EX-99.1 4 exh99-1.htm


EXHIBIT 99.1

STEEL PARTNERS HOLDINGS L.P.
Unaudited Pro Forma Condensed Consolidated Financial Information

On January 22, 2015, Handy & Harman Ltd. ("HNH"), a subsidiary of Steel Partners Holdings L.P., (SPLP), completed the previously announced sale of Arlon LLC ("Arlon") to Rogers Corporation ("Rogers") for $157 million in cash. The operations of Arlon were reported within SPLP's Diversified Industrial segment and comprised substantially all of HNH's former Arlon Electronic Materials business, which manufactured high performance materials for the printed circuit board industry and silicone rubber-based materials. The following unaudited pro forma condensed consolidated financial statements of SPLP are being presented to give effect to the disposition of Arlon.

•
The unaudited pro forma condensed consolidated balance sheet of SPLP as of September 30, 2014 was prepared as if the disposition of Arlon occurred as of September 30, 2014 and the pro forma adjustments give effect to events that are directly attributable to the transaction, regardless if they have a continuing impact or are nonrecurring.

•
The unaudited pro forma condensed consolidated income statements of SPLP for the nine months ended September 30, 2014 and the years ended December 31, 2013, 2012 and 2011 reflect the removal of Arlon's historical results from continuing operations and were prepared as if the disposition of Arlon had occurred on January 1, 2013. The pro forma adjustments give effect to events that are directly attributable to the transaction and have a continuing impact on the results of operations of SPLP.

These unaudited pro forma condensed consolidated financial statements of SPLP are derived from the audited and unaudited consolidated financial statements of SPLP included in its Annual Report on Form 10-K for the year ended December 31, 2013 and its Quarterly Report on Form 10-Q for the quarter ended September 30, 2014. The pro forma adjustments are based on factually supportable available information and certain assumptions that management believes are reasonable.

These unaudited pro forma condensed consolidated statements do not purport to represent what the results of operations or financial position of SPLP would actually have been had the transaction occurred on the dates noted above, or to project the results of operations or financial position of HNH for any future periods. In the opinion of management, all necessary adjustments to the unaudited pro forma financial information have been made.

These unaudited pro forma condensed consolidated financial statements should be read in conjunction with the related notes to these financial statements and with Management’s Discussion and Analysis of Financial Condition and the historical financial statements and related notes thereto of SPLP included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and its Quarterly Report on Form 10-Q for the quarter ended September 30, 2014.

Beginning with SPLP's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, Arlon's historical financial results for periods prior to the sale will be reflected in SPLP's consolidated financial statements within discontinued operations.



STEEL PARTNERS HOLDINGS L.P.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2014

(in thousands)
(A) Historical SPLP
  
(B)
Arlon Operations
  
Pro Forma Adjustments
  
Pro Forma SPLP
ASSETS
                      
Current assets:
                      
  Cash and cash equivalents
$
164,074
    
$
—
    
$
—
    
$
164,074
  
  Restricted cash
44,723
    
—
    
—
    
44,723
  
  Marketable securities
169,635
    
—
    
—
    
169,635
  
Trade and other receivables (net of allowance for doubtful accounts of $1,981)
127,349
    
(16,772
)
  
—
    
110,577
  
  Receivable from related parties
931
    
—
    
—
    
931
  
  Loans receivable, net
47,051
    
—
    
—
    
47,051
  
  Inventories, net
76,499
    
(8,623
)
  
—
    
67,876
  
  Deferred tax assets - current
22,291
    
(1,241
)
  
(18,600
)
(C)
2,450
  
  Prepaid and other current assets
17,291
    
(734
)
  
—
    
16,557
  
  Assets of discontinued operations
3,172
    
—
    
—
    
3,172
  
Total current assets
673,016
    
(27,370
)
  
(18,600
)
  
627,046
  
  Long-term loans receivable, net
63,428
    
—
    
—
    
63,428
  
  Goodwill
93,995
    
(6,582
)
  
—
    
87,413
  
  Intangible assets, net
136,392
    
(14,502
)
  
—
    
121,890
  
  Deferred tax assets - non-current
25,014
    
7,974
    
—
    
32,988
  
  Other non-current assets
47,579
    
280
    
—
    
47,859
  
  Property, plant and equipment, net
212,427
    
(28,055
)
  
—
    
184,372
  
  Long-term investments
298,885
    
—
    
—
    
298,885
  
Total Assets
$
1,550,736
    
$
(68,255
)
  
$
(18,600
)
  
$
1,463,881
  
LIABILITIES AND CAPITAL
                      
Current liabilities:
                      
  Accounts payable
$
53,349
    
$
(6,439
)
  
$
—
    
$
46,910
  
  Accrued liabilities
46,933
    
(4,021
)
  
(190
)
(D)
42,722
  
  Financial instruments
44,723
    
—
    
—
    
44,723
  
  Deposits
86,530
    
—
    
—
    
86,530
  
  Payable to related parties
873
    
—
    
—
    
873
  
  Short-term debt
629
    
—
    
—
    
629
  
  Current portion of long-term debt
13,566
    
—
    
—
    
13,566
  
  Deferred tax liabilities - current
3,096
    
—
    
—
    
3,096
  
  Other current liabilities
6,852
    
—
    
—
    
6,852
  
  Liabilities of discontinued operations
1,007
    
—
    
—
    
1,007
  
Total current liabilities
257,558
    
(10,460
)
  
(190
)
  
246,908
  
  Long-term deposits
57,420
    
—
          
57,420
  
  Long-term debt
323,330
    
—
    
(145,695
)
(E)
177,635
  
  Accrued pension liability
124,522
    
(997
)
  
—
    
123,525
  
  Deferred tax liabilities - non-current
5,252
    
—
    
—
    
5,252
  
  Other liabilities
12,757
    
(726
)
  
—
    
12,031
  
Total Liabilities
780,839
    
(12,183
)
  
(145,885
)
  
622,771
  
Commitments and Contingencies
—
    
—
    
—
    
—
  
Capital:
                      
Partners’ capital common units: 27,711,201 issued and outstanding (after deducting 8,800,330 held in treasury, at cost of $135,694)
510,655
    
(56,214
)
(F)
127,285
  
(F)
581,726
  
Accumulated other comprehensive income
41,922
    
142
    
—
    
42,064
  
Total Partners’ Capital
552,577
    
(56,072
)
  
127,285
    
623,790
  
Noncontrolling interests in consolidated entities
217,320
    
—
    
—
    
217,320
  
Total Capital
769,897
    
(56,072
)
  
127,285
    
841,110
  
Total Liabilities and Capital
$
1,550,736
    
$
(68,255
)
  
$
(18,600
)
  
$
1,463,881
  

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements



STEEL PARTNERS HOLDINGS L.P.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014



(in thousands except per common unit data)
(A) Historical SPLP
  
(B)        Arlon Operations
  
Pro Forma Adjustments
  
Pro Forma SPLP
Revenue
                      
Diversified industrial net sales
$
546,040
    
$
(77,483
)
  
$
—
    
$
468,557
  
Energy net sales
155,666
    
—
    
—
    
155,666
  
Financial services revenue
24,298
    
—
    
—
    
24,298
  
Investment and other income
1,215
    
—
    
—
    
1,215
  
Net investment gains
647
    
—
    
—
    
647
  
Total revenue
727,866
    
(77,483
)
  
—
    
650,383
  
 
Costs and expenses
                      
Cost of goods sold
502,594
    
(52,716
)
  
—
    
449,878
  
Selling, general and administrative expenses
153,752
    
(11,413
)
  
(397
)
(D)
141,942
  
Impairment charges
1,224
    
—
    
—
    
1,224
  
Finance interest expense
569
    
—
    
—
    
569
  
Recovery of loan losses
(52
)
  
—
    
—
    
(52
)
Interest expense
4,162
    
(28
)
  
—
    
4,134
  
Realized and unrealized gain on derivatives
(854
)
  
—
    
—
    
(854
)
Other income, net
(2,227
)
  
25
    
—
    
(2,202
)
Total costs and expenses
659,168
    
(64,132
)
  
(397
)
  
594,639
  
Income from continuing operations before income taxes
 and equity method income (loss)
68,698
    
(13,351
)
  
397
    
55,744
  
Income tax provision (benefit)
23,831
    
(4,713
)
  
159
  
(G)
19,277
  
 
Income (Loss) from equity method investments and investments held at fair value:
                      
Loss of associated companies, net of taxes
(3,328
)
  
—
    
—
    
(3,328
)
Income from other investments - related party
2,086
    
—
    
—
    
2,086
  
Loss from investments held at fair value
(13,226
)
  
—
    
—
    
(13,226
)
Net income from continuing operations
$
30,399
    
$
(8,638
)
  
$
238
    
$
21,999
  
                       
Net income per common unit - basic and diluted:
                      
Net income from continuing operations
$
0.38
                
$
0.21
  




See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements



STEEL PARTNERS HOLDINGS L.P.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2013




(in thousands except per common unit data)
(H) Historical SPLP
  
(B)
Arlon Operations
  
Pro Forma SPLP
Revenue
                
Diversified industrial net sales
$
655,224
    
$
(84,060
)
  
$
571,164
  
Energy net sales
120,029
          
120,029
  
Financial services revenue
28,185
          
28,185
  
Investment and other income
665
          
665
  
Net investment gains
1,071
          
1,071
  
Total revenue
805,174
    
(84,060
)
  
721,114
  
 
Costs and expenses
                
Cost of goods sold
556,374
    
(59,617
)
  
496,757
  
Selling, general and administrative expenses
216,092
    
(13,971
)
  
202,121
  
Impairment charges
2,689
          
2,689
  
Finance interest expense
698
          
698
  
Recovery of loan losses
(80
)
        
(80
)
Interest expense
5,786
    
(43
)
  
5,743
  
Realized and unrealized gain on derivatives
(1,195
)
        
(1,195
)
Other income, net
(2,093
)
  
(51
)
  
(2,144
)
Total costs and expenses
778,271
    
(73,682
)
  
704,589
  
 
Income from continuing operations before income taxes
 and equity method income (loss)
26,903
    
(10,378
)
  
16,525
  
Income tax provision
10,244
    
(3,767
)
  
6,477
  
 
Income (Loss) from equity method investments and investments held at fair value:
                
Income of associated companies, net of taxes
27,786
          
27,786
  
Loss from other investments - related party
(271
)
        
(271
)
Income from investments held at fair value
811
          
811
  
Net income from continuing operations
$
44,985
    
$
(6,611
)
  
$
38,374
  
                 
Net income per common unit - basic:
                
Net income from continuing operations
$
0.63
          
$
0.51
  
 
Net income per common unit - diluted:
                
Net income from continuing operations
$
0.61
          
$
0.49
  


See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements




STEEL PARTNERS HOLDINGS L.P.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2012




(in thousands except per common unit data)
(H) Historical SPLP
  
(B)        Arlon Operations
  
Pro Forma SPLP
Revenue
                
Diversified industrial net sales
$
579,528
    
$
(80,815
)
  
$
498,713
  
Energy net sales
92,834
          
92,834
  
Financial services revenue
21,155
          
21,155
  
Investment and other income
2,347
          
2,347
  
Net investment gains
15,722
          
15,722
  
Total revenue
711,586
    
(80,815
)
  
630,771
  
 
Costs and expenses
                
Cost of goods sold
470,885
    
(54,234
)
  
416,651
  
Selling, general and administrative expenses
169,776
    
(14,254
)
  
155,522
  
Impairment charges
1,602
          
1,602
  
Finance interest expense
1,176
          
1,176
  
Recovery of loan losses
(415
)
        
(415
)
Interest expense
13,429
    
(31
)
  
13,398
  
Realized and unrealized gain on derivatives
(1,352
)
        
(1,352
)
Deferred fee liability to related party - increase
11,448
          
11,448
  
Other expenses, net
609
    
(5
)
  
604
  
Total costs and expenses
667,158
    
(68,524
)
  
598,634
  
Income from continuing operations before income taxes
 and equity method income (loss)
44,428
    
(12,291
)
  
32,137
  
Income tax provision
16,833
    
(3,712
)
  
13,121
  
 
Income (Loss) from equity method investments and investments held at fair value:
                
Income of associated companies, net of taxes
14,204
          
14,204
  
Loss from other investments - related party
(8,329
)
        
(8,329
)
Income from investments held at fair value
18,967
          
18,967
  
Net income from continuing operations
$
52,437
    
$
(8,579
)
  
$
43,858
  
                 
Net income per common unit - basic:
                
Net income from continuing operations
$
1.17
          
$
1.02
  
 
Net income per common unit - diluted:
                
Net income from continuing operations
$
1.17
          
$
1.02
  


See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements



STEEL PARTNERS HOLDINGS L.P.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2011



(in thousands except per common unit data)
(H) Historical SPLP
  
(B)        Arlon Operations
  
Pro Forma SPLP
Revenue
                
Diversified industrial net sales
$
579,764
    
$
(81,282
)
  
$
498,482
  
Energy net sales
32,984
          
32,984
  
Financial services revenue
14,921
          
14,921
  
Investment and other income
867
          
867
  
Net investment losses
(4,352
)
        
(4,352
)
Total revenue
624,184
    
(81,282
)
  
542,902
  
Costs and expenses
                
Cost of goods sold
440,965
    
(58,195
)
  
382,770
  
Selling, general and administrative expenses
137,797
    
(13,172
)
  
124,625
  
Impairment charges
1,505
          
1,505
  
Finance interest expense
1,571
          
1,571
  
Provision for loan losses
8
          
8
  
Interest expense
12,424
    
(79
)
  
12,345
  
Realized and unrealized loss on derivatives
397
          
397
  
Deferred fee liability to related party - decrease
(6,107
)
        
(6,107
)
Other income, net
(7,808
)
  
7
    
(7,801
)
Total costs and expenses
580,752
    
(71,439
)
  
509,313
  
 
Income from continuing operations before income taxes
 and equity method income (loss)
43,432
    
(9,843
)
  
33,589
  
Income tax benefit
(64,968
)
  
(2,618
)
  
(67,586
)
Loss from equity method investments and investments held at fair value:
                
Loss of associated companies, net of taxes
(13,823
)
        
(13,823
)
Loss from other investments - related party
(15,743
)
        
(15,743
)
Loss from investments held at fair value
(183
)
        
(183
)
Net income from continuing operations
$
78,651
    
$
(7,225
)
  
$
71,426
  
                 
Net income per common unit - basic:
                
Net income from continuing operations
$
1.35
          
$
1.19
  
 
Net income per common unit - diluted:
                
Net income from continuing operations
$
0.94
          
$
0.81
  


See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements




STEEL PARTNERS HOLDINGS L.P.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)


(A) Represents the unaudited consolidated balance sheet as of September 30, 2014 and the unaudited consolidated income statement for the nine months ended September 30, 2014 reported in SPLP's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014.

(B) Reflects the elimination of the assets and liabilities and results of operations of Arlon in accordance with Accounting Standards Codification 205-20, Discontinued Operations.

(C) Reflects the utilization of $20,600 of HNH's U.S. federal net operating tax loss carryforwards in connection with the taxable gain on the sale of Arlon. The tax provision on the sale of Arlon is expected to total approximately $16,867, including the write-off of net current and non-current deferred tax assets (liabilities) totaling $1,241 and ($7,974), respectively, associated with the operations of Arlon and $5,000 in currently payable taxes. The unaudited pro forma condensed consolidated balance sheet assumes all cash taxes payable associated with the sale of Arlon were paid as of September 30, 2014.

(D) Represents the elimination of one-time transaction costs associated with the sale of Arlon accrued ($190) as of September 30, 2014 and expensed ($397) by HNH during the nine months ended September 30, 2014. No similar adjustments are required for the years ended December 31, 2013, 2012 or 2011. The unaudited pro forma condensed consolidated balance sheet assumes all cash transaction costs, which include the broker's commission and other closing-related costs and exclude the non-cash stock-based compensation charges discussed below, associated with the sale of Arlon were paid as of September 30, 2014.

(E) Represents the net cash proceeds, assuming payment of all cash taxes payable and one-time cash transaction costs, expected to be received in connection with the sale of Arlon. HNH is required to utilize the net cash proceeds to pay down amounts outstanding under its senior secured revolving credit facility. The amount of long-term debt to be repaid is comprised of the following:

Proceeds from the sale of Arlon
$
157,000
  
Reduction in sale proceeds for certain Indebtedness, as defined in the stock purchase agreement
(2,052
)
One-time cash transaction costs, excluding amounts paid prior to September 30, 2014
(4,253
)
Estimated cash taxes payable associated with the sale of Arlon
(5,000
)
   Total repayment of long-term debt
$
145,695
  

(F) Net adjustments to Partners' Capital in connection with the sale of Arlon are comprised of the following:

Proceeds from the sale of Arlon
$
157,000
  
Reduction in sale proceeds for certain Indebtedness, as defined in the stock purchase agreement
(2,052
)
One-time transaction costs, including the acceleration of restricted stock options
(4,322
)
Book value of Arlon net assets transferred to Rogers, excluding deferred taxes
(62,805
)
Estimated tax expense associated with the sale of Arlon
(16,867
)
Reclassification of accumulated other comprehensive loss to income
(142
)
Estimated impact of the acceleration of unvested restricted stock grants
259
  
   Total adjustments to Partners' Capital
$
71,071
  

(G) Represents the tax effect of the elimination of one-time transaction costs associated with the sale of Arlon recorded by HNH during the nine months ended September 30, 2014 using HNH's effective tax rate for the period.

(H) Represents the consolidated income statements for the years ended December 31, 2013, 2012 and 2011 reported in SPLP's Annual Report on Form 10-K for the fiscal year ended December 31, 2013.