Steel Partners(US:SPLP)2025-03-11 21:12Business Segments - Steel Partners Holdings L.P. operates through four segments: Diversified Industrial, Energy, Financial Services, and Supply Chain[24]. - The Diversified Industrial segment includes businesses that manufacture engineered niche industrial products, with significant market positions across various industries[26]. - The Energy segment provides drilling and production services primarily in North Dakota, Montana, Colorado, Wyoming, Texas, and New Mexico[36]. - WebBank, a subsidiary of Steel Partners, engages in a full range of banking activities, including originating loans and issuing credit cards, and is FDIC-insured[38]. - ModusLink Corporation, part of the Supply Chain segment, offers end-to-end global supply chain solutions and serves clients in consumer electronics, communications, and retail markets[40]. Employee and Operational Data - The company employs approximately 5,200 employees worldwide as of December 31, 2024[45]. - The company has not experienced significant issues in obtaining necessary raw materials, which are generally available from multiple sources[42]. - The company faces significant risks from economic downturns, particularly in the transportation, oil and gas exploration, and construction-related industries, which are cyclical and have experienced financial downturns in the past[57]. - Revenues in the Supply Chain segment are highly dependent on customer traffic and demand, which can be adversely affected by macroeconomic conditions, leading to potential declines in volumes and financial results[58]. Financial Performance and Risks - Inflation and supply chain disruptions have negatively impacted the company's operations, with rising costs of labor and materials potentially affecting financial results[61]. - The company has experienced significant volatility in crude oil prices, which has adversely affected its Diversified Industrial and Energy segments, leading to diminished demand and pricing pressures[62]. - Customer demand is sensitive to oil and gas price fluctuations, with ongoing geopolitical tensions contributing to market volatility and uncertainty[63]. - The company is exposed to risks associated with commodity price fluctuations, which can impact raw material costs and profit margins[65]. - Rising interest rates may increase borrowing costs and adversely affect the company's financial condition and investment opportunities[68]. - The company is subject to substantial cash funding requirements for defined benefit pension plans, which could impact its financial condition due to market performance and interest rate changes[69]. - Compliance with environmental, health, and safety regulations may require significant costs, and any violations could lead to substantial liabilities and operational impacts[73]. Regulatory and Compliance Issues - The market for banking and related financial services is highly competitive, with WebBank facing competition from both traditional banks and nontraditional lending companies[50]. - The company faces significant compliance costs due to extensive regulations, which could adversely affect its financial condition and operations[80]. - The SEC finalized rules requiring public companies to include extensive climate-related disclosures, which could lead to substantial compliance costs if reinstated[76]. - Political and financial risks may reduce demand for the company's Energy segment services due to increased regulations on greenhouse gas emissions[78]. - The company may face increased regulatory scrutiny and potential enforcement actions that could impact its operations and financial performance[85]. - The company is subject to extensive regulations, including those related to anti-corruption, privacy, and banking, which increase its regulatory compliance burden[83]. Financial Strategy and Capital Management - As of December 31, 2024, the company had a borrowing capacity of $470 million available under its senior credit facility and $118.8 million of outstanding indebtedness[89]. - Future cash flows may not be sufficient to meet obligations under the senior credit facility, potentially affecting liquidity and financial condition[88]. - The company’s business strategy includes acquisitions, which entail risks such as management diversion and increased costs[91]. - The company intends to manage its affairs to meet the Qualifying Income Exception to avoid being taxed as a corporation[157]. Taxation and Financial Implications - Changes in U.S. tax laws, such as the reduction of the corporate income tax rate from 35% to 21%, could negatively impact the company's operations[154]. - The company is subject to partnership audit rules, which could result in tax liabilities for current unitholders due to adjustments in prior year tax returns[153]. - If the company is taxed as a corporation, net income would be taxed at 21%, significantly reducing profitability and cash available for distribution[158]. - Tax-exempt entities may face adverse tax consequences from owning common units due to unrelated business taxable income (UBTI)[162]. Cybersecurity and Operational Risks - The company has established a comprehensive cybersecurity incident response and recovery plan, including a Cybersecurity Incident Policy and a Corporate Cyber Security Incident Team[178]. - The Audit Committee oversees the company's cybersecurity risk management program, ensuring effective controls and response strategies are in place[171]. - Cybersecurity threats and breaches could lead to significant operational disruptions and reputational damage, affecting overall business performance[105]. Revenue and Income Growth - Revenue for the year ended December 31, 2024, increased by $122,391, or 6.4%, to $2,027,848 compared to $1,905,457 in 2023[207]. - Net income for the year ended December 31, 2024, was $271,222, an increase of $117,220, or 76.1%, from $154,002 in 2023[216]. - The Financial Services segment revenue increased by $37,314, or 9.0%, contributing to overall revenue growth[208]. - Cost of goods sold increased by $49,338, or 4.5%, to $1,152,355 in 2024, driven by higher sales in the Diversified Industrial segment[209].