Steel Partners(SPLP) - 2022 Q2 - Quarterly Report

Financial Performance - Revenue for the three months ended June 30, 2022, increased by $54,975, or 14.2%, compared to the same period last year, driven by higher sales across all reportable segments[196]. - Revenue for the six months ended June 30, 2022, increased by $146,227, or 20.9%, compared to the same period last year, also due to higher sales across all reportable segments[196]. - Total revenue for the three months ended June 30, 2022, was $441,408, an increase of 14.2% compared to $386,433 for the same period in 2021[211]. - Net income from continuing operations for the three months ended June 30, 2022, was $92,113, compared to $27,435 for the same period in 2021, representing a significant increase[211]. - Financial Services revenue for the three months ended June 30, 2022, increased by $8,814, or 22.7%, compared to the same period in 2021[221]. - Diversified Industrial segment net sales for the three months ended June 30, 2022, increased by $40,905, or 13.4%, compared to the same period in 2021[212]. - Energy segment net revenue for the three months ended June 30, 2022, increased by $5,256, or 12.6%, compared to the same period in 2021[218]. Expenses and Costs - Cost of goods sold for the three months ended June 30, 2022, increased by $38,216, or 15.2%, primarily due to higher material and labor costs[197]. - Cost of goods sold for the six months ended June 30, 2022, increased by $97,701, or 21.3%, driven by similar factors as the quarterly increase[198]. - Selling, general and administrative expenses for the three months ended June 30, 2022, increased by $26,253, or 35.2%, primarily due to higher expenses in the Financial Services segment[199]. - Selling, general and administrative expenses for the six months ended June 30, 2022, increased by $43,577, or 30.4%, reflecting trends similar to the quarterly increase[200]. Gains and Losses - The Company recorded a pre-tax gain of $85,185 for the three and six months ended June 30, 2022, related to the divestiture of the SLPE business[203]. - Corporate and Other segment operating losses for the three months ended June 30, 2022, were $2,971, compared to income of $5,158 for the same period in 2021, primarily due to higher legal fees[226]. Cash Flow and Liquidity - Cash used in operating activities for the six months ended June 30, 2022, was $100,861, a decrease of $115,858 compared to cash generated in the same period of 2021[228]. - As of June 30, 2022, the Company generated $6,967 in cash from financing activities, primarily due to an increase in deposits of $360,620, offset by various repayments and acquisitions[230]. - The Company's working capital decreased to $305,659 as of June 30, 2022, down from $569,090 as of December 31, 2021[235]. - WebBank had $345,208 in cash, lines of credit, and access to the Federal Reserve Bank discount window as of June 30, 2022, representing approximately 23.7% of its total assets[237]. - The Company believes it has adequate resources to meet its financial obligations for at least the next twelve months[234]. Capital Expenditures and Debt - Capital expenditures for the six months ended June 30, 2022, were $18,470, compared to $13,925 for the same period in 2021, with full-year expectations ranging from $45,000 to $53,000[235]. - The Company made debt repayments of $129,900 on its Credit Agreement using proceeds from the sale of its SLPE business[236]. - The Credit Agreement, which includes a senior secured revolving credit facility of up to $600,000, is subject to financial covenants, and the Company was in compliance as of June 30, 2022[232]. Strategic Initiatives - The proposed merger with Steel Connect includes cash consideration of $1.35 per share, representing a premium of approximately 12.5% over the closing price on May 31, 2022, and about 90.1% over the price on November 19, 2020[179]. - The Merger Agreement with Steel Connect is subject to approval from a majority of stockholders and other customary closing conditions[182]. - The Company plans to enhance liquidity through operational improvements, supporting profitable sales growth, and evaluating strategic alternatives[231]. Economic Outlook - WebBank anticipates significant economic disruption and loan performance deterioration due to inflation, rising interest rates, and looming recession[175]. - The Energy segment's profitability is highly sensitive to crude oil price fluctuations, indicating potential risks if prices decline[174].