splp-20201103
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 3, 2020
STEEL PARTNERS HOLDINGS L.P.
(Exact name of registrant as specified in its charter)
   
Delaware001-3549313-3727655
(State or other jurisdiction
of incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)
   
590 Madison Avenue, 32nd Floor, New York, New York
10022
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (212) 520-2300
N/A
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolsName of each exchange on which registered
Common Units, $0 parSPLPNew York Stock Exchange
6.0% Series A Preferred UnitsSPLP-PRANew York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company

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.



Item 2.02 Results of Operations and Financial Condition.

On November 3, 2020, Steel Partners Holdings L.P., a Delaware limited partnership (the "Company"), issued a press release announcing its financial results for the quarter and nine months ended September 30, 2020 and other financial information. A copy of the press release is being furnished as Exhibit 99.1 hereto and is incorporated herein by reference.

The information in this Item 2.02, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of such section. The information in this report, including the exhibit, shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any incorporation by reference language in any such filing, unless the Company expressly sets forth in such future filing that such information is to be considered "filed" or incorporated by reference therein.


Item 9.01 Financial Statements and Exhibits.

(d)    Exhibits
Exhibit No.
Exhibits
104Cover Page Interactive Data File (embedded within the Inline XBRL document)



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
November 3, 2020STEEL PARTNERS HOLDINGS L.P.
  
 By:Steel Partners Holdings GP Inc.
  Its General Partner
   
  
By:/s/ Douglas B. Woodworth
Douglas B. Woodworth
Chief Financial Officer

Document


EXHIBIT 99.1


Steel Partners Holdings Reports Third Quarter Financial Results

Third Quarter 2020 Highlights

Revenue totaled $330.0 million, a decrease of 11.1%
Net income from continuing operations was $37.4 million
Net income attributable to common unitholders was $38.3 million, or $0.79 per diluted common unit
Adjusted EBITDA* increased to $73.3 million; Adjusted EBITDA margin* was 22.2%
Net cash provided by operating activities of continuing operations was $36.3 million
Adjusted free cash flow* totaled $40.6 million
Total debt was $302.7 million; net debt,* which includes, among other items, pension and preferred unit liabilities, totaled $447.2 million

YTD 2020 Highlights

Revenue totaled $973.3 million, a decrease of 12.5%
Net income from continuing operations was $0.5 million
Net loss attributable to common unitholders was $25.3 million, or $1.02 per common unit
Adjusted EBITDA* was $149.1 million; Adjusted EBITDA margin* was 15.3%
Net cash provided by operating activities of continuing operations was $296.2 million
Adjusted free cash flow* totaled $135.8 million

NEW YORK, N.Y., November 3, 2020 - Steel Partners Holdings L.P. (NYSE: SPLP), a diversified global holding company, today announced operating results for the third quarter and nine months ended September 30, 2020.
Q3 2020Q3 2019($ in thousands)YTD 2020YTD 2019
$330,007$371,080Revenue$973,344$1,112,608
37,38323,718Net income from continuing operations50767,432
38,275(2,878)Net income (loss) attributable to common unitholders(25,330)33,863
73,27159,150
Adjusted EBITDA*
149,133152,352
22.2%15.9%
Adjusted EBITDA margin*
15.3%13.7%
4,54610,113Purchases of property, plant and equipment15,58126,523
40,58353,319
Adjusted free cash flow*
135,80580,537
*    See reconciliations to the nearest GAAP measure included in the financial tables. See "Note Regarding Use of Non-GAAP Financial Measurements" below for the definition of these non-GAAP measures.

The Company continues to evaluate the global risks and the slowdown in business activity related to COVID-19, including the potential impacts on its employees, customers, suppliers and financial results. The severity of the impact on the Company's business for the remainder of 2020 and beyond will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic, the continued disruption to the demand for our businesses' products and services, and the impact of the global business and economic environment on liquidity and the availability of capital, all of which are uncertain and cannot be predicted. To help mitigate the financial impact of the COVID-19 pandemic, the Company initiated cost reduction actions, including the reduction and waiver of board and management fees, hiring freezes, staffing and force reductions, Company-wide salary reductions, bonus payment deferrals and temporary 401(k) match suspension. The Company has fully restored the prior salary reductions; however, management continues its focus on cash management and liquidity, which includes the elimination of discretionary spending, aggressive working capital management, strict approvals for capital expenditures and borrowing from its revolving credit facilities, if needed, as a precautionary measure to preserve financial flexibility. The Company will evaluate further actions if circumstances warrant.

"As we continue to manage through the COVID-19 pandemic, our top priorities are to ensure the health and safety of our employees," said Warren Lichtenstein, Executive Chairman of Steel Partners. "Our employees have continued to go above and beyond to deliver quality products and services to our customers during these challenging times."





"In the third quarter, we saw a continued recovery. All our business segments showed significant improvements compared to the prior quarter and on a year-over-year basis, with the exception of Energy, which showed significant improvement over the prior quarter but continues to face the headwinds of lower oil prices. Our flexibility and operational focus have allowed us to deliver solid results and positioned us for growth coming out of the downturn."

Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2020 and 2019
(in thousands)Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Revenue$330,007 $371,080 $973,344 $1,112,608 
Cost of goods sold216,322 236,474 632,600 727,489 
Selling, general and administrative expenses67,418 76,265 219,018 256,018 
Goodwill impairment charges— 24,219 — 24,219 
Asset impairment charges— 659 617 849 
Interest expense6,988 9,622 23,025 30,099 
Realized and unrealized (gains) losses on securities, net(969)(30,234)25,515 (68,720)
All other (incomes) expenses, net(8,724)14,797 35,608 44,125 
Total costs and expenses281,035 331,802 936,383 1,014,079 
Income from continuing operations before income taxes and equity method investments48,972 39,278 36,961 98,529 
Income tax provision14,783 13,705 10,034 31,505 
(Income) loss of associated companies, net of taxes(3,194)1,855 26,420 (408)
Net income from continuing operations$37,383 $23,718 $507 $67,432 

Revenue

Revenue for the three months ended September 30, 2020 decreased $41.1 million, or 11.1%, as compared to the same period last year, due to lower sales volume across all the reportable segments, primarily due to the impact of COVID-19.

Revenue for the nine months ended September 30, 2020 decreased $139.3 million, or 12.5%, as compared to the same period last year, due to lower sales volume across all the reportable segments, primarily due to the impact of COVID-19.

Cost of Goods Sold

Cost of goods sold for the three months ended September 30, 2020 decreased $20.2 million, or 8.5%, as compared to the same period last year, due to decreases in the Diversified Industrial and Energy segments. The decreases in the Diversified Industrial and Energy segments in the three months ended September 30, 2020 were primarily due to the lower sales volume discussed above, and the Company's cost reduction efforts to offset the impact of COVID-19.

Cost of goods sold for the nine months ended September 30, 2020 decreased $94.9 million, or 13.0%, as compared to the same period last year, due to decreases in the Diversified Industrial and Energy segments. The decreases in the Diversified Industrial and Energy segments in the nine months ended September 30, 2020 were primarily due to the lower sales volume discussed above, and the Company's cost reduction efforts to offset the impact of COVID-19.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") for the three months ended September 30, 2020 decreased $8.8 million, or 11.6%, as compared to the same period last year. The decrease was primarily due to lower sales volume and cost reduction initiatives from all the segments.

SG&A for the nine months ended September 30, 2020 decreased $37.0 million, or 14.5%, as compared to the same period last year, primarily due to the lower sales volume and cost reduction initiatives from Diversified Industrial and Energy segments,
2



partially offset by a $14.0 million environmental reserve charge recorded in the second quarter of 2020 in the Diversified Industrial segment related to a legacy, non-operating site and higher SG&A from the Financial Services segment driven by increased credit performance fees associated with the larger loan balances, partially offset by lower personnel expenses driven by cost reduction actions due to the economic impact of COVID-19. There was also a $12.5 million expense associated with a legal settlement in the Corporate and Other segment during the 2019 period associated with a historical acquisition.

Goodwill Impairment Charges

As a result of declines in customer demand and in the performance of the packaging business during the three months ended September 30, 2019, the Company determined that it was more likely than not that the fair value of the packaging business was below its carrying amount. The Company performed an assessment using a discounted cash flow approach and determined that the difference between the carrying amount and fair value of the packaging business was greater than the amount of goodwill allocated to that business. Accordingly, the Company recorded a $24.2 million charge in the consolidated statements of operations for the three and nine months ended September 30, 2019.

Asset Impairment Charges

As a result of COVID-19 related declines in our youth sports business within the Energy segment, intangible assets of $0.6 million, primarily customer relationships, were fully impaired during the first quarter of 2020. The asset impairment charges from the 2019 periods were primarily related to unused software in the Diversified Industrial segment's cutting replacement products and services business.

Interest Expense

Interest expense for the three months ended September 30, 2020 decreased $2.6 million, or 27.4%, as compared to the same period last year. The lower interest expense for the three months ended September 30, 2020 was primarily due to lower interest rates during the third quarter of 2020.

Interest expense for the nine months ended September 30, 2020 decreased $7.1 million, or 23.5%, as compared to the same period last year. The lower interest expense for the nine months ended September 30, 2020 was primarily due to lower interest rates during the 2020 period.

Realized and Unrealized (Gains) Losses on Securities, Net

The Company recorded gains of $1.0 million for the three months ended September 30, 2020, as compared to gains of $30.2 million in the same period of 2019 and losses of $25.5 million for the nine months ended September 30, 2020, as compared to gains of $68.7 million in 2019. The change in realized and unrealized (gains) losses on securities was primarily due to a realized loss on the sale of securities in the 2020 period, as well as mark-to-market adjustments on the Company's portfolio of securities in both periods.

All Other (Incomes) Expenses, Net

All other (incomes), net totaled $(8.7) million for the three months ended September 30, 2020, as compared to net expenses totaling $14.8 million in the same period of 2019, due primarily to a net improvement in the (benefit from) provision for loan losses, as the Company has seen lower than expected losses related to COVID-19 and higher debt paydowns, as well as lower finance interest expense, as compared to the prior period.

All other expenses, net decreased $8.5 million for the nine months ended September 30, 2020, as compared to the same period of 2019, due primarily to higher investment income, lower finance interest expense and lower provision for loan losses, as compared to the prior period.

Income Tax Provision

The Company recorded income tax provisions of $14.8 million and $13.7 million for the three months ended September 30, 2020 and 2019, respectively, and $10.0 million and $31.5 million for the nine months ended September 30, 2020 and 2019, respectively. As a limited partnership, we are generally not responsible for federal and state income taxes, and our profits and losses are passed directly to our limited partners for inclusion in their respective income tax returns. Provisions have been made for federal, state, local or foreign income taxes on the results of operations generated by our consolidated subsidiaries that are taxable entities.
3



Significant differences between the statutory rate and the effective tax rate include partnership losses for which no tax benefit is recognized, state taxes, changes in deferred tax valuation allowances and other permanent differences.

(Income) Loss of Associated Companies, Net of Taxes

The Company recorded income from associated companies, net of taxes of $3.2 million and a loss from associated companies, net of taxes of $26.4 million for the three and nine months ended September 30, 2020, respectively, as compared to a loss of $1.9 million and income of $0.4 million in the same periods of 2019.

Purchases of Property, Plant and Equipment (Capital Expenditures)

Capital expenditures for the third quarter of 2020 totaled $4.5 million, or 1.4% of revenue, as compared to $10.1 million, or 2.7% of revenue, in the third quarter of 2019. For the nine months ended September 30, 2020, capital expenditures were $15.6 million, or 1.6% of revenue, as compared to $26.5 million, or 2.4% of revenue, for the nine months ended September 30, 2019.

Additional Non-GAAP Financial Measures

Adjusted EBITDA for the third quarter of 2020 was $73.3 million versus $59.2 million for the same period in 2019. Adjusted EBITDA margin increased to 22.2% in the quarter from 15.9% in the third quarter of 2019, primarily due to the Company's continued focus on cost management and the lower than expected loan losses noted above. Adjusted free cash flow was $40.6 million for the third quarter of 2020 versus $53.3 million for the same period in 2019.

For the nine months ended September 30, 2020, Adjusted EBITDA and Adjusted EBITDA margin were $149.1 million and 15.3%, respectively, as compared to $152.4 million and 13.7% for the same period in 2019. For the nine months ended September 30, 2020, adjusted free cash flow was $135.8 million versus $80.5 million for the same period in 2019.

Liquidity and Capital Resources

As of September 30, 2020, the Company had $254.4 million in available liquidity under its senior credit agreement, as well as $19.1 million in cash and cash equivalents, excluding WebBank cash, and approximately $219.3 million in marketable securities and long-term investments.

As of September 30, 2020, total debt was $302.7 million, a decrease of approximately $35.4 million, as compared to December 31, 2019. As of September 30, 2020, net debt totaled $447.2 million, an increase of approximately $32.3 million, as compared to December 31, 2019. Total leverage (as defined in the Company's senior credit agreement) was 2.68x as of September 30, 2020 versus 3.17x as of December 31, 2019.

During the quarter ended September 30, 2020, WebBank continued issuing loans under the Small Business Administration's ("SBA") Paycheck Protection Program ("PPP") authorized under the Coronavirus Aid, Relief, and Economic Security Act. As of September 30, 2020, the total PPP loans and associated liabilities are $2.1 billion and $2.2 billion, respectively. The loans were funded by the PPP Liquidity Facility, have terms of between 2 and 5 years, and their repayment is guaranteed by the SBA. Loans can be forgiven in whole or part (up to full principal and any accrued interest) if certain criteria are met. The timing of loan forgiveness is uncertain at this time, but borrower forgiveness applications and SBA processing is expected over the next several quarters.

About Steel Partners Holdings L.P.

Steel Partners Holdings L.P. (www.steelpartners.com) is a diversified global holding company that owns and operates businesses and has significant interests in various companies, including diversified industrial products, energy, defense, supply chain management and logistics, direct marketing, banking and youth sports.


(Financial Tables Follow)
4



Consolidated Balance Sheets (unaudited)

(in thousands, except common units)September 30, 2020December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents$141,265 $139,467 
Marketable securities137 220 
Trade and other receivables - net of allowance for doubtful accounts of $3,433 and $2,512, respectively175,822 175,043 
Receivables from related parties3,457 2,221 
Loans receivable, including loans held for sale of $80,169 and $225,013, respectively, net299,943 546,908 
Inventories, net149,558 151,641 
Prepaid expenses and other current assets39,634 33,689 
Assets of discontinued operations— 41,012 
Total current assets809,816 1,090,201 
Long-term loans receivable, net2,289,835 196,145 
Goodwill151,940 149,626 
Other intangible assets, net143,674 158,593 
Deferred tax assets83,380 88,645 
Other non-current assets37,995 70,616 
Property, plant and equipment, net231,946 250,225 
Operating lease right-of-use assets29,744 34,324 
Long-term investments219,156 275,836 
Assets of discontinued operations— 18,143 
Total Assets$3,997,486 $2,332,354 
LIABILITIES AND CAPITAL
Current liabilities:
Accounts payable$117,042 $85,817 
Accrued liabilities72,261 114,941 
Deposits268,637 615,495 
Payables to related parties1,814 481 
Short-term debt70 1,800 
Current portion of long-term debt13,953 14,208 
Current portion of preferred unit liability— 39,782 
Other current liabilities91,789 42,041 
Liabilities of discontinued operations— 21,256 
Total current liabilities565,566 935,821 
Long-term deposits120,221 139,222 
Long-term debt288,676 322,081 
Other borrowings2,159,721 — 
Preferred unit liability146,218 144,247 
Accrued pension liabilities184,396 183,228 
Deferred tax liabilities1,753 2,497 
Long-term operating lease liabilities22,804 26,458 
Other non-current liabilities38,541 14,556 
Liabilities of discontinued operations— 87,825 
Total Liabilities3,527,896 1,855,935 
Commitments and Contingencies
Capital:
Partners' capital common units: 25,189,613 and 25,023,128 issued and outstanding (after deducting 12,647,864 and 12,647,864 units held in treasury, at cost of $198,781 and $198,781), respectively639,186 664,035 
Accumulated other comprehensive loss(174,125)(191,422)
Total Partners' Capital465,061 472,613 
Noncontrolling interests in consolidated entities4,529 3,806 
Total Capital469,590 476,419 
Total Liabilities and Capital$3,997,486 $2,332,354 
5



Consolidated Statements of Operations (unaudited)

(in thousands, except common units and per common unit data)Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Revenue:
Diversified industrial net sales$274,094 $281,120 $788,566 $862,090 
Energy net revenue22,378 44,147 75,282 126,665 
Financial services revenue33,535 45,813 109,496 123,853 
Total revenue330,007 371,080 973,344 1,112,608 
Costs and expenses:
Cost of goods sold216,322 236,474 632,600 727,489 
Selling, general and administrative expenses67,418 76,265 219,018 256,018 
Goodwill impairment charges— 24,219 — 24,219 
Asset impairment charges— 659 617 849 
Finance interest expense2,537 4,568 9,446 12,693 
(Benefit from) provision for loan losses(9,684)11,230 30,706 32,415 
Interest expense6,988 9,622 23,025 30,099 
Realized and unrealized (gains) losses on securities, net(969)(30,234)25,515 (68,720)
Other income, net(1,577)(1,001)(4,544)(983)
Total costs and expenses281,035 331,802 936,383 1,014,079 
Income from continuing operations before income taxes and equity method investments48,972 39,278 36,961 98,529 
Income tax provision14,783 13,705 10,034 31,505 
(Income) loss of associated companies, net of taxes(3,194)1,855 26,420 (408)
Net income from continuing operations37,383 23,718 507 67,432 
Discontinued operations
Loss from discontinued operations, net of taxes(21)(26,482)(2,602)(33,540)
Net income (loss) on deconsolidation of discontinued operations1,161 — (22,666)— 
Income (loss) from discontinued operations, net of taxes1,140 (26,482)(25,268)(33,540)
Net income (loss)38,523 (2,764)(24,761)33,892 
Net income attributable to noncontrolling interests in consolidated entities (continuing operations)(248)(114)(569)(29)
Net income (loss) attributable to common unitholders$38,275 $(2,878)$(25,330)$33,863 
Net income (loss) per common unit - basic
Net income from continuing operations$1.49 $0.94 $— $2.70 
Net income (loss) from discontinued operations0.05 (1.06)(1.02)(1.34)
Net income (loss) attributable to common unitholders$1.54 $(0.12)$(1.02)$1.36 
Net income (loss) per common unit - diluted
Net income from continuing operations$0.77 $0.94 $— $1.93 
Net income (loss) from discontinued operations0.02 (1.06)(1.02)(0.85)
Net income (loss) attributable to common unitholders$0.79 $(0.12)$(1.02)$1.08 
Weighted-average number of common units outstanding - basic24,874,281 25,011,142 24,844,114 24,947,814 
Weighted-average number of common units outstanding - diluted52,067,382 25,011,142 24,844,114 39,604,813 

6



Supplemental Balance Sheet Data (unaudited)
(in thousands, except common and preferred units)September 30,December 31,
20202019
Cash and cash equivalents$141,265 $139,467 
WebBank cash and cash equivalents122,126 125,047 
Cash and cash equivalents, excluding WebBank$19,139 $14,420 
Common units outstanding25,189,613 25,023,128 
Preferred units outstanding6,422,128 7,927,288 

Supplemental Non-GAAP Disclosures (unaudited)
Adjusted EBITDA Reconciliation:
(in thousands)Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Net income from continuing operations$37,383$23,718$507$67,432
Income tax provision14,78313,70510,03431,505
Income from continuing operations before income taxes52,16637,42310,54198,937
Add (Deduct):
(Income) loss of associated companies, net of taxes(3,194)1,85526,420(408)
Realized and unrealized (gains) losses on securities, net(969)(30,234)25,515(68,720)
Interest expense6,9889,62223,02530,099
Depreciation10,99910,93533,08532,891
Amortization5,2565,45215,65016,155
Non-cash goodwill impairment charges24,21924,219
Non-cash asset impairment charges659617849
Non-cash pension expense1,2572,2642,4326,213
Non-cash equity-based compensation333243589634
Other items, net435(3,288)11,25911,483
Adjusted EBITDA$73,271$59,150$149,133$152,352
Total revenue$330,007$371,080$973,344$1,112,608
Adjusted EBITDA margin22.2%15.9%15.3%13.7%

Net Debt Reconciliation:
(in thousands)September 30,December 31,
20202019
Total debt$302,699 $338,089 
Loan guarantee liability52,303 — 
Accrued pension liabilities184,396 183,228 
Preferred unit liability, including current portion146,218 184,029 
Cash and cash equivalents, excluding WebBank(19,139)(14,420)
Marketable securities(137)(220)
Long-term investments(219,156)(275,836)
Net debt$447,184 $414,870 
7




Adjusted Free Cash Flow Reconciliation:
(in thousands)Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Net cash provided by operating activities of continuing operations$36,338 $11,167 $296,230 $64,867 
Purchases of property, plant and equipment(4,546)(10,113)(15,581)(26,523)
Net increase (decrease) in loans held for sale8,791 52,265 (144,844)42,193 
Adjusted free cash flow$40,583 $53,319 $135,805 $80,537 

Segment Results (unaudited)
(in thousands)Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Revenue:
Diversified industrial$274,094 $281,120 $788,566 $862,090 
Energy22,378 44,147 75,282 126,665 
Financial services33,535 45,813 109,496 123,853 
Total revenue$330,007 $371,080 $973,344 $1,112,608 
Income (loss) from continuing operations before interest expense and income taxes:
Diversified industrial$26,372 $(3,042)$54,408 $27,609 
Energy(1,891)954 (7,041)(472)
Financial services28,701 20,436 31,892 48,012 
Corporate and other5,972 28,697 (45,693)53,887 
Income from continuing operations before interest expense and income taxes59,154 47,045 33,566 129,036 
Interest expense6,988 9,622 23,025 30,099 
Income tax provision14,783 13,705 10,034 31,505 
Net income from continuing operations$37,383 $23,718 $507 $67,432 
(Income) loss of associated companies, net of taxes:
Corporate and other$(3,194)$1,855 $26,420 $(408)
Total$(3,194)$1,855 $26,420 $(408)
Segment depreciation and amortization:
Diversified industrial$12,243 $11,927 $36,893 $35,449 
Energy3,669 4,309 11,156 13,174 
Financial services304 110 567 309 
Corporate and other39 41 119 114 
Total depreciation and amortization$16,255 $16,387 $48,735 $49,046 
Segment Adjusted EBITDA:
Diversified industrial$41,848 $35,902 $108,295 $96,118 
Energy2,052 5,167 4,755 12,664 
Financial services28,656 17,931 32,457 45,632 
Corporate and other715 150 3,626 (2,062)
Total Adjusted EBITDA$73,271 $59,150 $149,133 $152,352 
8



For the nine months ended September 30, 2020, the Company changed the methods used to measure reported segment income or loss by allocating additional expenses from the Corporate and Other segment to the Diversified Industrial, Energy and Financial Services segments. In addition, the Company recast all 2019 financial information associated with API Group Limited and certain of its affiliates, which were deconsolidated during the first quarter of 2020 and previously included in the Diversified Industrial segment, to discontinued operations. The 2019 financial information has been recast to reflect these changes on a comparable basis.

Note Regarding Use of Non-GAAP Financial Measurements

The financial data contained in this press release includes certain non-GAAP financial measurements as defined by the U.S. Securities and Exchange Commission ("SEC"), including "Adjusted EBITDA," "Net Debt" and "Adjusted Free Cash Flow." The Company is presenting these non-GAAP financial measurements because it believes that these measures provide useful information to investors about the Company's business and its financial condition. The Company defines Adjusted EBITDA as net income or loss from continuing operations before the effects of income or loss from investments in associated companies and other investments held at fair value, interest expense, taxes, depreciation and amortization, non-cash pension expense or income, and realized and unrealized gains or losses on investments, and excludes certain non-recurring and non-cash items. The Company defines Net Debt as the sum of total debt, loan guarantee liability, accrued pension liabilities and preferred unit liability, less the sum of cash and cash equivalents (excluding those used in WebBank's banking operations), marketable securities and long-term investments. The Company defines Adjusted Free Cash Flow as net cash provided by or used in operating activities of continuing operations less the sum of purchases of property, plant and equipment, and net increases or decreases in loans held for sale. The Company believes these measures are useful to investors because they are measures used by the Company's Board of Directors and management to evaluate its ongoing business, including in internal management reporting, budgeting and forecasting processes, in comparing operating results across the business, as internal profitability measures, as components in assessing liquidity and evaluating the ability and the desirability of making capital expenditures and significant acquisitions, and as elements in determining executive compensation.

However, the measures are not measures of financial performance under generally accepted accounting principles in the U.S. ("U.S. GAAP"), and the items excluded from these measures are significant components in understanding and assessing financial performance. Therefore, these non-GAAP financial measurements should not be considered substitutes for net income or loss, total debt, or cash flows from operating, investing or financing activities. Because Adjusted EBITDA is calculated before recurring cash charges, including realized losses on investments, interest expense, and taxes, and is not adjusted for capital expenditures or other recurring cash requirements of the business, it should not be considered as a measure of discretionary cash available to invest in the growth of the business. There are a number of material limitations to the use of Adjusted EBITDA as an analytical tool, including the following:

Adjusted EBITDA does not reflect the Company's tax provision or the cash requirements to pay its taxes;
Adjusted EBITDA does not reflect income or loss from the Company's investments in associated companies and other investments held at fair value;
Adjusted EBITDA does not reflect the Company's interest expense;
Although depreciation and amortization are non-cash expenses in the period recorded, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect the cash requirements for such replacement;
Adjusted EBITDA does not reflect the Company's net realized and unrealized gains and losses on its investments;
Adjusted EBITDA does not include non-cash charges for pension expense and equity-based compensation;
Adjusted EBITDA does not include amounts related to noncontrolling interests in consolidated entities;
Adjusted EBITDA does not include certain other non-recurring and non-cash items; and
Adjusted EBITDA does not include the Company's discontinued operations.

In addition, Net Debt assumes the Company's cash and cash equivalents (excluding those used in WebBank's banking operations), marketable securities and long-term investments are immediately convertible in cash and can be used to reduce outstanding debt without restriction at their recorded fair value, while Adjusted Free Cash Flow excludes net increases or decreases in loans held for sale, which can vary significantly from period-to-period since these loans are typically sold after origination and thus represent a significant component in WebBank's operating cash flow requirements.

The Company compensates for these limitations by relying primarily on its U.S. GAAP financial measures and using these measures only as supplemental information. The Company believes that consideration of Adjusted EBITDA, Net Debt and Adjusted Free Cash Flow, together with a careful review of its U.S. GAAP financial measures, is a well-informed method of analyzing SPLP. Because Adjusted EBITDA, Net Debt and Adjusted Free Cash Flow are not measurements determined in accordance with U.S. GAAP and are susceptible to varying calculations, Adjusted EBITDA, Net Debt and Adjusted Free Cash Flow, as presented, may not be comparable to other similarly titled measures of other companies.
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Forward-Looking Statements

This press release contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that reflect SPLP's current expectations and projections about its future results, performance, prospects and opportunities. SPLP identifies these forward-looking statements by using words such as "may," "should," "expect," "hope," "anticipate," "believe," "intend," "plan," "estimate," "will" and similar expressions. These forward-looking statements are based on information currently available to the Company and are subject to risks, uncertainties and other factors that could cause its actual results, performance, prospects or opportunities in 2020 and beyond to differ materially from those expressed in, or implied by, these forward-looking statements. These factors include, without limitation, the impact of COVID-19 on business activity generally and on the Company's financial condition and operations, including whether facilities considered to be essential retain that designation, the continued decline of crude oil prices, customers' acceptance of our new and existing products, our ability to deploy our capital in a manner that maximizes unitholder value, the ability to consolidate and manage the Company's newly acquired businesses, the potential fluctuation in the Company's operating results, the Company's ongoing cash flow requirements for defined benefit pension plans, the cost of compliance with extensive federal and state regulatory requirements and any potential liability thereunder, the Company's need for additional financing and the terms and conditions of any financing that is consummated, the ability to identify suitable acquisition candidates or investment opportunities for our core businesses, the impact of losses in the Company's investment portfolio, the effect of fluctuations in interest rates and the phase-out of LIBOR, our ability to protect the Company's intellectual property rights, the Company's ability to manage risks inherent to conducting business internationally, the outcome of litigation or other legal proceedings in which we are involved from time to time, a significant disruption in, or breach in security of, our technology systems, labor disputes and the ability to recruit and retain experienced personnel, general economic conditions, fluctuations in demand for our products and services, the inability to realize the benefits of net operating losses of our affiliates and subsidiaries, the possible volatility of our common or preferred unit trading prices and other risks detailed from time to time in filings we make with the SEC. These statements involve significant risks and uncertainties, and no assurance can be given that the actual results will be consistent with these forward-looking statements. Investors should read carefully the factors described in the "Risk Factors" section of the Company's filings with the SEC, including the Company's Form 10-K for the year ended December 31, 2019 and Form 10-Q for each of the 2020 quarterly periods, for information regarding risk factors that could affect the Company's results. Any forward-looking statement made in this press release speaks only as of the date hereof. Except as otherwise required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances, or any other reason.

Investor Relations Contact

Jennifer Golembeske
212-520-2300
jgolembeske@steelpartners.com
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