income or loss. In the past, changes in fair value were reported in the Company's consolidated statement of comprehensive income (loss) and in Accumulated other comprehensive

7


income (loss) ("AOCI"). Equity investments that do not have readily determinable market values may be measured at cost under ASU 2016-01, subject to an assessment for impairment. We adopted ASU 2016-01 effective January 1, 2018. Upon adoption, we recorded a cumulative effect reclassification adjustment from AOCI to Partners' capital of $91,078, which represented the accumulated net unrealized gain on equity securities that was held in AOCI as of December 31, 2017. See also Note 12 - "Capital and Accumulated Other Comprehensive Loss." Furthermore, to have a comparable presentation in our prior-period financial statements after adoption of ASU 2016-01 in 2018, we reclassified realized gains of $648 and $433 for the three and six months ended June 30, 2017, respectively, from Other (income) expenses, net to Realized and unrealized losses (gains) on securities, net in both the consolidated income statements and consolidated statement of cash flows for 2017.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Topic 842 is effective for public companies for annual reporting periods beginning after December 15, 2018, including interim periods within those fiscal years. The new standard establishes a right-of-use ("ROU") model that requires a lessee to record a ROU asset and a lease liability, measured on a discounted basis, on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, which clarified various aspects of the guidance under ASU 2016-02. Originally, entities were required to adopt ASU 2016-02 using a modified retrospective approach, which required prior periods to be presented under this new standard with certain practical expedients available. However, in July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which now allows entities the option of recognizing the cumulative effect of applying the new standard as an adjustment to the opening balance of retained earnings in the year of adoption (January 1, 2019) while continuing to present all prior periods under previous lease accounting guidance.

The Company's implementation plan for the new lease standard includes an information system, and business process and control changes to accumulate the appropriate data in order to calculate and record the recognition of ROU assets, lease liabilities and the related expense recognition. The Company is creating an inventory of our existing portfolio of leases and continues to review other contracts to determine if they contain leases as defined by Topic 842. While this assessment continues, the Company has not yet determined the effect of Topic 842 on our consolidated balance sheet. The Company does not expect that the adoption of Topic 842 will have a material impact on our results of operations or cash flow presentation. The Company will continue to assess any incremental disclosures that will be required in our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new standard changes the impairment model for most financial assets that are measured at amortized cost and certain other instruments, including trade receivables, from an incurred loss model to an expected loss model and adds certain new required disclosures. Under the expected loss model, entities will recognize estimated credit losses to be incurred over the entire contractual term of the instrument rather than delaying recognition of credit losses until it is probable the loss has been incurred. The new standard is effective for the Company's 2020 fiscal year with early adoption permitted for all entities in fiscal years beginning after December 15, 2018. The Company is currently evaluating the potential impact of this new guidance.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This new standard provided guidance to help decrease diversity in practice in how certain cash receipts and cash payments are classified in the statement of cash flows. The amendments in ASU 2016-15 provided guidance on eight specific cash flow issues. We adopted ASU 2016-15 effective January 1, 2018. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. This new standard provides guidance on the classification of restricted cash in the statement of cash flows. We adopted ASU 2016-18 effective January 1, 2018. As a result of the adoption of ASU 2016-18, in the consolidated statement of cash flows for the six months ended June 30, 2017, we reclassified $13,979 of restricted cash.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This new standard provides guidance to help determine more clearly what is a business acquisition, as opposed to an asset acquisition. The amendments provide a screen to help determine when a set of components is a business by reducing the number of transactions in an acquisition that need to be evaluated. The new standard states that to classify the acquisition of assets as a business, there must be an input and a substantive process that jointly contribute to the ability to create outputs, with outputs being defined as the key elements of the business. If all of the fair value of the assets acquired are concentrated in a single asset group, this would not qualify as a business. The Company adopted ASU 2017-01 effective January 1, 2018. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.


8


In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This new standard simplifies subsequent measurements of goodwill by eliminating Step 2 from the goodwill impairment test. Instead, entities will perform their interim or annual goodwill impairment testing by comparing the fair value of a reporting unit with its carrying amount and recognizing an impairment charge based on the amount that the carrying amount exceeds the reporting unit's fair value. The loss recognized should not exceed the total goodwill allocated to the reporting unit. The amendments in ASU 2017-04 are effective for the Company's 2020 fiscal year. The Company is currently evaluating the potential impact of this new guidance.

In March 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This new standard requires the components of net benefit cost to be disaggregated within the income statement, with service cost being included in the same line item as other compensation costs, and any other components being presented outside of operating income. The Company adopted ASU 2017-07 effective January 1, 2018. Since the Company's significant pension plans have been frozen, there is no substantial service cost associated with such plans and therefore, the adoption of ASU 2017-07 did not have a material impact on the Company's consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting. This new standard provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The standard states that entities should account for the effects of a modification unless the fair value of the modified award is the same as the fair value of the original award, the vesting conditions do not change, and the classification as an equity instrument or a liability instrument is the same. We adopted ASU 2017-09 effective January 1, 2018. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This new standard was created to refine and expand hedge accounting for both financial and commodity risk in order to simplify the current application of hedge accounting guidance in current U.S. GAAP. This new standard creates more transparency around how hedging results are presented, both in the notes and on the face of the financial statements. The amendments in ASU 2017-12 are effective for the Company's 2019 fiscal year. The Company is currently evaluating the potential impact of this new guidance.

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The new standard provides financial statement preparers with an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the federal Tax Cuts and Jobs Act ("TCJA") is recorded. The amendments in ASU 2018-02 are effective for the Company's 2019 fiscal year. The Company is currently evaluating the potential impact of this new guidance.

In March 2018, the FASB issued ASU 2018-05, Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. ASU 2018-05 applies to income tax effects from the enactment of the TCJA in December 2017. ASU 2018-05 allows a Company to report as provisional those amounts where the Company does not have the necessary information available, prepared or analyzed in reasonable detail to complete the accounting under Accounting Standards Codification Topic 740. ASU 2018-05 further allows a measurement period, not to exceed one year from the enactment date of TCJA, during which an entity may need to reflect adjustments to its provisional amounts. ASU 2018-05 requires that any adjustments to provisional amounts during the measurement period be included in income from continuing operations as an adjustment to tax expense or benefit, and also requires certain disclosures. The provisions of ASU 2018-05 were effective as of the enactment date of the TCJA, December 22, 2017.

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This new standard was created to simplify the accounting for share-based payments to nonemployees. This standard provides guidance on how to account for share-based payment transactions with nonemployees in which a grantor acquires goods or services to be used or consumed in the grantor's own operations by issuing share-based payment awards. The amendments in ASU 2018-07 are effective for the Company's 2019 fiscal year. The Company is currently evaluating the potential impact of this new guidance.

2. REVENUES

Adoption of ASC 606, "Revenue from Contracts with Customers"


9


On January 1, 2018, the Company adopted ASC 606 for all contracts with customers using the modified retrospective transition method. The Company recognized a net increase of $1,034 to Partners' capital due to the cumulative impact of adopting ASC 606. The impact to Partners' capital was primarily related to the timing of when revenue is recognized. While revenue from most contracts will continue to be recognized at a point in time, revenue from other contracts (for example, contracts for sale of custom manufactured goods that do not have an alternative use and for which the Company has an enforceable right to payment) will be recognized over time. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company does not expect the adoption of the new revenue standard to have a material impact to our net income on an ongoing basis. For the three and six months ended June 30, 2018, ASC 606 did not have a material impact on the Company's consolidated income statement, including total revenue.

Revenue Recognition Accounting Policies

Revenues are recognized when control of the promised goods or services are transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

The Company records all shipping and handling fees billed to customers as revenue. The Company has elected to account for shipping and handling activities that are performed after the customer obtains control of a good as activities to fulfill the promise to transfer the good. If revenue is recognized for the related good before the shipping and handling activities occur, the related costs of those shipping and handling activities are accrued.

Sales and usage-based taxes are excluded from revenues. The Company does not have any material service-type warranty arrangements. The expected costs associated with the Company's assurance warranties continue to be recognized as expense when the products are sold. The Company does not have any material significant financing arrangements as payment is received shortly after the goods are sold or services are performed.

Standalone Selling Price

Generally, the Company's sales contracts with customers contain only one performance obligation. In certain circumstances, contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines the standalone selling price based on the prices charged to similar customers or by using the expected cost plus margin approach.

Practical Expedients and Exemptions

The Company's performance obligations are generally part of contracts that have a duration of less than one year. Therefore, in accordance with the standard, the Company generally expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within Selling, general and administrative expenses.

For certain of the services that the Company's Diversified Industrial and Energy segments provide, the Company has determined that it has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the Company's performance completed to date, and therefore, the Company recognizes revenue in the amount to which the entity has a right to invoice.

Disaggregation of Revenues

Revenues are disaggregated at the Company's segment level since the segment categories depict how the nature, amount, timing and uncertainty of revenues and cash flows are affected by economic factors. For additional details related to the Company's reportable segments see Note 18 - "Segment Information."

The following table presents the Company's revenues disaggregated by geography for the three and six months ended June 30, 2018 and 2017. The Company's revenues are primarily derived domestically. Foreign revenues are based on the country in which the legal subsidiary generating the revenue is domiciled. Revenue from any single foreign country was not material to the Company's consolidated financial statements.

10


 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
United States
$
374,580

 
$
308,422

 
$
682,520

 
$
584,704

Foreign (a)
59,857

 
49,969

 
118,162

 
97,006

Total revenue
$
434,437

 
$
358,391

 
$
800,682

 
$
681,710

(a)
Foreign revenues are primarily related to the Company's API Group plc ("API") business, which is domiciled in the United Kingdom.

Diversified Industrial Revenues

The Diversified Industrial segment is comprised of manufacturers of engineered niche industrial products. The majority of revenues recognized are for the sale of manufactured goods in the United States. Other revenue recognized is for repair and maintenance services. Customer contracts are generally short-term in nature and are based on individual customer purchase orders. The terms and conditions of the customer purchase orders are dictated by either the Company's standard terms and conditions or by a master service agreement.

Diversified Industrial revenues related to product sales are recognized when control of the promised goods is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods. This condition is usually met at a point-in-time when the product has been shipped to the customer, or in certain circumstances when the product has been delivered to the customer, depending on the terms of the contract. However, revenues for certain custom manufactured goods are recognized over time as the customer order is fulfilled (for example, contracts for sale of custom manufactured goods that do not have an alternative use and for which the Company has an enforceable right to payment). Generally, the units of delivery method is used to determine the timing of revenue recognition for over time arrangements since there is no material work in-process and finished goods for those arrangements. However, for certain over time arrangements where there is a material amount of work in-process and finished products, a cost incurred input method is used to determine the timing of revenue recognition. Service revenues are primarily recognized in the amount to which the entity has a right to invoice.

Certain customers may receive sales incentives, such as right of return, rebates, volume discounts and early payment discounts, which are accounted for as variable consideration. The Company estimates these amounts based on the expected incentive amount to be provided to customers and reduces revenues. The Company adjusts its estimate of revenue at the earlier of when the expected value or most likely amount of consideration we expect to receive changes or when the consideration becomes fixed.

Energy Revenues

The Energy segment provides drilling and production services to the oil & gas industry in the United States. The services provided include well completion and recompletion, well maintenance and workover, snubbing, flow testing, down hole pumping, plug and abatement, well logging and perforating services. Service revenues are recognized in the amount to which the entity has a right to invoice. Consideration for Energy contracts is generally fixed.

A portion of Energy revenues are service revenues related to Energy's youth sports business. These service revenues are recognized when services are provided to the customer, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those services. Consideration for the Energy's sports business contracts is generally fixed.

Financial Services Revenues

WebBank generates revenues through a combination of interest income and non-interest income. Interest income is derived from interest and fees earned on loans and investments. Interest income is accrued on the unpaid principal balance, including amortization of premiums and accretion of discounts. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield over the estimated life of the loan. Non-interest income is primarily derived from premiums on the sale of loans, loan servicing fees, origination fees earned on loans and fee income on contractual lending arrangements. WebBank's revenue streams are primarily accounted for outside of the scope of ASC 606.

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed trade receivables, unbilled receivables (contract assets) and deferred revenue (contract liabilities) on the consolidated balance sheet. As of June 30, 2018, and January 1, 2018, the Company's return asset account, located in the consolidated balance sheets, was not materially impacted by ASC 606.

Contract Assets

11



Unbilled receivables arise when the timing of billings to customers differs from the timing of revenue recognition, such as when the Company recognizes revenue over time before a customer can be billed. Contract assets are classified as Prepaid expenses and other current assets on the consolidated balance sheet. The balances of contract assets as of June 30, 2018 and January 1, 2018 were $5,584 and $3,480, respectively.

Contract Liabilities

The Company records deferred revenues when cash payments are received or due in advance of the Company's performance, including amounts which are refundable, which are recorded as contract liabilities. Contract liabilities are classified as Other current liabilities on the consolidated balance sheet based on the timing of when the Company expects to recognize revenue. The balances of contract liabilities as of June 30, 2018 and January 1, 2018 were $7,344 and $3,920, respectively. For the three and six months ended June 30, 2018, the Company recognized revenue of $1,059 and $3,210, respectively, that was included in the contract liability balance at the date of adoption.

3. ACQUISITIONS

2018 Acquisitions

On June 1, 2018, the Company completed the acquisition of PST Group, Inc. ("PST") located in Muskego, Wisconsin for approximately $4,620. PST manufactures precision-engineered threaded components and custom ball screw assemblies, providing linear motion and power transmission solutions across a range of industries. PST, which is not material to SPLP's operations, is included in the Company's Diversified Industrial segment. The preliminary purchase price allocation is subject to finalization of valuations of certain acquired assets and liabilities.

On February 16, 2018, the Company completed the acquisition of certain assets and liabilities of Dunmore Corporation in the U.S. and the share purchase of Dunmore Europe GmbH in Germany (collectively, "Dunmore") for a purchase price of $70,173, which includes assumed debt and is subject to an earn-out based on future earnings during the period from January 1, 2018 through December 31, 2019, as provided in the purchase agreement. In no case will the purchase price, including the potential earn-out, exceed $80,000. Dunmore is a global provider of specialty coated, laminated and metallized films for the aircraft, spacecraft, photovoltaic, graphic arts, packaging, insulation, surfacing and fashion industries. Dunmore will report into the Company's packaging business in its Diversified Industrial segment. In connection with the Dunmore acquisition, which is not material to SPLP's operations, the Company recorded inventories, property, plant and equipment, other intangible assets (primarily customer relationships) and goodwill on a preliminary basis, totaling approximately $7,700, $30,600, $19,900 and $11,423, respectively, as well as other assets and liabilities. The preliminary purchase price allocation is subject to finalization of valuations of certain acquired assets and liabilities.

2017 Acquisition

On May 19, 2017, the Company acquired an 80% interest in Basin Well Logging Wireline Services, Inc. ("Basin") located in Farmington, New Mexico for approximately $5,800. Basin provides wireline services to major oil & gas exploration and production companies in the U.S. and specializes in cased-hole wireline logging and perforating services for exploration and production companies with wells in New Mexico, Texas, Utah, Arizona and Colorado. In connection with the Basin acquisition, which was not material to SPLP's operations, goodwill totaling approximately $2,353 was recorded.

4. DIVESTITURES

In the second quarter of 2017, API sold a facility in Salford, UK for approximately $5,000 and recorded a gain on sale of approximately $450, which is recorded in Other (income) expenses, net in the Company's consolidated income statements. Also, in the first quarter of 2017, API sold a facility in Rahway, N.J. for approximately $7,500 and recorded a gain on sale of approximately $200, which is recorded in Other (income) expenses, net in the Company's consolidated income statements.

In January 2017, the Company sold its Micro-Tube Fabricators, Inc. business ("MTF") for approximately $2,500 and recorded a loss on sale of $400, which is included in Other (income) expenses, net in the Company's consolidated income statements. MTF specialized in the production of precision fabricated tubular components produced for medical device, aerospace, aircraft, automotive and electronic applications, and it was included in the Company's Diversified Industrial segment. The price was paid $2,000 in cash at closing and a $500 subordinated promissory note to the Company bearing 5% interest annually, which has been fully collected. In addition, the Company may receive up to $1,000 of additional contingent consideration if certain sales volume

12


milestones are met between the sale date and December 31, 2019. In 2017, the Company earned $755 of additional contingent consideration. The operations of MTF were not significant to the Company's consolidated financial statements.

5. LOANS RECEIVABLE, INCLUDING LOANS HELD FOR SALE

Major classification of WebBank's loans receivable, including loans held for sale, at June 30, 2018 and December 31, 2017 are as follows:
 
Total
 
Current
 
Non-current
 
June 30, 2018
 
%
 
December 31, 2017
 
%
 
June 30, 2018
 
December 31, 2017
 
June 30, 2018
 
December 31, 2017
Loans held for sale
$
158,926

 


 
$
136,773

 


 
$
158,926

 
$
136,773

 
$

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate loans
$
633

 
%
 
$
568

 
1
%
 
20

 
20

 
613

 
548

Commercial and industrial
100,438

 
43
%
 
84,726

 
61
%
 
42,927

 
28,315

 
57,511

 
56,411

Consumer loans
133,781

 
57
%
 
53,238

 
38
%
 
50,109

 
22,371

 
83,672

 
30,867

Total loans
234,852

 
100
%
 
138,532

 
100
%
 
93,056

 
50,706

 
141,796

 
87,826

Less:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses
(9,565
)
 
 
 
(5,237
)
 
 
 
(9,565
)
 
(5,237
)
 

 

Total loans receivable, net
$
225,287

 
 
 
$
133,295

 
 
 
83,491

 
45,469

 
141,796

 
87,826

Loans receivable, including loans held for sale (a)


 
 
 


 
 
 
$
242,417

 
$
182,242

 
$
141,796

 
$
87,826

(a)
The carrying value is considered to be representative of fair value because the rates of interest are not significantly different from market interest rates for instruments with similar maturities.

Commercial and industrial loans include net unaccreted discounts of $444 at June 30, 2018. Consumer loans include unaccreted discounts of $193 at June 30, 2018. Loans with a carrying value of approximately $52,899 and $57,436 were pledged as collateral for potential borrowings at June 30, 2018 and December 31, 2017, respectively. WebBank serviced $3,085 in loans for others at June 30, 2018.

The allowance for loan losses ("ALLL") represents an estimate of probable and estimable losses inherent in the loan portfolio as of the balance sheet date. The amount of the ALLL is established by analyzing the portfolio at least quarterly and a provision for or reduction of loan losses is recorded so that the ALLL is at an appropriate level at the balance sheet date. The increase in the ALLL was due to an increase in existing impaired loans and an increase in the loan portfolio of held-to-maturity consumer loans. There have been no other significant changes in the credit quality of loans in the loan portfolio since December 31, 2017.

6. INVENTORIES, NET

A summary of Inventories, net is as follows:
 
June 30, 2018
 
December 31, 2017
Finished products
$
49,522

 
$
49,053

In-process
26,649

 
25,037

Raw materials
60,662

 
53,015

Fine and fabricated precious metal in various stages of completion
22,478

 
16,757

 
159,311

 
143,862

LIFO reserve
(726
)
 
(1,227
)
Total
$
158,585

 
$
142,635


Fine and Fabricated Precious Metal Inventory

In order to produce certain of its products, the Company purchases, maintains and utilizes precious metal inventory. The Company records certain precious metal inventory at the lower of LIFO cost or market, with any adjustments recorded through Cost of goods sold. Remaining precious metal inventory is accounted for primarily at fair value.

During the third quarter of 2017, the Company began obtaining certain precious metals under a $29,500 fee consignment agreement with the Bank of Nova Scotia ("ScotiaBank"). As of June 30, 2018, the Company had approximately $8,500 of silver

13


under consignment with ScotiaBank, which is recorded at fair value in Inventories, net with a corresponding liability for the same amount included in Accrued liabilities on the Company's consolidated balance sheet. Fees charged under the consignment agreement are recorded in Interest expense in the Company's consolidated income statements.
 
June 30, 2018
 
December 31, 2017
Supplemental inventory information:
 
 
 
Precious metals stated at LIFO cost
$
10,811

 
$
4,897

Precious metals stated under non-LIFO cost methods, primarily at fair value
$
10,941

 
$
10,633

Market value per ounce:
 
 
 
Silver
$
16.15

 
$
17.01

Gold
$
1,250.45

 
$
1,296.50

Palladium
$
953.00

 
$
1,056.00


7. GOODWILL AND OTHER INTANGIBLE ASSETS, NET

A reconciliation of the change in the carrying value of goodwill by reportable segment is as follows:
 
Diversified Industrial
 
Energy
 
Corporate and Other
 
Total
Balance at December 31, 2017
 
 
 
 
 
 
 
Gross goodwill
$
193,530

 
$
65,548

 
$
81

 
$
259,159

Accumulated impairments
(24,254
)
 
(64,790
)
 

 
(89,044
)
Net goodwill
169,276

 
758

 
81

 
170,115

Acquisitions (a)
11,423

 
1,595

 

 
13,018

Currency translation adjustments
(245
)
 

 

 
(245
)
Balance at June 30, 2018
 
 
 
 
 
 
 
Gross goodwill
204,708

 
67,143

 
81

 
271,932

Accumulated impairments
(24,254
)
 
(64,790
)
 

 
(89,044
)
Net goodwill
$
180,454

 
$
2,353

 
$
81

 
$
182,888

(a)
Goodwill related to the Dunmore acquisition and purchase price adjustments related to the Basin acquisition. For additional information, see Note 3 - "Acquisitions."

A summary of Other intangible assets, net is as follows:
 
June 30, 2018
 
December 31, 2017
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net
Customer relationships
$
234,921

 
$
92,021

 
$
142,900

 
$
222,277

 
$
80,952

 
$
141,325

Trademarks, trade names and brand names
55,590

 
16,405

 
39,185

 
52,356

 
14,996

 
37,360

Developed technology, patents and patent applications
31,650

 
13,041

 
18,609

 
28,239

 
11,756

 
16,483

Other
17,312

 
13,138

 
4,174

 
16,131

 
11,982

 
4,149

Total
$
339,473

 
$
134,605

 
$
204,868

 
$
319,003

 
$
119,686

 
$
199,317


Other intangible assets, net as of June 30, 2018 includes approximately $19,900 in intangible assets, primarily customer relationships, associated with the Dunmore acquisition. These balances, and the related goodwill balance noted above, are subject to adjustment during the finalization of the purchase price allocations for the Dunmore acquisition.

Trademarks with indefinite lives as of June 30, 2018 and December 31, 2017 were $11,320 and $8,020, respectively. Amortization expense related to intangible assets was $7,822 and $7,418 for the three months ended June 30, 2018 and 2017, respectively, and $15,173 and $15,537 for the six months ended June 30, 2018 and 2017, respectively.

8. INVESTMENTS

Short-Term Investments

Marketable Securities


14


The Company's short-term investments primarily consist of its marketable securities portfolio held by its subsidiary, Steel Excel Inc ("Steel Excel"). The classification of marketable securities as a current asset is based on the intended holding period and realizability of the investments. The Company's portfolio of marketable securities was as follows:
 
June 30, 2018
 
December 31, 2017
 
Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Short-term deposits
$
18,977

 
$

 
$

 
$
18,977

 
$
35,834

 
$

 
$

 
$
35,834

Mutual funds

 

 

 

 
12,077

 
4,675

 

 
16,752

Corporate securities
5,296

 
32

 
(1,383
)
 
3,945

 
32,311

 
11,893

 
(2,643
)
 
41,561

Total marketable securities
24,273

 
32

 
(1,383
)
 
22,922

 
80,222

 
16,568

 
(2,643
)
 
94,147

Amounts classified as cash equivalents
(18,977
)
 

 

 
(18,977
)
 
(35,834
)
 

 

 
(35,834
)
Amounts classified as marketable securities
$
5,296

 
$
32

 
$
(1,383
)
 
$
3,945

 
$
44,388

 
$
16,568

 
$
(2,643
)
 
$
58,313


Proceeds from sales of marketable securities were approximately $12,300 and $13,500 in the three months ended June 30, 2018 and 2017, respectively, and were approximately $46,000 and $14,700 in the six months ended June 30, 2018 and 2017, respectively. The Company determines gains and losses from sales of marketable securities based on specific identification of the securities sold. Gross realized gains and losses from sales of marketable securities, which are reported as a component of Realized and unrealized losses (gains) on securities, net in the Company's consolidated income statements, were as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Gross realized gains
$
6,416

 
$
85

 
$
16,090

 
$
96

Gross realized losses
(2,219
)
 
(135
)
 
(5,129
)
 
(362
)
Realized gains (losses), net
$
4,197

 
$
(50
)
 
$
10,961

 
$
(266
)

Effective January 1, 2018 upon adoption of ASU 2016-01, unrealized gains or losses due to changes in fair value of securities are being accounted for as a component of Realized and unrealized losses (gains) on securities, net in the Company's consolidated income statements. Prior to January 1, 2018, changes in fair value were recognized in Partners' capital as Other comprehensive income or loss, except for other-than-temporary impairments, which were reflected as a reduction of cost and charged to the consolidated income statements.

The fair value of marketable securities with unrealized losses at June 30, 2018, and the duration of time that such losses had been unrealized, were as follows:
 
Less than 12 Months
 
12 Months or Greater
 
Total
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
Corporate securities
$
1,388

 
$
(1,202
)
 
$
1,807

 
$
(181
)
 
$
3,195

 
$
(1,383
)
Total
$
1,388

 
$
(1,202
)
 
$
1,807

 
$
(181
)
 
$
3,195

 
$
(1,383
)

The fair value of marketable securities with unrealized losses at December 31, 2017, and the duration of time that such losses had been unrealized, were as follows:
 
Less than 12 Months
 
12 Months or Greater
 
Total
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
Corporate securities
$
5,801

 
$
(2,558
)
 
$
398

 
$
(85
)
 
$
6,199

 
$
(2,643
)
Total
$
5,801

 
$
(2,558
)
 
$
398

 
$
(85
)
 
$
6,199

 
$
(2,643
)

The corporate securities with gross unrealized losses primarily consist of investments in equity securities of publicly-traded entities. The Company evaluated such securities to determine if certain unrealized losses represented other-than-temporary impairments. This determination was based on several factors, including any adverse changes in the market conditions and economic environments in which the entities operate. The Company determined that there was no indication of other-than-temporary impairments on its investments with unrealized losses that had not been previously recorded as impairment charges. This determination was based on several factors, including the length of time and extent to which fair value had been less than the cost

15


basis, the financial condition and near-term prospects of the entities, and the intent and ability to hold the corporate securities for a period of time sufficient to allow for any anticipated recovery in market value.

Long-Term Investments

The following table summarizes the Company's long-term investments as of June 30, 2018 and December 31, 2017. For those investments at fair value, the carrying amount of the investment equals its respective fair value.
 
Ownership %
 
Long-Term Investments Balance
 
Loss (Income) Recorded in the Consolidated Income Statements
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
June 30, 2018
 
December 31, 2017
 
June 30, 2018
 
December 31, 2017
 
2018
 
2017
 
2018
 
2017
Corporate securities (a),(e)
 
 
 
 
$
197,823

 
$
131,307

 
$
8,317

 
$

 
$
24,014

 
$

Steel Connect, Inc. ("STCN") convertible notes (b),(f)
 
 
 
 
14,703

 
10,387

 
(272
)
 
24

 
42

 
(344
)
STCN preferred stock (c),(f)
 
 
 
 
43,276

 
35,000

 
(827
)
 

 
(8,276
)
 

STCN warrants (f)
 
 
 
 

 

 

 
23

 

 
10

Equity method investments: (f)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Carried at fair value:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  STCN common stock
30.2
%
 
30.4
%
 
39,276

 
45,275

 
(649
)
 
1,356

 
5,350

 
(3,766
)
  Aviat Networks, Inc. ("Aviat")
12.7
%
 
12.7
%
 
10,972

 
10,168

 
147

 
(1,568
)
 
(702
)
 
(2,393
)
  Other 
43.8
%
 
43.8
%
 
1,223

 
1,223

 

 

 

 

Long-term investments carried at fair value
 
 
 
 
307,273

 
233,360









Carried at cost:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Other equity method investments carried at cost (d),(f)
 
 
 
 
2,740

 
2,784

 
14

 
97

 
44

 
123

Total
 
 
 
 
$
310,013

 
$
236,144

 

 

 

 

(a)
Cost basis totaled $100,379 at June 30, 2018 and $12,250 at December 31, 2017 and gross unrealized gains totaled $97,444 and $119,057 at June 30, 2018 and December 31, 2017, respectively.
(b)
Represents investment in STCN convertible notes. Cost basis totaled $13,262 at June 30, 2018 and $8,903 at December 31, 2017 and gross unrealized gains totaled $1,441 and $1,484 at June 30, 2018 and December 31, 2017, respectively. Changes in fair value are recorded in the Company's consolidated income statements as the Company elected the fair value option to account for this investment.
(c)
Represents investment in STCN preferred stock. On December 15, 2017, the Company entered into an agreement pursuant to which STCN issued Series C convertible voting preferred stock for an aggregate purchase consideration of $35,000. Each share of preferred stock can be converted into shares of STCN's common stock at an initial conversion price equal to $1.96 per share, subject to appropriate adjustments for any stock dividend, stock split, stock combination, reclassification or similar transaction, among other things. Changes in fair value are recorded in the Company's consolidated income statements as the Company elected the fair value option to account for this investment. The convertible preferred shares, if converted as of June 30, 2018, when combined with the common shares owned by the Company, would result in the Company having a direct interest of approximately 46% of STCN's outstanding shares. During the first quarter of 2018, the Company recorded an $11,208 out-of-period adjustment related to the increase in the fair value of the Company's investment in STCN preferred stock for the period from December 15, 2017 to December 31, 2017. Had this adjustment been recorded at December 31, 2017, the Company's investment in STCN preferred stock would have been valued at $46,208 at December 31, 2017, and the Company's Income from associated companies, net of taxes for the six months ended June 30, 2018 would be reduced by $11,208.
(d)
Represents investments in iGo, Inc. ("iGo") of 45% and a 50% investment in API Optix s.r.o ("API Optix"), a joint venture investment held by the Company.
(e)
Loss (income) from these investments is included in Realized and unrealized losses (gains) on securities, net in the consolidated income statements.
(f)
Loss (income) from these investments is included in Income of associated companies, net of taxes in the consolidated income statements.

The Company's long-term investments include common shares of Babcock & Wilcox Enterprises, Inc. ("BW"). BW commenced a rights offering, as amended, pursuant to which BW distributed nontransferable subscription rights to each of its common stockholders. Each subscription right allowed BW shareholders to purchase 2.8 common shares of BW at a subscription price of $2.00 per common share. At that time, the Company owned 6,993,219 shares of BW common stock, constituting approximately 15.8% of BW's outstanding shares. Vintage Capital Management, LLC ("Vintage") and BW entered into an agreement under which Vintage agreed to provide a backstop commitment to purchase any BW common shares that were not subscribed for in the rights offering. On April 12, 2018, the Company entered into an agreement with Vintage pursuant to which it agreed to fund a portion of Vintage's backstop commitment subject to specified conditions. Upon the completion of the rights offering, the Company purchased 22,981,822 BW common shares at an aggregate price of $45,964, including $6,802 to fund its backstop commitment, increasing the Company's ownership in BW to approximately 17.8% of the outstanding shares.

16



Equity Method Investments

The Company's investments in associated companies are accounted for under the equity method of accounting. Certain associated companies have a fiscal year end that differs from December 31. Additional information for each of SPLP's investments in associated companies that have impacted the Company's consolidated income statements during the six months ended June 30, 2018 and 2017 is as follows:

Equity Method, Carried At Fair Value:

STCN (formerly ModusLink Global Solutions, Inc.) provides supply chain and logistics services to companies in the consumer electronics, communications, computing, medical devices, software, storage and retail industries. STCN also owns IWCO Direct Holdings Inc. ("IWCO"), a provider of data-driven marketing solutions that offers a full range of services including strategy, creative and production for multichannel marketing campaigns, along with postal logistics strategies for direct mail.
Aviat is a global provider of microwave networking solutions.
The Other investment represents the Company's investment in a Japanese real estate partnership.

Equity Method, Carried At Cost:

iGo is a provider of accessories for mobile devices. This investment is being accounted for under the traditional equity method. Based on the closing market price of iGo's publicly-traded shares, the fair value of the investment in iGo was approximately $2,288 and $2,317 at June 30, 2018 and December 31, 2017, respectively.
The Company has a 50% joint venture in API Optix, a company that provides development and origination services in the field of micro and nano-scale surface relief technology. The investment is being accounted for under the equity method as an associated company.

The below summary balance sheet and income statement amounts include results for the major associated companies for the periods in which they were accounted for as an associated company or the nearest practicable corresponding period to the Company's fiscal period.
 
June 30, 2018
 
December 31, 2017
 
 
 
 
Summary of balance sheet amounts: (a)
 
 
 
 
 
 
 
Current assets
$
270,220

 
$
257,846

 
 
 
 
Non-current assets
572,813

 
23,452

 
 
 
 
Total assets
$
843,033

 
$
281,298

 
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
$
292,990

 
$
149,155

 
 
 
 
Non-current liabilities
396,210

 
69,172

 
 
 
 
Total liabilities
689,200

 
218,327

 
 
 
 
Contingently redeemable preferred stock
35,175

 

 
 
 
 
Equity
118,658

 
62,971

 
 
 
 
Total liabilities and equity
$
843,033

 
$
281,298

 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Summary operating results: (a)
 
 
 
 
 
 
 
Net revenue
$
188,922

 
$
97,948

 
$
340,041

 
$
215,516

Gross profit
$
39,005

 
$
8,542

 
$
55,955

 
$
19,740

Net (loss) income (b)
$
(10,333
)
 
$
(5,067
)
 
$
54,497

 
$
(7,973
)
(a)
The increases in the 2018 amounts, as compared to the 2017 amounts, in the table above are principally due to STCN's acquisition of IWCO.
(b)
Net income in the 2018 six-month period was favorably impacted by an income tax benefit related to STCN's acquisition of IWCO.

Other Investments

WebBank had $43,474 and $32,816 of held-to-maturity securities at June 30, 2018 and December 31, 2017, respectively. WebBank records these securities at amortized cost, and they are included in Other non-current assets on the Company's consolidated balance sheets. The dollar value of these securities with maturities less than five years is $17,205, after five years through ten years is $24,705 and after ten years is $1,564. Actual maturities may differ from expected or contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The securities are

17


collateralized by unsecured consumer loans. These securities had an estimated fair value of $43,389 and $32,842 at June 30, 2018 and December 31, 2017, respectively.

9. LONG-TERM DEBT

Debt consists of the following:
 
June 30, 2018
 
December 31, 2017
Short term debt:
 
 
 
Foreign
$
2,756

 
$
1,624

Short-term debt
2,756

 
1,624

Long-term debt:
 
 
 
SPLP revolving facility
488,754

 
406,981

Other debt - foreign
985

 

Other debt - domestic
5,833

 
6,062

Subtotal
495,572

 
413,043

Less portion due within one year
806

 
459

Long-term debt
494,766

 
412,584

Total debt
$
498,328

 
$
414,667


On November 14, 2017, SPH Group Holdings, Steel Excel, API Americas Inc., Handy & Harman Ltd. ("HNH") and Cedar 2015 Limited (collectively, the "Borrowers"), each a direct or indirect subsidiary of the Company, entered into a credit agreement ("Credit Agreement") that consolidated a number of the Company's existing credit facilities into one combined, revolving credit facility covering substantially all of the Company's subsidiaries, with the exception of WebBank. The Credit Agreement provided for a revolving credit facility in an aggregate principal amount not to exceed $600,000, including a $55,000 subfacility for swing line loans and a $50,000 subfacility for standby letters of credit. The Credit Agreement also permits the Borrowers, under certain circumstances, to increase the aggregate principal amount of revolving credit commitments under the Credit Agreement by up to $150,000. Borrowings under the Credit Agreement bear interest, at the Borrower's option, at annual rates of either the Base Rate or the Euro-Rate, as defined, plus an applicable margin as set forth in the Credit Agreement (1.25% and 2.25%, respectively, for Base Rate and Euro-Rate borrowings at June 30, 2018), and the Credit Agreement provides for a commitment fee to be paid on unused borrowings. The weighted average interest rate on the Credit Agreement was 4.29% at June 30, 2018. At June 30, 2018, letters of credit totaling $10,621 had been issued under the Credit Agreement, including $3,751 of the letters of credit guaranteeing various insurance activities, and $6,870 for environmental and other matters. The Credit Agreement permits SPLP, the parent, to fund the dividends on its preferred units and its routine corporate expenses. The Company's total availability under the Credit Agreement, which is based upon earnings and certain covenants as described in the Credit Agreement, was approximately $106,600 as of June 30, 2018.

On April 27, 2018, the Company entered into an amendment to the Credit Agreement to allow the Company to (i) exercise its BW subscription rights discussed in Note 8 - "Investments," (ii) increase the maximum aggregate principal amount to $700,000, (iii) increase the defined leverage ratios under the Credit Agreement by 0.25 "turns" for the fiscal quarters ending June 30, 2018, September 30, 2018 and December 31, 2018, and (v) make certain administrative changes.

The Credit Agreement will expire with all amounts outstanding due and payable, on November 14, 2022. The Credit Agreement is guaranteed by substantially all existing and thereafter acquired assets of the Borrowers and the Guarantors, as defined in the agreement, and a pledge of all of the issued and outstanding shares of capital stock of each of the Borrowers' and Guarantors' subsidiaries, and is fully guaranteed by the Guarantors. The Credit Agreement is subject to certain mandatory prepayment provisions and restrictive and financial covenants, which include a maximum ratio limit on Total Leverage and a minimum ratio limit on Interest Coverage, as defined. The Company was in compliance with all debt covenants at June 30, 2018.

10. FINANCIAL INSTRUMENTS

At June 30, 2018 and December 31, 2017, financial instrument liabilities and related restricted cash consisted of $13,496 and $15,629, respectively, related to short sales of corporate securities. Year-to-date activity is summarized below for financial instrument liabilities and related restricted cash:

18


 
June 30,
 
2018
 
2017
Balance, beginning of period
$
15,629

 
$
12,640

Settlement of short sales of corporate securities
(3,100
)
 
(59
)
Short sales of corporate securities
26

 
99

Net investment losses
941

 
1,299

Balance, end of period
$
13,496

 
$
13,979


Short Sales of Corporate Securities

From time to time, the Company enters into short sale transactions on certain corporate securities in which it receives proceeds from the sale of such securities and incurs obligations to deliver such securities at a later date. Upon initially entering into such short sale transactions, the Company recognizes a liability equal to the fair value of the obligation, with a comparable amount of cash and cash equivalents reclassified as restricted cash. Subsequent changes in the fair value of such obligations, determined based on the closing market price of the securities, are recognized currently as gains or losses, with a comparable adjustment made between unrestricted and restricted cash.

Foreign Currency Forward Contracts

API enters into foreign currency forward contracts to hedge certain of its receivables and payables denominated in other currencies. In addition, API enters into foreign currency forward contracts to hedge the value of its future sales denominated in Euros and the value of certain of its future purchases denominated in USD. These hedges have settlement dates ranging through June 2019 at June 30, 2018. The forward contracts that are used to hedge the risk of foreign exchange movement on its receivables and payables are accounted for as fair value hedges. At June 30, 2018, there were contracts in place to buy Sterling and sell Euros in the amount of €10,500. The fair values of these derivatives are recognized as derivative assets and liabilities on the Company's consolidated balance sheets. The net change in fair value of the derivative assets and liabilities are recognized in the Company's consolidated income statements. The forward contracts that are used to hedge the value of API's future sales and purchases are accounted for as cash flow hedges. At June 30, 2018, there were contracts in place to hedge the value of future sales denominated in Euros in the amount of €14,400 and the value of future purchases denominated in USD in the amount of $3,450. These hedges are fully effective, and accordingly, the changes in fair value are recorded in AOCI, and at maturity, any gain or loss on the forward contract is reclassified from AOCI into the Company's consolidated income statements.

WebBank - Economic Interests in Loans

WebBank's derivative financial instruments represent on-going economic interests in loans made after they are sold. These derivatives are carried at fair value on a gross basis in Other non-current assets on the Company's consolidated balance sheets at June 30, 2018 and are classified within Level 3 in the fair value hierarchy (see Note 15 - "Fair Value Measurements"). At June 30, 2018, outstanding derivatives mature within 3 to 5 years. Gains and losses resulting from changes in the fair value of derivative instruments are accounted for in the Company's consolidated income statements in Financial services revenue. Fair value represents the estimated amounts that WebBank would receive or pay to terminate the contracts at the reporting date based on a discounted cash flow model for the same or similar instruments. WebBank does not enter into derivative contracts for speculative or trading purposes.

Call and Put Options

The options are traded in active markets, and accordingly, the Company records the fair value of the options through the use of quoted prices and records any changes in fair value in the consolidated income statements in Other (income) expenses, net.

Precious Metal and Commodity Inventories

The Company's precious metal and commodity inventories are subject to market price fluctuations. The Company enters into commodity futures and forward contracts to mitigate the impact of price fluctuations on its precious and certain non-precious metal inventories that are not subject to fixed price contracts. The Company's hedging strategy is designed to protect it against normal volatility; therefore, abnormal price changes in these commodities or markets could negatively impact the Company's earnings.

As of June 30, 2018, the Company had the following outstanding forward contracts with settlement dates through July 2018. There were no futures contracts outstanding at June 30, 2018.

19


Commodity
Amount
 
Notional Value
Silver
378,895 ounces
 
$
6,053

Gold
2,400 ounces
 
$
2,999

Copper
325,000 pounds
 
$
993

Tin
20 metric tons
 
$
426


Fair Value Hedges. Of the total forward contracts outstanding, 18,895 ounces of silver and substantially all the copper contracts are designated and accounted for as fair value hedges and are associated primarily with the Company's precious metal inventory carried at fair value. The fair values of these derivatives are recognized as derivative assets and liabilities on the Company's consolidated balance sheets. The net change in fair value of the derivative assets and liabilities, and the change in the fair value of the underlying hedged inventory, are recognized in the Company's consolidated income statements, and such amounts principally offset each other due to the effectiveness of the hedges.

Economic Hedges. The remaining outstanding forward contracts for silver, and all the contracts for gold and tin, are accounted for as economic hedges. As these derivatives are not designated as accounting hedges, they are accounted for as derivatives with no hedge designation. The derivatives are marked to market, and both realized and unrealized gains and losses are recorded in current period earnings in the Company's consolidated income statements. The economic hedges are associated primarily with the Company's precious metal inventory valued using the LIFO method.

The forward contracts were made with a counterparty rated A+ by Standard & Poor's. Accordingly, the Company has determined that there is minimal credit risk of default. The Company estimates the fair value of its derivative contracts through the use of market quotes or with the assistance of brokers when market information is not available. The Company maintains collateral on account with the third-party broker which varies in amount depending on the value of open contracts.

The fair value and carrying amount of derivative instruments on the Company's consolidated balance sheets and the effect of derivative instruments in the Company's consolidated income statements are shown in the following tables:
Derivative
 
Balance Sheet Location
 
June 30, 2018
 
December 31, 2017
Commodity contracts (a),(b)
 
Prepaid expenses and other current assets (Accrued liabilities)
 
$
29

 
$
(49
)
Commodity contracts (c)
 
Accrued liabilities
 
(45
)
 
(78
)
Foreign exchange forward contracts (a),(d)
 
Prepaid expenses and other current assets

 
311

 
166

Foreign exchange forward contracts (a),(b)
 
Accrued liabilities
 
(95
)
 
(188
)
Economic interests in loans (c)
 
Other non-current assets
 
15,682

 
13,126

Call options
 
Other current liabilities
 

 
(258
)
Put options
 
Prepaid expenses and other current assets
 

 
3

Total derivatives
 
 
 
$
15,882

 
$
12,722

 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
 
 
2018
 
2017
 
2018
 
2017
Derivative
 
Income Statement Location
 
Gain (Loss)
 
Gain (Loss)
 
Gain (Loss)
 
Gain (Loss)
Commodity contracts (a),(b)
 
Cost of goods sold
 
$
73

 
$
1,004

 
$
151

 
$
(179
)
Commodity contracts (c)
 
Cost of goods sold
 
(15
)
 
(31
)
 
(62
)
 
64

Commodity contracts (c)
 
Other income (expenses), net
 
357

 
285

 
502

 
(75
)
Foreign exchange forward contracts (a),(d)
 
Revenue
 
77

 
(391
)
 
57

 
(796
)
Foreign exchange forward contracts (a),(b)
 
Other income (expenses), net
 
(18
)
 
(220
)
 
(14
)
 
(231
)
Economic interests in loans (c)
 
Revenue
 
4,083

 
3,021

 
7,364

 
5,518

Call options
 
Other income (expenses), net
 

 
24

 
250

 
72

Put options
 
Other income (expenses), net
 

 
(187
)
 
(3
)
 
(521
)
Total derivatives
 
 
 
$
4,557

 
$
3,505

 
$
8,245

 
$
3,852

(a)
Designated as hedging instruments.
(b)
Fair value hedge.
(c)
Economic hedge.
(d)
Cash flow hedge.

Financial Instruments with Off-Balance Sheet Risk

WebBank is a party to financial instruments with off-balance sheet risk. In the normal course of business, these financial instruments include commitments to extend credit in the form of loans as part of WebBank's lending arrangements. Those

20


instruments involve to varying degrees, elements of credit and interest rate risk in excess of the amount recognized on the consolidated balance sheets. The contract amounts of those instruments reflect the extent of involvement WebBank has in particular classes of financial instruments.

At June 30, 2018 and December 31, 2017, WebBank's undisbursed loan commitments under these instruments totaled $143,535 and $148,529, respectively. Commitments to extend credit are agreements to lend to a borrower who meets the lending criteria through one of WebBank's lending agreements, provided there is no violation of any condition established in the contract with the counterparty to the lending arrangement.

Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since certain of the commitments are expected to expire without the credit being extended, the total commitment amounts do not necessarily represent future cash requirements. WebBank evaluates each prospective borrower's credit worthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by WebBank upon extension of credit is based on management's credit evaluation of the borrower and WebBank's counterparty.

WebBank's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. WebBank uses the same credit policy in making commitments and conditional obligations as it does for on-balance sheet instruments.

WebBank estimates an allowance for potential losses on off-balance sheet contingent credit exposures related to the guaranteed amount of its Small Business Administration ("SBA") and United States Department of Agriculture ("USDA") loans and whether or not the SBA/USDA honors the guarantee. WebBank determines the allowance for these contingent credit exposures based on historical experience and portfolio analysis. The allowance is included in Other non-current liabilities on the Company's consolidated balance sheets, with any related increases or decreases in the reserve included in the Company's consolidated income statements. The allowance was $188 at both June 30, 2018 and December 31, 2017.

11. PENSION BENEFIT PLANS

HNH maintains several qualified and non-qualified pension plans and other post-retirement benefit plans. API maintains a pension plan in the United Kingdom and a pension plan in the U.S. which is not significant. The Company's other pension and postretirement benefit plans are not significant individually or in the aggregate. The following table presents the components of pension expense for HNH's and API's significant pension plans:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Interest cost
$
5,351

 
$
5,482

 
$
10,729

 
$
10,935

Expected return on plan assets
(7,018
)
 
(6,154
)
 
(14,027
)
 
(12,323
)
Amortization of actuarial loss
2,539

 
2,287

 
5,078

 
4,575

Total
$
872

 
$
1,615

 
$
1,780

 
$
3,187


Pension expense is included in Selling, general and administrative expenses in the consolidated income statements for all periods presented. Required future pension contributions are estimated based upon assumptions such as discount rates on future obligations, assumed rates of return on plan assets and legislative changes. Actual future pension costs and required funding obligations will be affected by changes in the factors and assumptions described in the previous sentence, as well as other changes such as any plan termination or other acceleration events. Required minimum pension contributions are as follows:

HNH expects to contribute approximately $19,200 for the remainder of 2018, and $33,400, $35,800, $31,400, $32,100 and $43,200 in 2019, 2020, 2021, 2022 and for the five years thereafter, respectively.
API expects to contribute approximately $152 for the remainder of 2018, and $922 in each year 2019, 2020, 2021, 2022 and 2023.

12. CAPITAL AND ACCUMULATED OTHER COMPREHENSIVE LOSS

As of June 30, 2018, the Company had 26,192,463 Class A units (regular common units) outstanding.

Common Unit Repurchase Program


21


On December 7, 2016, the Board of Directors of SPH GP approved the repurchase of up to an aggregate of 2,000,000 of the Company's common units ("Repurchase Program"). The Repurchase Program supersedes and cancels, to the extent any amounts remain available, all previously approved repurchase programs. Any purchases made under the Repurchase Program will be made from time to time on the open market at prevailing market prices or in negotiated transactions off the market, in compliance with applicable laws and regulations. In connection with the Repurchase Program, the Company may enter into a stock purchase plan. The Repurchase Program has no termination date. During the first six months of 2018, the Company purchased 363,715 units for an aggregate price of approximately $6,660.

Incentive Award Plan

On May 24, 2018, the Company's unitholders approved the adoption of the Company's 2018 Incentive Award Plan ("2018 Plan"). The 2018 Plan provides equity-based compensation through the grant of options to purchase the Company's limited partnership ("LP") units, unit appreciation rights, restricted units, phantom units, substitute awards, performance awards, other unit-based awards, and includes, as appropriate, any tandem distribution equivalent rights granted with respect to an award. The 2018 Plan allows for issuance of up to 500,000 LP units. As of June 30, 2018, no awards had been granted under the 2018 Plan.

Common Unit Dividend

On January 13, 2017, the Company paid dividends of approximately $3,923 to common unitholders of record as of January 3, 2017, excluding a consolidated affiliate. This special one-time cash dividend of $0.15 per common unit was declared on December 22, 2016. Any future determination to declare dividends on its common units will remain at the discretion of the Company's Board of Directors and will be dependent upon a number of factors, including the Company's results of operations, cash flows, financial position and capital requirements, among others.

Preferred Units

The 6.0% Series A preferred units, no par value ("SPLP Preferred Units"), which were issued in connection with the Steel Excel, HNH and WebFinancial Holding Corporation ("WFHC") transactions discussed below, entitle the holders to a cumulative quarterly cash or in-kind (or a combination thereof) distribution. The Company declared cash distributions of approximately $5,800 and $1,300 to preferred unitholders for the six months ended June 30, 2018 and 2017, respectively. The SPLP Preferred Units have a term of nine years and are redeemable at any time at the Company's option at the $25 liquidation value per unit, plus any accrued and unpaid distributions (payable in cash or SPLP common units, or a combination of both, at the Company's discretion). If redeemed in common units, the number of common units to be issued will be equal to the liquidation value per unit divided by the volume weighted-average price of the common units for 60 days prior to the redemption. In addition, the holders can require the Company to repurchase up to 1,600,000 of the SPLP Preferred Units, in cash on a pro rata basis, on the third anniversary of the original issuance date of February 7, 2017, reduced by any preferred units called for redemption by the Company, in cash on a pro rata basis, prior to that time.

The SPLP Preferred Units have no voting rights, except that holders of the preferred units have certain voting rights in limited circumstances relating to the election of directors following the failure to pay six quarterly distributions. The SPLP Preferred Units are recorded as a non-current liability, including accrued interest expense, on the Company's consolidated balance sheets as of June 30, 2018 and December 31, 2017 because they have an unconditional obligation to be redeemed for cash or by issuing a variable number of SPLP common units for a monetary value that is fixed and known at inception. Because the SPLP Preferred Units are classified as a liability, distributions thereon are recorded as a component of Interest expense in the Company's consolidated income statements. As of June 30, 2018, there were 7,927,288 SPLP Preferred Units outstanding.

Steel Excel Transaction

On December 23, 2016, the Company entered into an Amended Agreement and Plan of Merger with a subsidiary of the Company and Steel Excel to make a tender offer to purchase any and all of the outstanding shares of common stock of Steel Excel not already owned by the Company or any of its affiliates. In exchange for each share of Steel Excel common stock, the Company offered 0.712 SPLP Preferred Units. The offer commenced on January 9, 2017 and expired on February 6, 2017. As a result of the completion of the offer, the Company issued approximately 2,500,000 SPLP Preferred Units with a fair value and liquidation value of $25.00 per SPLP Preferred Unit, or approximately $63,500, to Steel Excel shareholders and paid approximately $2,100 in cash for any remaining unvested restricted shares of Steel Excel. As a result of this transaction, the Company owns 100% of Steel Excel.

HNH Transaction


22


On June 26, 2017, the Company entered into an Agreement and Plan of Merger with a subsidiary of the Company and HNH to make a tender offer to purchase any and all of the outstanding shares of common stock of HNH not already owned by the Company or any of its affiliates. In exchange for each share of HNH common stock, the Company offered 1.484 SPLP Preferred Units. The offer expired on October 12, 2017, and as a result of the completion of the offer, the Company issued approximately 5,400,000 SPLP Preferred Units with a fair value of approximately $112,000 and liquidation value of approximately $135,000 to HNH shareholders. As a result of this transaction, the Company owns 100% of HNH. Certain former stockholders of HNH made a demand for appraisal of the tender offer consideration under the laws of the State of Delaware. In the first quarter of 2018, this matter was settled. As a result, 211,643 SPLP Preferred Units were retired and the preferred unit liability was reduced with respect to these units, and $931 was charged to the consolidated income statement in Selling, general and administrative expenses.

WFHC Transactions

In June 2018, the Company entered into purchase agreements with minority stockholders of its subsidiary, WFHC, pursuant to which the Company purchased shares of common stock and preferred stock of WFHC in exchange for aggregate consideration totaling $13,278, comprised of cash of $6,306, 185,407 common units of SPLP and 186,271 SPLP Preferred Units.

For each of the Steel Excel, HNH and WFHC transactions, in accordance with the accounting standard on consolidation, changes in a parent's ownership interest where the parent retains a controlling financial interest in its subsidiary were accounted for as equity transactions. The carrying amount of the acquired noncontrolling interests were eliminated to reflect the change in SPLP's ownership interest in each subsidiary, and the difference between the fair value of the consideration paid and the amount by which the noncontrolling interest was adjusted was recognized in Partners' capital.

Accumulated Other Comprehensive Loss

Changes, net of tax, in Accumulated other comprehensive loss are as follows:
 
Six Months Ended June 30, 2018
 
Unrealized gain on available-for-sale securities
 
Unrealized loss on derivative financial instruments
 
Cumulative translation adjustment
 
Change in net pension and other benefit obligations
 
Total
Balance at beginning of period
$
91,078

 
$
(1,901
)
 
$
(18,259
)
 
$
(177,085
)
 
$
(106,167
)
Net other comprehensive income (loss) attributable to common unitholders (a),(b)

 
274

 
(743
)
 
5

 
(464
)
Cumulative effect of adopting ASU 2016-01 relating to net unrealized gains and losses on equity securities (c)
(91,078
)