NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 various companies, including diversified industrial products, energy, banking, defense, direct marking, supply chain management and logistics 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 22 - "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 21 - "Related Party Transactions."
Impact of COVID-19
In March 2020, the World Health Organization categorized the novel Coronavirus ("COVID-19") as a pandemic, and the President of the United States of America ("U.S.") declared the COVID-19 outbreak a national emergency. The spread of the outbreak has caused significant disruptions in the U.S. and global economies, and economists expect the impact will potentially be significant beyond 2020. The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. 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. As the situation surrounding COVID-19 remains fluid, it is expected to continue having a negative impact to the Company; however, it is difficult to predict the duration of the pandemic and its continued impact on the Company's business, operations, financial condition and cash flows. There is no certainty that federal, state or local regulations regarding safety measures to address the spread of COVID-19 will not adversely impact the Company's operations. As of the filing of this Form 10-K, all of the Company's facilities were open and able to operate at normal capacities. Additionally, as the COVID-19 pandemic progressed, the Company initiated cost reduction actions, including the reduction and waiver of management and board fees, hiring freezes, employee furloughs, staffing and force reductions, salary reductions, bonus payment deferrals and 401(k) match suspension to help mitigate the financial impact of the COVID-19 pandemic. The Company also froze all discretionary spend, implemented strict approvals for capital expenditures and aggressively managed working capital. The Company continues to evaluate further or continued actions as circumstances warrant.
The COVID-19 pandemic has adversely affected our consolidated financial results for the year ended December 31, 2020. The Company anticipates COVID-19 may continue to have an adverse impact on our business through 2021 and potentially beyond. While the Company developed and implemented, and continues to develop and implement, health and safety protocols, business continuity plans and crisis management protocols in an effort to try to mitigate the negative impact of COVID-19 to its employees and business, the severity of the impact of the COVID-19 pandemic on the Company's business beyond 2020 will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic, governmental actions that have been taken, or may be taken in the future, in response to the pandemic, and the extent and severity of the impact on the Company's customers and suppliers, all of which are uncertain and cannot be predicted. The Company's future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, supply chain disruptions and uncertain demand, and the impact of any initiatives or programs that the Company may undertake to address financial and operations challenges faced by its customers. As of the date of filing this Form 10-K, the extent to which the COVID-19 pandemic may materially impact the Company's financial condition, liquidity or results of operations is uncertain.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its majority or wholly-owned subsidiaries. All material inter-company accounts and transactions have been eliminated in consolidation. Certain amounts in the Company's 2019 consolidated statement of cash flows and notes have been reclassified to conform to the comparable 2020 presentation.
On January 31, 2020, the Company announced that API Group Limited and certain of its affiliates commenced administration proceedings in the United Kingdom ("U.K."). The purpose of the administration proceedings is to facilitate an orderly sale or wind-down of its U.K. operations, which include API Laminates Limited and API Foils Holdings Limited. In the U.S., API Americas Inc. voluntarily filed for Chapter 11 proceedings in Bankruptcy Court on February 2, 2020, in order to facilitate the sale or liquidation of its U.S. assets. The API entities (collectively, "API") were wholly-owned subsidiaries of the Company and were included in the Diversified Industrial segment. The Company deconsolidated API on January 31, 2020 as it no longer held a controlling financial interest as of that date. The results of API's operations are included in Discontinued operations in the accompanying statements of operations. The assets and liabilities of API as of December 31, 2019, prior to their deconsolidation, are included in Assets and Liabilities of discontinued operations, respectively, in the accompanying consolidated balance sheet. All amounts associated with API have been removed from the Company's financial statements and footnotes, and reported in discontinued operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates in Preparation of Consolidated Financial Statements
The Company's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. ("U.S. GAAP"). The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses, and related disclosure of contingent assets and liabilities during the reporting period. The more significant estimates include: (1) revenue recognition; (2) the valuation allowances for trade and other receivables, loans receivable and inventories; (3) the valuation of goodwill, indefinite-lived intangible assets, long-lived assets and associated companies; (4) the valuation of deferred tax assets; (5) contingencies, including legal and environmental liabilities; (6) fair value of derivatives; (7) post-employment benefit liabilities; (8) estimates and assumptions used in the determination of fair value of certain securities; and (9) estimates of loan losses. Actual results may differ from the estimates used in preparing the consolidated financial statements; and, due to substantial holdings in and/or restrictions on certain investments, the value that may be realized could differ from the estimated fair value.
Restatement For Correction of Immaterial Errors in Previously Issued Consolidated Financial Statements
In connection with the preparation of the consolidated financial statements for the year ended December 31, 2020, the Company identified errors in its previously filed annual consolidated financial statements and unaudited quarterly consolidated financial statements. The errors were not material to any individual prior quarterly or annual period. The prior period errors are related primarily to a division of the Company's Electrical Products business within the Diversified Industrial segment ("Electrical Products Misstatements") and were primarily the result of: (1) divisional management override of internal controls, (2) improper segregation of duties, including failure to obtain independent review of recorded accounting entries and accounting analyses and (3) inadequate documentation and support for and/or untimely preparation of account reconciliations. The Electrical Products Misstatements resulted in: (1) improper valuation of inventories and trade receivables, including the related allowance for doubtful accounts, (2) improper recognition of revenue on contracts performed over time and (3) accounts payable and associated expenses not recorded accurately or in the appropriate period and (4) other errors.
The Company assessed the materiality of the errors in its historical annual consolidated financial statements in accordance with U.S. Securities and Exchange Commission ("SEC") Staff Accounting Bulletin ("SAB") Topic 1.M, Materiality, codified in Accounting Standards Codification ("ASC") 250, Accounting Changes and Error Corrections, and concluded that the errors were not material to the previously filed annual consolidated financial statements or corresponding unaudited interim periods but would be material in the aggregate if corrected solely in the consolidated financial statements as of and for the year ended December 31, 2020. In accordance with ASC 250 (SAB Topic 1.N, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements), the Company has corrected for these errors by revising previously filed 2019 annual consolidated financial statements, including the impact to beginning Partners' capital, in connection with the filing of this 2020 Annual Report on Form 10-K. The revised annual consolidated financial statements also include adjustments to correct certain other immaterial errors, including errors that had previously been adjusted for and disclosed as out of period corrections in the period identified.
The accompanying footnotes have also been corrected to reflect the impact of the revisions of the previously filed 2019 annual consolidated financial statements. Refer to Note 25 - "Restatement of Previously Issued Consolidated Financial Statements" for reconciliations between as reported and as revised annual amounts.
Cash and Cash Equivalents
Cash and cash equivalents include cash and deposits in depository institutions and financial institutions, and includes WebBank cash at the Federal Reserve Bank. The Company considers all highly liquid debt instruments with maturities of three months or less when purchased to be cash equivalents. Cash and cash equivalents include qualifying money market funds and exclude amounts where availability is restricted by loan agreements or other contractual provisions. Cash equivalents are stated at cost, which approximates market value.
Marketable Securities and Long-Term Investments
Marketable securities consist of short-term deposits, corporate debt and equity instruments, and mutual funds. The Company classifies its marketable securities as current assets based on the nature of the securities and their availability for use in current operations. Long-term investments consist of equity securities and certain associated company investments. Held-to-maturity securities are classified in Other non-current assets. SPLP determines the appropriate classifications of its investments at the acquisition date and re-evaluates the classifications at each balance sheet date.
•Available-for-sale equity securities are reported at fair value, with unrealized gains and losses recognized in Realized and unrealized gains on securities, net in the consolidated statements of operations.
•Available-for-sale debt securities are reported at fair value, with unrealized gains and losses recognized in accumulated other comprehensive income or loss ("AOCI") as a separate component of SPLP's Partners' capital in both 2020 and 2019.
•Associated companies represent equity method investments in companies where the Company's ownership is generally between 20% and 50% of the outstanding equity and it has the ability to exercise significant influence, but not control, over the investee. For equity method investments where the fair value option has been elected, unrealized gains and losses are reported in the Company's consolidated statements of operations as part of Loss of associated companies, net of taxes. For the equity method investments where the fair value option has not been elected, SPLP records the investment at cost and subsequently increases or decreases the investment by its proportionate share of the net income or loss and other comprehensive income or loss of the investee.
•Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts.
Dividend and interest income is recognized when earned. Realized gains and losses on marketable securities and long-term investments are included in earnings and are derived using the specific-identification method. Commission expense is recorded as a reduction of sales proceeds on investment sales. Commission expense on purchases is included in the cost of investments on the Company's consolidated balance sheets.
Other Than Temporary Impairment
If the Company believes a decline in the market value of any available-for-sale debt security, equity method or held-to-maturity security below cost is other than temporary, a loss is charged to earnings, which establishes a new cost basis for the security. Impairment losses are included in Asset impairment charges in the Company's consolidated statements of operations. SPLP's determination of whether a security is other than temporarily impaired incorporates both quantitative and qualitative information. The Company considers a number of factors including, but not limited to, the length of time and the extent to which the fair value has been less than cost, the length of time expected for recovery, the financial condition of the issuer, the reason for the decline in fair value, changes in fair value subsequent to the balance sheet date, the ability and intent to hold investments to maturity, and other factors specific to the individual investment.
Specifically, for held-to-maturity securities, the Company considers whether it plans to sell the security or it is more-likely-than-not that it will be required to sell the security before recovery of its amortized cost. The credit component of an other-than-temporary impairment loss is recognized in earnings and the non-credit component is recognized in AOCI in situations where the Company does not intend to sell the security and it is more likely-than-not that the Company will not be required to sell the security prior to recovery. SPLP's assessment involves a high degree of judgment and accordingly, actual results may differ materially from those estimates and judgments.
Trade Receivables and Allowance for Doubtful Accounts
The Company recognizes bad debt expense through an allowance account using estimates based primarily on management's evaluation of the financial condition of the customer, historical experience, credit quality, whether any amounts are currently past due, the length of time accounts may be past due, previous loss history and management's determination of a
customer's current ability to pay its obligations. Trade receivable balances are charged off against the allowance when it is determined that the receivables will not be recovered, and payments subsequently received on such receivables are credited to recovery of accounts written off. The Company believes that the credit risk with respect to trade receivables is limited due to this credit evaluation process. As of December 31, 2020, the top 10 of the Company's largest customer balances accounted for 25% of the Company's trade receivables. The Company's allowance for doubtful accounts for trade receivables was $3,368 and $2,578 as of December 31, 2020 and 2019, respectively. The Company recorded charges of $1,258 to the allowance offset by recoveries of $468 for the year ended December 31, 2020 and charges of $682 to the allowance offset by recoveries of $681 for the year ended December 31, 2019.
Loans Receivable, Including Loans Held for Sale
WebBank's loan activities include several lending arrangements with companies where it originates credit card and other loans for consumers and small businesses. These loans are classified as Loans receivable and are typically sold after origination. As part of these arrangements, WebBank earns fees that are recorded in non-interest income. Fees earned from these lending arrangements are recorded as fee income. WebBank also purchases participations in commercial and industrial loans through loan syndications. Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses ("ALLL"), and any deferred fees or costs on originated loans. Interest income is accrued on the unpaid principal balance. 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.
Loans held for sale are carried at the lower of cost or estimated market value in the aggregate. A valuation allowance is recorded when cost exceeds fair value based on our determination at the time of reclassification and periodically thereafter. Gains and losses are recorded in noninterest income based on the difference between sales proceeds and carrying value and impairments from reductions in carrying value.
Loans are reported as past due when either principal or interest is due and unpaid for a period of 30 days or more. The accrual of interest on loans is discontinued at the time the loan is 90 days delinquent for commercial loans, 120 days for consumer loans and 180 days for small business loans unless the loan is well-secured and in process of collection. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.
All interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Loan Impairment and Allowance for Loan Losses
A loan is considered impaired when, based on current information and events, it is probable that WebBank will be unable to collect all amounts due according to the contractual terms of the loan agreement, including scheduled interest payments. When a loan has been identified as being impaired, the amount of impairment is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or, when appropriate, the loan's observable fair value or the fair value of the collateral (less any selling costs) if the loan is collateral-dependent. If the measurement of the impaired loan is less than the recorded investment in the loan (including accrued interest, net of deferred loan fees or costs and unamortized premium or discount), an impairment is recognized by creating or adjusting an existing allocation of the ALLL, or by charging down the loan to its value determined in accordance with U.S. GAAP.
The ALLL is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when the uncollectability of a loan or receivable balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The ALLL is evaluated on a regular basis and is based upon a periodic review of the collectability of the amounts due in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower's ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance consists of specific and general components. The specific component relates to loans that are classified as doubtful, substandard or loss. For such loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical loss experience and is adjusted for qualitative factors to cover uncertainties that could affect the estimate of probable losses. The ALLL is increased by charges to income and decreased by charge-offs (net of recoveries). The periodic evaluation of the
adequacy of the allowance is based on WebBank's past loss experience, known and inherent risks in the portfolio, adverse situations that may affect the debtor's ability to repay, the estimated value of any underlying collateral and current economic conditions.
Inventories
Inventories are generally stated at the lower of cost (determined by the first-in, first-out method or average cost method) and net realizable value. Cost is determined by the last-in, first-out ("LIFO") method for certain precious metal inventory held in the U.S., and remaining precious metal inventory is primarily carried at fair value. For precious metal inventory, no segregation among raw materials, work in process and finished products is practicable. For other inventory, the cost of work in process and finished products comprises the cost of raw materials, direct labor and overhead costs attributable to the production of inventory.
Non-precious metal inventories are evaluated for estimated excess and obsolescence based upon assumptions about future demand and market conditions, and are adjusted accordingly. If actual market conditions are less favorable than those projected, future write-downs may be required.
Goodwill and Other Intangible Assets, Net
Goodwill, which is not amortized, represents the difference between the purchase price and the fair value of identifiable net assets acquired in a business combination. The Company reviews goodwill for impairment annually in the fourth quarter, and tests for impairment during the year if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Examples of such events would include pertinent macroeconomic conditions, industry and market considerations, overall financial performance and other factors. An entity can choose between using the Step 0 approach or the Step 1 approach.
For the Step 0 approach, an entity may assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. An entity has an unconditional option to bypass the Step 0 assessment for any reporting unit in any period and proceed directly to performing a Step 1 of the goodwill impairment test. An entity may resume performing the Step 0 assessment in any subsequent period. For the Step 1 approach, which is a quantitative approach, the Company will calculate the fair value of a reporting unit and compare it to its carrying amount. There are several methods that may be used to estimate a reporting unit's fair value, including the income approach, the market approach and/or the cost approach. The amount of impairment, if any, is determined 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.
For 2020, the Company utilized a quantitative approach for all of its reporting units primarily using a discounted cash flow method with consideration of market comparisons. The annual impairment test did not result in an impairment to goodwill for any of the reporting units, except for a partial impairment of the Performance Materials reporting unit. As a result of a decline in the Performance Materials reporting unit's estimated fair value, the Company recorded a $1,100 charge in Goodwill impairment charges in the accompanying consolidated statement of operations for the year ended December 31, 2020. The annual impairment test in 2019 did not result in an impairment to goodwill. The Company performed an interim impairment test during the third quarter of 2019 for the Packaging reporting unit, which included the operations of API and Dunmore Corporation in the U.S. and Dunmore Europe GmbH in Germany (collectively, "Dunmore"). Due to a decline in their estimated fair values, the Company recorded aggregate Goodwill impairment charges of $41,853 ($15,924 classified in continuing operations for Dunmore and $25,929 classified in discontinued operations for API). Refer to Note 9 - "Goodwill and Other Intangible Assets, Net," for additional information on the goodwill impairment charges.
For finite-lived intangible assets, the Company evaluates the carrying amount of such assets when circumstances indicate the carrying amount may not be recoverable. Conditions that could have an adverse impact on the cash flows and fair value of the long-lived assets are deteriorating business climate, condition of the asset or plans to dispose of the asset before the end of its useful life. If the assets' carrying amounts exceed the sum of the undiscounted cash flows, an impairment charge is recognized in the amount by which the carrying amounts exceeds their fair values. The Company performs such assessments at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities, which is generally at the plant level, operating company level or the reporting unit level, depending on the level of interdependencies in the Company's operations. As a result of COVID-19 related declines in the Company's youth sports business within the Energy segment, intangible assets of $606, primarily customer relationships, were fully impaired during 2020. The impairment is included in Asset impairment charges in the accompanying statement of operations for the year ended December 31, 2020.
Indefinite-lived intangible assets, which are only within the Diversified Industrial segment, are tested for impairment at least annually, or when events or changes in circumstances indicate that it is more likely than not that the asset is impaired. Companies can use the same two testing approaches for indefinite-lived intangibles as for goodwill. For 2020 and 2019, the Company utilized both the quantitative and qualitative approaches to assess its indefinite-lived intangible assets, and the results indicated no impairment.
Derivatives
The Company uses various hedging instruments to reduce the impact of changes in precious metal prices and the effect of foreign currency fluctuations. In accordance with Financial Accounting Standards Board ("FASB") ASC 815, Derivatives and Hedging, these instruments are recorded as either fair value hedges, economic hedges, cash flow hedges or derivatives with no hedging designation.
Precious Metals
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.
Fair Value Hedges. 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 statements of operations, and such amounts principally offset each other due to the effectiveness of the hedges. The fair value hedges are associated primarily with the Company's precious metal inventory carried at fair value.
Economic Hedges. As these derivatives are not designated as accounting hedges under ASC 815, 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 statements of operations. The economic hedges are associated primarily with the Company's precious metal inventory valued using the LIFO method.
Foreign Currency Forward Contracts
The Company enters into foreign currency forward contracts to hedge certain of its receivables and payables denominated in other currencies. In addition, the Company enters into foreign currency forward contracts to hedge the value of certain of its future sales and the value of its future purchases denominated in other currencies. Such hedges have historically been associated with API's operations in the U.K. 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 under ASC 815. 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 statements of operations. The forward contracts that are used to hedge the value of the Company's future sales and purchases are accounted for as cash flow hedges in accordance with ASC 815. 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 statements of operations.
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 and are classified within Level 3 in the fair value hierarchy (see Note 19 - "Fair Value Measurements"). At December 31, 2020, outstanding derivatives mature within 3 to 5 years. Gains and losses resulting from changes in fair value of derivative instruments are accounted for in the Company's consolidated statements of operations in Financial Services revenue. Fair value represents the estimated amounts that WebBank would receive 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.
Property, Plant and Equipment, Net
Property, plant and equipment is recorded at cost. Depreciation of property, plant and equipment is recorded principally on the straight line method over the estimated useful lives of the assets, which range as follows: machinery and equipment 3 to 15 years and buildings and improvements 10 to 30 years. Leasehold improvements are amortized over the shorter of the terms of the related leases or the estimated useful lives of the improvements. Interest cost is capitalized for qualifying assets during the assets' acquisition period. Maintenance and repairs are charged to expense, and renewals and betterments are capitalized. Gains or losses on dispositions is recorded in Other income, net.
The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. If the carrying amounts of the long-lived assets exceed the sum of the undiscounted cash flows, an impairment charge is recognized in the amount by which the carrying amounts exceeds their fair values, which is generally determined using a discounted cash flow methodology. The Company performs such assessments at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities, which is generally at the plant level, operating company level or the reporting unit level, depending on the level of interdependencies in the Company's operations. The Company considers various factors in determining whether an impairment test is necessary, including among other things: a significant or prolonged deterioration in operating results and projected cash flows; significant changes in the extent or manner in which assets are used; technological advances with respect to assets which would potentially render them obsolete; the Company's strategy and capital planning; and the economic climate in the markets it serves. When estimating future cash flows and if necessary, fair value, the Company makes judgments as to the expected utilization of assets and estimated future cash flows related to those assets. The Company considers historical and anticipated future results, general economic and market conditions, the impact of planned business and operational strategies and other information available at the time the estimates are made. The Company believes these estimates are reasonable; however, changes in circumstances or conditions could have a significant impact on its estimates, which might result in material impairment charges in the future.
Leases
The Company determines if an agreement qualifies as a lease or contains a lease in the period that the agreement is executed. An agreement is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The right to control the use of an asset includes the right to obtain substantially all of the economic benefits of the underlying asset and the right to direct how and for what purpose the asset is used.
Right of use ("ROU") assets represent our right to use an underlying asset for the entirety of the lease term. Lease liabilities represent the Company's obligation to make payments over the life of the lease. A ROU asset and a lease liability are recognized at commencement of the lease based on the present value of the lease payments over the life of the lease. Since the interest rate implicit in a lease is generally not readily determinable, we use an incremental borrowing rate to determine the present value of the lease payments. The incremental borrowing rate represents the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar lease term to obtain an asset of similar value. Our lease terms may include options to extend or terminate the lease when the Company is reasonably certain that we will exercise that option.
Initial direct costs are included as part of the ROU asset upon commencement of the lease. The Company has applied the practical expedient available for lessees in which lease and non-lease components are accounted for as a single lease component for all of our asset classes. We also elected the practical expedient to exclude short-term leases (leases with original terms of 12 months or less) from our ROU asset and lease liability accounts.
Deferred Debt Issue Costs
Costs to issue debt are capitalized and deferred when incurred and subsequently amortized to interest expense over the term of the related debt using the effective interest rate method. Deferred debt issuance costs are presented in the Company's consolidated balance sheets as a direct deduction from the carrying amount of the associated debt liability.
Business Combinations
When the Company acquires a business, it allocates the purchase price to the assets acquired, liabilities assumed and any noncontrolling interests based on their fair values at the acquisition date. Significant judgment may be used to determine these fair values including the use of appraisals, discounted cash flow models, market value for similar purchases or other methods applicable to the circumstances. The assumptions and judgments made by the Company when recording business combinations will have an impact on reported results of operations in the future.
Revenue Recognition
General
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 are 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. Cash received from customers prior to shipment of goods, or otherwise not yet earned, is recorded as deferred revenue.
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. The Company's performance obligations are generally part of contracts with customers that have a duration of less than one year, and therefore, the Company has not provided disclosures with respect to remaining performance obligations.
Practical Expedients and Exemptions
Given the typical duration of the Company's contracts with customers, as noted directly above, is less than one year, 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.
Diversified Industrial and Energy Segments
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 U.S. 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, a cost incurred input method is used to determine the timing of revenue recognition for over time arrangements. 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, and these estimates are typically constrained. 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.
Diversified Industrials' service revenues are generated primarily by repair and maintenance work performed on equipment used at mass merchants, supermarkets and restaurants. Service revenues are primarily recognized in the amount to which the entity has a right to invoice.
The Energy segment provides drilling and production services to the oil and gas industry in the U.S. The services provided include well completion and recompletion, well maintenance and workover, flow testing, down hole pumping, plug and abatement, well logging and perforating wireline 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.
The Company has also entered into rebate agreements with certain customers. These programs are typically structured to incentivize the customers to increase their annual purchases from the Company. The rebates are usually calculated as a percentage of the purchase amount, and such percentages may increase as the customer's level of purchases rise. Rebates are recorded as a reduction of net sales in the Company's consolidated statements of operations. As of December 31, 2020 and 2019, accrued rebates payable totaled $13,294 and $14,806, respectively, and are included in Accrued liabilities on the Company's consolidated balance sheets.
Financial Services Segment
WebBank generates revenue 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 certain loans and fee income on contractual lending arrangements.
Concentration of Revenue
No single customer accounted for 10% or more of the Company's consolidated revenues in 2020 or 2019.
Fair Value Measurements
The Company measures certain assets and liabilities at fair value (see Note 19 - "Fair Value Measurements"). Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair values of assets and liabilities are determined based on a three-level measurement input hierarchy. Level 1 inputs are quoted prices in active markets for identical assets or liabilities as of the measurement date. Level 2 inputs are other than quoted market prices that are observable, either directly or indirectly, for an asset or liability. Level 2 inputs can include quoted prices in active markets for similar assets or liabilities, quoted prices in a market that is not active for identical assets or liabilities, or other inputs that can be corroborated by observable market data. Level 3 inputs are unobservable for the asset or liability when there is little, if any, market activity for the asset or liability. Level 3 inputs are based on the best information available and may include data developed by the Company.
Pension Plans
The Company sponsors qualified and non-qualified pension and other post-retirement benefit plans covering certain of its current or former employees. In accordance with accounting standards for employee pension benefits, the Company recognizes on a plan-by-plan basis the unfunded status of its pension and post-retirement benefit plans in the consolidated financial statements and measures its pension plan assets and benefit obligations as of December 31. The obligation for the Company's pension and post-retirement benefit plans and the related annual costs of employee benefits are calculated based on several long-term assumptions, including discount rates and expected mortality for employee benefit liabilities, rates of return on plan assets and expected annual rates for salary increases for employee participants.
Equity-Based Compensation
The Company accounts for restricted stock units granted to employees and non-employee directors as compensation expense, which is recognized in exchange for the services received. The compensation expense is based on the fair value of the equity instruments on the grant-date and is recognized as an expense over the service period of the recipients. The Company accounts for forfeitures in the period in which they occur.
Income Taxes
SPLP and certain of its subsidiaries, as limited partnerships, are generally not responsible for federal and state income taxes, and their profits and losses are passed directly to their partners for inclusion in their respective income tax returns. SPLP's subsidiaries that are corporate entities are subject to federal and state income taxes and file corporate income tax returns.
SPLP's subsidiaries that are subject to income taxes use the liability method of accounting for such taxes. Under the liability method, deferred tax assets and deferred tax liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards. Deferred tax assets and deferred tax liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and deferred tax liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Such subsidiaries evaluate the recoverability of deferred tax assets and establish a valuation allowance when it is more likely than not that some portion of the deferred tax assets will not be realized.
When tax returns are filed, it is highly certain that most positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the Company's consolidated financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is provided for and reflected as a liability for unrecognized tax benefits on the Company's consolidated balance sheets, along with any associated interest and penalties that would be payable to the taxing authorities upon examination.
SPLP's policy is to record estimated interest and penalties related to the underpayment of income taxes as income tax provision in its consolidated statements of operations.
The Company does not release income tax effects from AOCI until the underlying asset or liability to which the income tax relates has been derecognized from the balance sheet or otherwise terminated.
Foreign Currency Translation
Assets and liabilities of SPLP's foreign subsidiaries are translated at current exchange rates and related revenues and expenses are translated at average rates of exchange in effect during the year. Resulting cumulative translation adjustments are recorded as a separate component of other comprehensive income or loss. Gains and losses arising from transactions denominated in a currency other than the functional currency of the reporting entity are included in earnings.
Legal Contingencies
The Company is subject to litigation, proceedings, claims or assessments and various contingent liabilities incidental to its business or assumed in connection with certain business acquisitions. The Company accrues a charge for a loss contingency when it believe it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. If the loss is within a range of specified amounts, the most likely amount is accrued, and the Company accrues the minimum amount in the range if no amount within the range represents a better estimate. Generally, the Company records the loss contingency at the amount we expect to pay to resolve the contingency, and the amount is generally not discounted to the present value. Amounts recoverable under insurance contracts are recorded as assets when recovery is deemed probable. Contingencies that might result in a gain are not recognized until realizable. Changes to the amount of the estimated loss or resolution of one or more contingencies could have a material impact on our results of operations, financial position and cash flows.
Environmental Liabilities
The Company accrues for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study.
Such accruals are adjusted as further information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable.
Adoption of New Accounting Standards
In August 2018, the FASB issued Accounting Standards Update No. ("ASU") 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements on fair value measurements. The Company adopted ASU 2018-13 on January 1, 2020. Because ASU 2018-13 affects disclosure only, the adoption of this standard did not have a material impact on the Company's consolidated financial statements.
Accounting Standards Not Yet Effective
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This 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 over the entire contractual term of the instrument rather than delaying recognition of credit losses until it is probable the loss has been incurred. In May 2019, the FASB issued ASU 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief. ASU 2019-05 provides entities with an option to irrevocably elect the fair value option, applied on an instrument-by-instrument basis for eligible instruments, that are within the scope of Subtopic 326-20, upon the adoption of Topic 326. The fair value option election does not apply to held-to-maturity debt securities. The new standards were to be effective for the Company's 2020 fiscal year. In November 2019, the FASB issued ASU 2019-10, Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates. This new standard amended the effective date of Topic 326 for smaller reporting companies until January 1, 2023. A company's determination about whether it is eligible to be a smaller reporting company is based on its most recent determination as of November 15, 2019, in accordance with SEC regulations. As of this date, the Company met the SEC definition of a smaller reporting company. Therefore, the Company will not be required to adopt Topic 326 until January 1, 2023. The Company is currently evaluating the potential impact of this new guidance; however, it expects that it could have a significant impact on the Company's ALLL.
In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans. ASU 2018-14 modifies the disclosure requirements for employers that sponsor defined benefit pension and other post-retirement plans. The amendments in ASU 2018-14 are effective for the Company's 2021 fiscal year end. Because ASU 2018-14 affects disclosure only, management does not expect that the adoption of this standard will have a material impact on the Company's consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 removes specific exceptions to the general principles in Topic 740 in order to reduce the complexity of its application. ASU 2019-12 also improves consistency and simplifies existing guidance by clarifying and amending certain specific areas of Topic 740. The amendments in ASU 2019-12 are effective for the Company's 2021 fiscal year, including interim periods, although early adoption is permitted. The Company is currently evaluating the potential impact of this new guidance.
In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. ASU 2020-01 clarifies the interaction between accounting standards related to equity securities, equity method investments, and certain derivatives, and is expected to reduce diversity in practice and increase comparability of the accounting for these interactions. The amendments in ASU 2020-01 are effective for the Company's 2021 fiscal year, including interim periods. The Company is currently evaluating the potential impact of this new guidance, but management does not expect that the adoption of this standard will have a material impact on the Company's consolidated financial statements.
In March 2020 and January 2021, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and ASU 2021-01, Reference Rate Reform: Scope, respectively. Together these ASU's provide temporary optional expedients and exceptions for applying U.S. GAAP, if certain exceptions are met, to contracts, hedging relationships and other arrangements affected by the discontinuation of the London Interbank Offered Rate, known as LIBOR, or by another reference rate expected to be discontinued. These ASU's were effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements and related disclosures.
3. REVENUES
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 22 - "Segment Information."
The following table presents the Company's revenues disaggregated by geography for the years ended December 31, 2020 and 2019. 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
United States
|
$
|
1,229,406
|
|
|
$
|
1,373,505
|
|
Foreign
|
81,230
|
|
|
81,543
|
|
Total revenue
|
$
|
1,310,636
|
|
|
$
|
1,455,048
|
|
Contract Balances
Differences in the timing of revenue recognition, billings and cash collections result in billed trade receivables, unbilled receivables (contract assets) and deferred revenue (contract liabilities) on the consolidated balance sheets.
Contract Assets
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 sheets. The balances of contract assets as of December 31, 2020 and 2019 were $17,119 and $10,749, respectively. As of December 31, 2020 and 2019, the Company's return assets account was not material.
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 sheets based on the timing of when the Company expects to recognize revenue.
|
|
|
|
|
|
|
|
|
|
|
Contract Liabilities
|
December 31, 2019
|
|
$
|
6,737
|
|
Deferral of revenue
|
|
15,466
|
|
Recognition of revenue
|
|
(14,496)
|
|
December 31, 2020
|
|
$
|
7,707
|
|
4. LEASES
The Company has operating and finance leases for operating plants, warehouses, corporate offices, housing facilities, vehicles and equipment. Our leases have remaining lease terms of up to 20 years.
The components of lease cost are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
Operating lease cost
|
$
|
10,249
|
|
|
$
|
11,771
|
|
Short-term lease cost
|
$
|
453
|
|
|
$
|
465
|
|
|
|
|
|
|
|
|
|
Finance lease cost:
|
|
|
|
Amortization of right-of-use assets
|
$
|
1,256
|
|
|
$
|
1,172
|
|
Interest on lease liabilities
|
322
|
|
|
311
|
|
Total finance lease cost
|
$
|
1,578
|
|
|
$
|
1,483
|
|
Supplemental cash flow information related to leases is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
Operating cash flows from operating leases
|
$
|
10,204
|
|
|
$
|
10,987
|
|
Operating cash flows from finance leases
|
$
|
321
|
|
|
$
|
288
|
|
Financing cash flows from finance leases
|
$
|
1,660
|
|
|
$
|
1,504
|
|
Right-of-use assets obtained in exchange for lease obligations:
|
|
|
|
Operating leases
|
$
|
6,784
|
|
|
$
|
6,906
|
|
Finance leases
|
$
|
64
|
|
|
$
|
3,716
|
|
Supplemental balance sheet information related to leases is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
Location on
Consolidated Balance Sheet
|
Operating leases
|
|
|
|
|
|
Operating lease right-of-use assets
|
$
|
29,715
|
|
|
$
|
34,324
|
|
|
Operating lease right-of-use assets
|
|
|
|
|
|
|
Current operating lease liabilities
|
$
|
8,936
|
|
|
$
|
8,858
|
|
|
Other current liabilities
|
Non-current operating lease liabilities
|
21,845
|
|
|
26,458
|
|
|
Long-term operating lease liabilities
|
Total operating lease liabilities
|
$
|
30,781
|
|
|
$
|
35,316
|
|
|
|
|
|
|
|
|
|
Finance leases
|
|
|
|
|
|
Finance lease assets
|
$
|
7,575
|
|
|
$
|
9,325
|
|
|
Property, plant and equipment, net
|
|
|
|
|
|
|
Current finance lease liabilities
|
$
|
623
|
|
|
$
|
617
|
|
|
Other current liabilities
|
Non-current finance lease liabilities
|
5,177
|
|
|
6,767
|
|
|
Other non-current liabilities
|
Total finance lease liabilities
|
$
|
5,800
|
|
|
$
|
7,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
Weighted-average remaining lease term (years)
|
|
|
|
Operating leases
|
5.38 years
|
|
5.74 years
|
Finance leases
|
4.31 years
|
|
5.16 years
|
Weighted-average discount rate
|
|
|
|
Operating leases
|
4.29
|
%
|
|
4.24
|
%
|
Finance leases
|
4.20
|
%
|
|
4.19
|
%
|
Maturities of lease liabilities, as of December 31, 2020, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Leases
|
|
Finance Leases
|
2021
|
|
$
|
10,195
|
|
|
$
|
2,026
|
|
2022
|
|
11,248
|
|
|
1,907
|
|
2023
|
|
8,210
|
|
|
1,777
|
|
2024
|
|
5,854
|
|
|
1,734
|
|
2025
|
|
4,390
|
|
|
1,251
|
|
Thereafter
|
|
7,264
|
|
|
810
|
|
Total lease payments
|
|
47,161
|
|
|
9,505
|
|
|
|
|
|
|
Present value of current lease liabilities
|
|
8,936
|
|
|
623
|
|
Present value of long-term lease liabilities
|
|
21,845
|
|
|
5,177
|
|
Total present value of lease liabilities
|
|
30,781
|
|
|
5,800
|
|
|
|
|
|
|
Difference between undiscounted cash flows and discounted cash flows
|
|
$
|
16,380
|
|
|
$
|
3,705
|
|
5. ACQUISITIONS AND DIVESTITURES
Acquisitions
On January 23, 2020, the Company, through its wholly-owned subsidiary, OMG, Inc. ("OMG"), completed the acquisition of Metallon, Inc. ("Metallon"), which is in the business of manufacturing plugs for the composite exterior deck market, for a cash purchase price of $3,500. The assets acquired included goodwill of $2,300, other intangible assets, primarily unpatented technology, of $800 and property, plant and equipment of $400. No liabilities or contingent consideration were included in the acquisition. Prior to the acquisition, Metallon was the exclusive supplier of plugs to OMG for composite exterior decks, and this acquisition will provide OMG with additional control of its supply chain, production costs and overall product margin. OMG is included in the Company's Diversified Industrial segment. The goodwill of $2,300 is expected to be deductible for income tax purposes. The final purchase price and purchase price allocation of Metallon were finalized as of September 30, 2020, with no significant changes to preliminary amounts.
On April 1, 2019, the Company, through its wholly-owned subsidiary, WebBank, completed the acquisition of National Partners PFco, LLC ("National Partners") for consideration of $47,725, which includes assumed debt, including debt with a third-party that WebBank had a preexisting $10,000 participation, and was subject to a potential earn-out based on future performance. The earn-out expired on June 30, 2020 and was not paid out as the performance requirements were not met. National Partners provides commercial premium finance solutions for national insurance brokerages, independent insurance agencies and insureds in key markets throughout the U.S. National Partners is included with WebBank in the Company's Financial Services segment. In connection with the acquisition, the Company recorded trade and other receivables, other intangible assets and goodwill associated with the acquisition, totaling approximately $37,195, $2,230 and $6,515, respectively, as well as other assets and liabilities. Other intangible assets consist of agent relationships of $1,800 and trade names of $430. The goodwill from the acquisition consists largely of the synergies expected from combining the operations of the two businesses. The goodwill of $6,515 is expected to be deductible for income tax purposes. The final purchase price and purchase price allocation of National Partners were finalized as of April 1, 2020, with no significant changes to preliminary amounts.
Divestiture
On January 31, 2021, the Company completed the sale of its Edge business for a sales price of $16,000, subject to a working capital adjustment. Edge provided roofing edge metal products and was part of the Company's OMG business.
6. DISCONTINUED OPERATIONS
On January 31, 2020, the Company announced that API Group Limited and certain of its affiliates commenced administration proceedings in the U.K. The purpose of the administration proceedings is to facilitate an orderly sale or wind-down of its U.K. operations, which include API Laminates Limited and API Foils Holdings Limited. In the U.S., API Americas Inc. voluntarily filed for Chapter 11 proceedings in Bankruptcy Court on February 2, 2020, in order to facilitate the sale or liquidation of its U.S. assets. The API Americas Inc. Chapter 11 bankruptcy proceedings were closed by the Bankruptcy Court on December 21, 2020. The API entities were wholly-owned subsidiaries of the Company and part of the Diversified Industrial segment. The Company deconsolidated API on January 31, 2020 as it no longer held a controlling financial interest as of that date. On the date of the deconsolidation, the Company believed that API became a variable interest entity. The Company determined at deconsolidation that it was not the primary beneficiary of API as the Company no longer held a controlling financial interest in API and the Company lacked significant decision-making ability.
The components of Income (loss) from discontinued operations, net of taxes in the accompanying consolidated statements of operations are:
|
|
|
|
|
|
|
Year Ended
December 31, 2020
|
Loss from operations of discontinued operation
|
$
|
(2,808)
|
|
Gain upon initial deconsolidation of API
|
30,515
|
|
Loss from change in guarantee liability
|
(51,138)
|
|
Tax benefit from loss on discontinued operations
|
13,232
|
|
Loss from discontinued operations, net of taxes
|
$
|
(10,199)
|
|
The gain upon initial deconsolidation of $30,515 is based primarily on the Company's carrying value of API's assets, liabilities and accumulated other comprehensive loss at the time of deconsolidation. All amounts associated with API have been removed from the Company's financial statements and footnotes, and reported in discontinued operations as described herein.
As of the date of deconsolidation, API held approximately $69,220 of principal loans under the Company's senior credit agreement described in Note 13 - "Debt" Under the terms of the credit agreement, the Company and certain consolidated subsidiaries were guarantors, and accordingly, were responsible for the ultimate repayment of these loans. The net proceeds from the sale of the assets of API were not sufficient to fully repay the loans. On December 23, 2020, the Company became the obligor of the debt, the guarantee liability was removed from the Company's consolidated balance sheet and the Company recorded debt at that time for the amount of the remaining outstanding debt obligation.
On February 2, 2020, the Company became obligor to API's U.S. pension plans. Accordingly, the Company retained the previously recorded API pension obligation liability of approximately $5,238. These obligations remain recorded in Accrued pension liabilities in the accompanying consolidated balance sheet as of December 31, 2020.
The following represents the detail of Loss from discontinued operations, net of taxes in the accompanying consolidated statements of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
Revenue
|
$
|
6,388
|
|
|
$
|
106,389
|
|
Costs and expenses:
|
|
|
|
Cost of goods sold
|
6,085
|
|
|
104,409
|
|
Selling, general and administrative expenses
|
2,726
|
|
|
22,737
|
|
Goodwill impairment charges
|
—
|
|
|
25,929
|
|
Asset impairment charges
|
—
|
|
|
30,533
|
|
Other expenses, net
|
385
|
|
|
3,193
|
|
Total costs and expenses
|
9,196
|
|
|
186,801
|
|
Loss before income taxes
|
(2,808)
|
|
|
(80,412)
|
|
Income tax benefit (provision)
|
—
|
|
|
(753)
|
|
Loss from discontinued operations, net of taxes
|
$
|
(2,808)
|
|
|
$
|
(81,165)
|
|
The following is a summary of the assets and liabilities of discontinued operations:
|
|
|
|
|
|
|
December 31, 2019
|
Assets
|
|
Current assets:
|
|
Cash and cash equivalents
|
$
|
8,881
|
|
Trade and other receivables
|
13,367
|
|
Inventories, net
|
16,192
|
|
Prepaid expenses and other current assets
|
2,572
|
|
Total current assets
|
41,012
|
|
|
|
Other non-current assets
|
50
|
|
Property, plant and equipment, net
|
11,176
|
|
Operating lease right-of-use-assets
|
6,041
|
|
Total Assets
|
$
|
58,279
|
|
Liabilities
|
|
Current liabilities:
|
|
Accounts payable
|
$
|
14,027
|
|
Accrued liabilities
|
4,701
|
|
|
|
Short-term debt
|
1,397
|
|
Other current liabilities
|
1,131
|
|
Total current liabilities
|
21,256
|
|
Long-term debt
|
69,055
|
|
Accrued pension liabilities
|
12,849
|
|
Deferred tax liabilities
|
1,117
|
|
Long-term operating lease liabilities
|
4,804
|
|
Total Liabilities
|
$
|
109,081
|
|
7. LOANS RECEIVABLE, INCLUDING LOANS HELD FOR SALE
Major classifications of Loans receivable, including loans held for sale, held by WebBank at December 31, 2020 and 2019 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Current
|
|
Non-current
|
|
December 31, 2020
|
|
%
|
|
December 31, 2019
|
|
%
|
|
December 31, 2020
|
|
December 31, 2019
|
|
December 31, 2020
|
|
December 31, 2019
|
Loans held for sale
|
$
|
88,171
|
|
|
|
|
$
|
226,532
|
|
|
|
|
$
|
88,171
|
|
|
$
|
226,532
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
$
|
672
|
|
|
—
|
%
|
|
$
|
659
|
|
|
—
|
%
|
|
—
|
|
|
—
|
|
|
672
|
|
|
$
|
659
|
|
Commercial and industrial
|
2,279,672
|
|
|
94
|
%
|
|
251,349
|
|
|
45
|
%
|
|
221,469
|
|
|
233,510
|
|
|
2,058,203
|
|
|
17,839
|
|
Consumer loans
|
147,652
|
|
|
6
|
%
|
|
302,714
|
|
|
55
|
%
|
|
23,510
|
|
|
125,067
|
|
|
124,142
|
|
|
177,647
|
|
Total loans
|
2,427,996
|
|
|
100
|
%
|
|
554,722
|
|
|
100
|
%
|
|
244,979
|
|
|
358,577
|
|
|
2,183,017
|
|
|
196,145
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
(27,059)
|
|
|
|
|
(36,682)
|
|
|
|
|
(27,059)
|
|
|
(36,682)
|
|
|
—
|
|
|
—
|
|
Total loans receivable, net
|
$
|
2,400,937
|
|
|
|
|
$
|
518,040
|
|
|
|
|
217,920
|
|
|
321,895
|
|
|
2,183,017
|
|
|
196,145
|
|
Loans receivable, including loans held for sale (a)
|
|
|
|
|
|
|
|
$
|
306,091
|
|
|
$
|
548,427
|
|
|
$
|
2,183,017
|
|
|
$
|
196,145
|
|
(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. The fair value of loans receivable, including loans held for sale, was $2,498,218 and $760,644 at December 31, 2020 and 2019, respectively.
Loans with a carrying value of approximately $15,849 and $15,737 were pledged as collateral for potential borrowings at December 31, 2020 and 2019, respectively. WebBank serviced $2,828 and $2,898 in loans for others at December 31, 2020 and 2019, respectively.
WebBank sold loans classified as loans held for sale of $11,361,131 and $23,864,975 during the year ended December 31, 2020 and 2019, respectively. The sold loans were derecognized from the consolidated balance sheets. Loans classified as loans held for sale primarily consist of consumer and small business loans. Amounts added to loans held for sale during these same periods were $11,231,167 and $23,906,695, respectively. The reduction in loans held for sale as of December 31, 2020, reflects the impact of reduced lending by WebBank's partners due to the economic impact of COVID-19.
Such factors include WebBank's partners experiencing reduced sales volume, as well as tightening their credit policies due to the increase in the U.S. unemployment rates and other factors. This in turn has reduced the volume of loans being initiated by, and then sold by, WebBank.
Allowance for Loan Losses
The ALLL represents an estimate of probable and estimable losses inherent in the loan portfolio as of the balance sheet date. Losses are charged to the ALLL when incurred. Generally, commercial loans are charged off or charged down at the point at which they are determined to be uncollectible in whole or in part. Consumer term loans are charged off at 120 days past due and open-end consumer and small and medium business loans are charged off at 180 days past due unless the loan is well secured and in the process of collection. 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 methodologies used to estimate the ALLL depend upon the impairment status and portfolio segment of the loan. Loan groupings are created for each loan class and are then graded against historical and industry loss rates.
After applying historic loss experience, the quantitatively derived level of ALLL is reviewed for each segment using qualitative criteria. Various risk factors are tracked that influence our judgment regarding the level of the ALLL across the portfolio segments. Primary qualitative factors that may be reflected in the quantitative models include:
•Asset quality trends
•Risk management and loan administration practices
•Portfolio management and controls
•Effect of changes in the nature and volume of the portfolio
•Changes in lending policies and underwriting policies
•Existence and effect of any portfolio concentrations
•National economic business conditions and other macroeconomic adjustments
•Regional and local economic and business conditions
•Data availability and applicability
•Industry monitoring
•Value of underlying collateral
Changes in these factors are reviewed to ensure that changes in the level of the ALLL are consistent with changes in these factors. The magnitude of the impact of each of these factors on the qualitative assessment of the ALLL changes from quarter to quarter according to the extent these factors are already reflected in historic loss rates and according to the extent these factors diverge from one another. Also considered is the uncertainty inherent in the estimation process when evaluating the ALLL. WebBank's ALLL decreased $9,623, or 26%, during the year ended December 31, 2020, as compared to the year ended December 31, 2019. The decrease in the ALLL during the year ended December 31, 2020 was driven by lower held-to-maturity ("HTM") loan balances, partially offset by an increase due to COVID-19 related qualitative and environmental factors. WebBank continues to monitor the impact of COVID-19 on its loan portfolio and anticipates potential future economic disruption associated with the COVID-19 pandemic. The Company believes there remains a potential for broad negative impact on the macro-economy that may cause estimated credit losses to materially differ from historical loss experience.
Changes in the ALLL are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate Loans
|
|
Commercial & Industrial
|
|
Consumer Loans
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
$
|
26
|
|
|
$
|
6,165
|
|
|
$
|
11,468
|
|
|
$
|
17,659
|
|
Charge-offs
|
—
|
|
|
(8,667)
|
|
|
(17,918)
|
|
|
(26,585)
|
|
Recoveries
|
22
|
|
|
461
|
|
|
1,752
|
|
|
2,235
|
|
Provision
|
(24)
|
|
|
12,961
|
|
|
30,436
|
|
|
43,373
|
|
December 31, 2019
|
24
|
|
|
10,920
|
|
|
25,738
|
|
|
36,682
|
|
Charge-offs
|
—
|
|
|
(14,250)
|
|
|
(21,042)
|
|
|
(35,292)
|
|
Recoveries
|
22
|
|
|
1,313
|
|
|
2,388
|
|
|
3,723
|
|
Provision
|
(24)
|
|
|
11,310
|
|
|
10,660
|
|
|
21,946
|
|
December 31, 2020
|
$
|
22
|
|
|
$
|
9,293
|
|
|
$
|
17,744
|
|
|
$
|
27,059
|
|
The ALLL and outstanding loan balances according to the Company's impairment method are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
Commercial Real Estate Loans
|
|
Commercial & Industrial
|
|
Consumer Loans
|
|
Total
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
10
|
|
|
$
|
129
|
|
|
$
|
—
|
|
|
$
|
139
|
|
Collectively evaluated for impairment
|
12
|
|
|
9,164
|
|
|
17,744
|
|
|
26,920
|
|
Total
|
$
|
22
|
|
|
$
|
9,293
|
|
|
$
|
17,744
|
|
|
$
|
27,059
|
|
Outstanding loan balances:
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
10
|
|
|
$
|
1,283
|
|
|
$
|
—
|
|
|
$
|
1,293
|
|
Collectively evaluated for impairment
|
662
|
|
|
2,278,389
|
|
|
147,652
|
|
|
2,426,703
|
|
Total
|
$
|
672
|
|
|
$
|
2,279,672
|
|
|
$
|
147,652
|
|
|
$
|
2,427,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
Commercial Real Estate Loans
|
|
Commercial & Industrial
|
|
Consumer Loans
|
|
Total
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
12
|
|
|
$
|
360
|
|
|
$
|
—
|
|
|
$
|
372
|
|
Collectively evaluated for impairment
|
12
|
|
|
10,560
|
|
|
25,738
|
|
|
36,310
|
|
Total
|
$
|
24
|
|
|
$
|
10,920
|
|
|
$
|
25,738
|
|
|
$
|
36,682
|
|
Outstanding loan balances:
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
12
|
|
|
$
|
2,706
|
|
|
$
|
—
|
|
|
$
|
2,718
|
|
Collectively evaluated for impairment
|
647
|
|
|
248,643
|
|
|
302,714
|
|
|
552,004
|
|
Total
|
$
|
659
|
|
|
$
|
251,349
|
|
|
$
|
302,714
|
|
|
$
|
554,722
|
|
Nonaccrual and Past Due Loans
Commercial and industrial loans past due 90 days or more and still accruing interest were $7,369 and $4,962 at December 31, 2020 and 2019, respectively. Consumer loans past due 90 days or more and still accruing interest were $1,332 and $3,089 at December 31, 2020 and 2019, respectively. The Company did not have any nonaccrual loans at December 31, 2020 or 2019.
Past due loans (accruing and nonaccruing) are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
Current
|
|
30-89 Days
Past Due
|
|
90+ Days
Past Due
|
|
Total
Past Due
|
|
Total Loans
|
|
Recorded
Investment
In Accruing
Loans 90+
Days Past Due
|
|
Nonaccrual
Loans
That Are
Current (a)
|
Commercial real estate loans
|
$
|
672
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
672
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial and industrial
|
2,265,150
|
|
|
7,153
|
|
|
7,369
|
|
|
14,522
|
|
|
2,279,672
|
|
|
7,369
|
|
|
—
|
|
Consumer loans
|
142,418
|
|
|
3,902
|
|
|
1,332
|
|
|
5,234
|
|
|
147,652
|
|
|
1,332
|
|
|
—
|
|
Total loans
|
$
|
2,408,240
|
|
|
$
|
11,055
|
|
|
$
|
8,701
|
|
|
$
|
19,756
|
|
|
$
|
2,427,996
|
|
|
$
|
8,701
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
Current
|
|
30-89 Days
Past Due
|
|
90+ Days
Past Due
|
|
Total
Past Due
|
|
Total Loans
|
|
Recorded
Investment
In Accruing
Loans 90+
Days Past Due
|
|
Nonaccrual
Loans
That Are
Current (a)
|
Commercial real estate loans
|
$
|
659
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
659
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial and industrial
|
238,025
|
|
|
8,362
|
|
|
4,962
|
|
|
13,324
|
|
|
251,349
|
|
|
4,962
|
|
|
—
|
|
Consumer loans
|
292,394
|
|
|
7,231
|
|
|
3,089
|
|
|
10,320
|
|
|
302,714
|
|
|
3,089
|
|
|
—
|
|
Total loans
|
$
|
531,078
|
|
|
$
|
15,593
|
|
|
$
|
8,051
|
|
|
$
|
23,644
|
|
|
$
|
554,722
|
|
|
$
|
8,051
|
|
|
$
|
—
|
|
(a) Represents nonaccrual loans that are not past due more than 30 days; however, full payment of principal and interest is still not expected.
Credit Quality Indicators
In addition to the past due and nonaccrual criteria, loans are analyzed using a loan grading system. Generally, internal grades are assigned to commercial loans based on the performance of the loans, financial/statistical models and loan officer
judgment. For consumer loans and some commercial and industrial loans, the primary credit quality indicator is payment status. Reviews and grading of loans with unpaid principal balances of $100 or more is performed once per year. Grades follow definitions of Pass, Special Mention, Substandard and Doubtful, which are consistent with published definitions of regulatory risk classifications. The definitions of Pass, Special Mention, Substandard and Doubtful are summarized as follows:
•Pass: An asset in this category is a higher quality asset and does not fit any of the other categories described below. The likelihood of loss is considered remote.
•Special Mention: An asset in this category has a specific weakness or problem but does not currently present a significant risk of loss or default as to any material term of the loan or financing agreement.
•Substandard: An asset in this category has a developing or currently minor weakness or weaknesses that could result in loss or default if deficiencies are not corrected or adverse conditions arise.
•Doubtful: An asset in this category has an existing weakness or weaknesses that have developed into a serious risk of significant loss or default with regard to a material term of the financing agreement.
Outstanding loan balances (accruing and nonaccruing) categorized by these credit quality indicators are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
Non - Graded
|
|
Pass
|
|
Special
Mention
|
|
Sub-
standard
|
|
Doubtful
|
|
Total Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
$
|
—
|
|
|
$
|
662
|
|
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
672
|
|
Commercial and industrial
|
194,338
|
|
|
2,080,623
|
|
|
3,428
|
|
|
1,283
|
|
|
—
|
|
|
2,279,672
|
|
Consumer loans
|
147,652
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
147,652
|
|
Total loans
|
$
|
341,990
|
|
|
$
|
2,081,285
|
|
|
$
|
3,428
|
|
|
$
|
1,293
|
|
|
$
|
—
|
|
|
$
|
2,427,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
Non - Graded
|
|
Pass
|
|
Special
Mention
|
|
Sub-
standard
|
|
Doubtful
|
|
Total Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
$
|
—
|
|
|
$
|
647
|
|
|
$
|
—
|
|
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
659
|
|
Commercial and industrial
|
234,560
|
|
|
14,083
|
|
|
—
|
|
|
2,706
|
|
|
—
|
|
|
251,349
|
|
Consumer loans
|
302,714
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
302,714
|
|
Total loans
|
$
|
537,274
|
|
|
$
|
14,730
|
|
|
$
|
—
|
|
|
$
|
2,718
|
|
|
$
|
—
|
|
|
$
|
554,722
|
|
Impaired Loans
Loans are considered impaired when, based on current information and events, it is probable that WebBank will be unable to collect all amounts due according to the contractual terms of the loan agreement, including scheduled interest payments. When loans are impaired, an estimate of the amount of the balance that is impaired is made and a specific reserve is assigned to the loan based on the estimated present value of the loan's future cash flows discounted at the loan's effective interest rate, the observable market price of the loan or the fair value of the loan's underlying collateral less the cost to sell. When the impairment is based on the fair value of the loan's underlying collateral, the portion of the balance that is impaired is charged off, such that these loans do not have a specific reserve in the ALLL. Payments received on impaired loans that are accruing are recognized in interest income, according to the contractual loan agreement. WebBank recognized $72 and $158 on impaired loans for the years ended December 31, 2020 and 2019, respectively. Payments received on impaired loans that are on nonaccrual are not recognized in interest income, but are applied as a reduction to the principal outstanding. Payments are recognized when cash is received. Information on impaired loans is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded Investment
|
|
|
|
|
|
|
December 31, 2020
|
Unpaid Principal
Balance
|
|
With No
Allowance
|
|
With
Allowance
|
|
Total Recorded
Investment
|
|
Related
Allowance
|
|
Average Recorded
Investment
|
Commercial real estate loans
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
10
|
|
|
$
|
10
|
|
|
$
|
11
|
|
Commercial and industrial
|
1,283
|
|
|
—
|
|
|
1,283
|
|
|
1,283
|
|
|
129
|
|
|
2,319
|
|
Total loans
|
$
|
1,293
|
|
|
$
|
—
|
|
|
$
|
1,293
|
|
|
$
|
1,293
|
|
|
$
|
139
|
|
|
$
|
2,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded Investment
|
|
|
|
|
|
|
December 31, 2019
|
Unpaid Principal
Balance
|
|
With No
Allowance
|
|
With
Allowance
|
|
Total Recorded
Investment
|
|
Related
Allowance
|
|
Average Recorded
Investment
|
Commercial real estate loans
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
12
|
|
|
$
|
12
|
|
|
$
|
12
|
|
|
$
|
14
|
|
Commercial and industrial
|
2,706
|
|
|
—
|
|
|
2,706
|
|
|
2,706
|
|
|
360
|
|
|
2,746
|
|
Total loans
|
$
|
2,718
|
|
|
$
|
—
|
|
|
$
|
2,718
|
|
|
$
|
2,718
|
|
|
$
|
372
|
|
|
$
|
2,760
|
|
During the year ended December 31, 2020, WebBank issued loans under the Small Business Administration's ("SBA") Paycheck Protection Program ("PPP"), primarily with one of its lending partners, authorized under the Coronavirus Aid, Relief, and Economic Security ("CARES") Act. 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. Payments by borrowers on the loans begin up to 16 months after the note date, and interest will continue to accrue during the 16-month deferment at 1%. Loans can be forgiven in whole or part (up to the full principal and any accrued interest) if certain criteria are met. Loan processing fees paid to WebBank from the SBA are accounted for as loan origination fees. Net deferred fees are recognized over the life of the loan as a yield adjustment on the loans. If a loan is paid off or forgiven by the SBA prior to its maturity date, the remaining unamortized deferred fees will be recognized in interest income at that time. The PPP loans are included in Commercial and industrial loans in the tables above. As of December 31, 2020, the total PPP loans and associated liabilities are $2,047,769 and $2,090,223, respectively, and are included in Long-term loans receivable, net, and Other borrowings, respectively, on the consolidated balance sheet as of December 31, 2020. Upon borrower forgiveness, the SBA pays WebBank for the principal and accrued interest owed on the loan. The timing of loan forgiveness is uncertain at this time, but borrower forgiveness applications and SBA processing is expected over the next several quarters. As the PPP continues to evolve, changes to the loan terms and exercise of loan forgiveness may materially impact the outstanding loan balances and the effective yield.
The Company is offering loan modifications to assist borrowers during the COVID-19 pandemic. The CARES Act along with the interagency statement issued by the federal banking agencies provides that loan modifications made in response to COVID-19 do not need to be accounted for as a troubled debt restructuring ("TDR"). Accordingly, the Company does not account for such loan modifications as TDRs. The Company's loan modifications allow for payment deferrals, payment reduction, settlements amongst others. At December 31, 2020, the Company had granted loan modifications on $16,089 of loans. The program is ongoing and additional loans continue to be granted modifications. The Company granted approximately $8,848 short–term deferments on loan balances of $16,089, which represent 0.66% of total loan balances as of December 31, 2020. These loan modifications are not classified as TDRs and will not be reported as past due provided that they are performing in accordance with the modified terms.
8. INVENTORIES, NET
A summary of Inventories, net is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
Finished products
|
$
|
41,894
|
|
|
$
|
48,094
|
|
In-process
|
24,590
|
|
|
27,594
|
|
Raw materials
|
39,613
|
|
|
46,440
|
|
Fine and fabricated precious metal in various stages of completion
|
34,269
|
|
|
29,202
|
|
|
140,366
|
|
|
151,330
|
|
LIFO reserve
|
(3,280)
|
|
|
(2,877)
|
|
Total
|
$
|
137,086
|
|
|
$
|
148,453
|
|
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.
The Company obtains certain precious metals under a fee consignment agreement. As of December 31, 2020 and 2019, the Company had approximately $25,919 and $6,880, respectively, of precious metals, principally silver, under consignment, which are recorded at fair value in Inventories, net with a corresponding liability for the same amount included in Accounts payable on the Company's consolidated balance sheets. Fees charged under the consignment agreement are recorded in Interest expense in the Company's consolidated statements of operations.
The Company continues to monitor the impact of COVID-19 on our customers and our inventory levels and related reserves.
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
Supplemental inventory information:
|
|
|
|
Precious metals stated at LIFO cost
|
$
|
4,956
|
|
|
$
|
16,181
|
|
Precious metals stated under non-LIFO cost methods, primarily at fair value
|
$
|
26,033
|
|
|
$
|
10,144
|
|
Market value per ounce:
|
|
|
|
Silver
|
$
|
26.28
|
|
|
$
|
17.86
|
|
Gold
|
$
|
1,891.70
|
|
|
$
|
1,522.14
|
|
Palladium
|
$
|
2,448.54
|
|
|
$
|
1,935.19
|
|
9. GOODWILL AND OTHER INTANGIBLE ASSETS, NET
A reconciliation of the change in the carrying amount of goodwill by reportable segment is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diversified Industrial
|
|
Energy
|
|
Financial Services
|
|
Corporate and Other
|
|
Total
|
Balance at December 31, 2019:
|
|
|
|
|
|
|
|
|
|
Gross goodwill
|
$
|
180,855
|
|
|
$
|
67,143
|
|
|
$
|
6,515
|
|
|
$
|
81
|
|
|
$
|
254,594
|
|
Accumulated impairments
|
(40,178)
|
|
|
(64,790)
|
|
|
—
|
|
|
—
|
|
|
(104,968)
|
|
Net goodwill
|
140,677
|
|
|
2,353
|
|
|
6,515
|
|
|
81
|
|
|
149,626
|
|
Acquisitions (a)
|
2,300
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,300
|
|
Impairments
|
(1,100)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,100)
|
|
Currency translation adjustments
|
26
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26
|
|
Balance at December 31, 2020:
|
|
|
|
|
|
|
|
|
|
Gross goodwill
|
183,181
|
|
|
67,143
|
|
|
6,515
|
|
|
81
|
|
|
256,920
|
|
Accumulated impairments
|
(41,278)
|
|
|
(64,790)
|
|
|
—
|
|
|
—
|
|
|
(106,068)
|
|
Net goodwill
|
$
|
141,903
|
|
|
$
|
2,353
|
|
|
$
|
6,515
|
|
|
$
|
81
|
|
|
$
|
150,852
|
|
(a) Related to the acquisition of Metallon. See Note 5 - "Acquisitions and Divestitures."
In connection with the Company's annual fourth quarter goodwill impairment testing and as a result of declines in customer demand in the Performance Materials reporting unit, which is included in the Diversified Industrial segment, the Company determined its fair value was less than its carrying value. The Company partially impaired the Performance Materials reporting units' goodwill and recorded a $1,100 charge in Goodwill impairment charges in the accompanying consolidated statement of operations for the year ended December 31, 2020. The fair value of the Performance Materials reporting unit was determined using a discounted cash flow model (a form of the income approach) with consideration of market comparisons. The discounted cash flow model used the Company's projections, which are subject to various risks and uncertainties associated with its forecasted revenue, expenses and cash flows, as well as the expected impact on its business from the COVID-19 pandemic. The Company's significant assumptions in the analysis include, but are not limited to, future cash flow projections, the weighted- average cost of capital, the terminal growth rate and the tax rate. The Company's estimates of future cash flows are based on the current economic environment, recent operating results and planned business strategies. These estimates could be negatively affected by changes in regulations, further economic downturns, decreased customer demand for Performance Materials' products or an inability to execute its business strategies. Future cash flow estimates are, by their nature, subjective, and actual results may differ materially from the Company's estimates. As of December 31, 2020, the Performance Materials' reporting unit had $6,808 of goodwill. While the Performance Materials reporting unit's goodwill was determined not to be fully impaired in the fourth quarter, it may be at risk of further impairment in the future if the business does not perform as projected, including if it does not recover as planned from the COVID-19 pandemic, or if market factors utilized in the impairment test deteriorate, including an unfavorable change in the terminal growth rate or the weighted-average cost of capital.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diversified Industrial
|
|
Energy
|
|
Financial Services
|
|
Corporate and Other
|
|
Total
|
|
|
|
|
Balance at December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross goodwill
|
$
|
179,836
|
|
|
$
|
67,143
|
|
|
$
|
—
|
|
|
$
|
81
|
|
|
$
|
247,060
|
|
|
|
|
|
Accumulated impairments
|
(24,254)
|
|
|
(64,790)
|
|
|
—
|
|
|
—
|
|
|
(89,044)
|
|
|
|
|
|
Net goodwill
|
155,582
|
|
|
2,353
|
|
|
—
|
|
|
81
|
|
|
158,016
|
|
|
|
|
|
Acquisitions (a), (b)
|
2,403
|
|
|
—
|
|
|
6,515
|
|
|
—
|
|
|
8,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairments
|
(15,924)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,924)
|
|
|
|
|
|
Currency translation adjustments
|
(1,384)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,384)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross goodwill
|
180,855
|
|
|
67,143
|
|
|
6,515
|
|
|
81
|
|
|
254,594
|
|
|
|
|
|
Accumulated impairments
|
(40,178)
|
|
|
(64,790)
|
|
|
—
|
|
|
—
|
|
|
(104,968)
|
|
|
|
|
|
Net goodwill
|
$
|
140,677
|
|
|
$
|
2,353
|
|
|
$
|
6,515
|
|
|
$
|
81
|
|
|
$
|
149,626
|
|
|
|
|
|
(a) Diversified Industrial - Purchase price adjustments related to the 2018 Dunmore acquisition.
(b) Financial Services - Goodwill related to the National Partners acquisition.
As a result of declines in customer demand and the performance of the Packaging reporting unit, which is included in the Diversified Industrial segment, the Company determined that it was more likely than not that the fair value of the Packaging reporting unit was below its carrying amount as of September 30, 2019. Accordingly, the Company performed an assessment using a discounted cash flow method with consideration of market comparisons and determined that the fair value of the Packaging reporting unit was less than its carrying amount. The Company fully impaired the Packaging reporting units' goodwill as of September 30, 2019 and recorded a $15,924 charge in Goodwill impairment charges in the accompanying consolidated statement of operations for the year ended December 31, 2019.
A summary of Other intangible assets, net is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net
|
|
Customer relationships
|
$
|
213,984
|
|
|
$
|
122,785
|
|
|
$
|
91,199
|
|
|
$
|
216,428
|
|
|
$
|
109,701
|
|
|
$
|
106,727
|
|
|
|
Trademarks, trade names and brand names
|
51,189
|
|
|
20,209
|
|
|
30,980
|
|
|
51,414
|
|
|
18,469
|
|
|
32,945
|
|
|
|
Developed technology, patents and patent applications
|
32,319
|
|
|
19,724
|
|
|
12,595
|
|
|
31,984
|
|
|
17,176
|
|
|
14,808
|
|
|
|
Other
|
18,777
|
|
|
14,970
|
|
|
3,807
|
|
|
17,963
|
|
|
13,850
|
|
|
4,113
|
|
|
|
Total
|
$
|
316,269
|
|
|
$
|
177,688
|
|
|
$
|
138,581
|
|
|
$
|
317,789
|
|
|
$
|
159,196
|
|
|
$
|
158,593
|
|
|
|
Trademarks with indefinite lives as of December 31, 2020 and 2019 were $11,405 and $11,320, respectively. Amortization expense related to intangible assets was $20,750 and $21,561 for the years ended December 31, 2020 and 2019, respectively. The estimated amortization expense for each of the five succeeding years and thereafter is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31,
|
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
|
Thereafter
|
Estimated amortization expense
|
|
$
|
20,106
|
|
|
$
|
17,887
|
|
|
$
|
16,891
|
|
|
$
|
16,317
|
|
|
$
|
14,902
|
|
|
$
|
41,073
|
|
10. PROPERTY, PLANT AND EQUIPMENT, NET
A summary of property, plant and equipment, net is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
Land
|
$
|
15,888
|
|
|
$
|
16,251
|
|
Buildings and improvements
|
83,709
|
|
|
81,386
|
|
Machinery, equipment and other
|
427,733
|
|
|
403,030
|
|
Construction in progress
|
9,864
|
|
|
16,452
|
|
|
537,194
|
|
|
517,119
|
|
Accumulated depreciation
|
(308,202)
|
|
|
(266,986)
|
|
Property, plant and equipment, net
|
$
|
228,992
|
|
|
$
|
250,133
|
|
Depreciation expense was $44,583 and $44,619 for the years ended December 31, 2020 and 2019, respectively.
In March 2021, the Joining Materials business sold an idle facility in Toronto, Canada for $9.2 million CDN.
11. INVESTMENTS
Short-Term Investments
The Company's short-term investments primarily consist of its marketable securities portfolio. The classification of marketable securities as a current asset is based on the intended holding period and realizability of the investments. The investments are carried at fair value and totaled $106 and $220 as of December 31, 2020 and 2019, respectively. Unrealized losses on short-term investments totaled $70 and $501 for the years ended December 31, 2020 and 2019, respectively.
Long-Term Investments
The following table summarizes the Company's long-term investments as of December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership %
|
|
Long-Term Investments Balance
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
Corporate securities (a)
|
|
|
|
|
$
|
210,538
|
|
|
$
|
186,777
|
|
|
|
|
|
|
|
|
Collateralized debt securities
|
|
|
|
|
450
|
|
|
855
|
|
|
|
|
|
|
|
|
Steel Connect, Inc. ("STCN") convertible notes (b)
|
|
|
|
|
14,258
|
|
|
11,839
|
|
|
|
|
|
|
|
|
STCN preferred stock (c)
|
|
|
|
|
32,832
|
|
|
39,178
|
|
|
|
|
|
|
|
|
STCN common stock
|
29.0
|
%
|
|
29.4
|
%
|
|
14,309
|
|
|
26,547
|
|
|
|
|
|
|
|
|
Aviat Networks, Inc. ("Aviat") common stock (d)
|
10.1
|
%
|
|
12.4
|
%
|
|
18,910
|
|
|
9,417
|
|
|
|
|
|
|
|
|
Other
|
—
|
%
|
|
43.8
|
%
|
|
—
|
|
|
1,223
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
$
|
291,297
|
|
|
$
|
275,836
|
|
|
|
|
|
|
|
|
(a) Corporate securities primarily include the Company's investments in the common stock of Aerojet Rocketdyne Holdings, Inc. ("Aerojet"). The Company owned 5.1% and 5.0% of Aerojet common stock as of December 31, 2020 and 2019, respectively. The fair value of the investment in Aerojet was $208,758 and $180,357 as of December 31, 2020 and 2019, respectively. Gross unrealized gains for all Corporate securities totaled $197,657 and $128,282 at December 31, 2020 and 2019, respectively.
(b) Represents investment in STCN convertible notes, which the Company accounts for under the fair value option with changes in fair value recognized in the Company's consolidated statements of operations. The convertible notes outstanding as of December 31, 2018 matured on March 1, 2019. The Company entered into a new convertible note with STCN ("New Note") on February 28, 2019, which matures on March 1, 2024. The cost basis of the New Note totaled $14,943 as of both December 31, 2020 and 2019. The New Note is convertible into shares of STCN's common stock at an initial conversion rate of 421.2655 shares of common stock per $1,000 principal amount of the New Note (which is equivalent to an initial conversion price of approximately $2.37 per share), subject to adjustment upon the occurrence of certain events. The New Notes, if converted as of December 31, 2020, when combined with STCN common and preferred shares, also if converted, owned by the Company, would result in the Company having a direct interest of approximately 48.7% of STCN's outstanding shares.
(c) Represents investment in shares of STCN preferred stock which the Company accounts for under the fair value option with changes in fair value recognized in the Company's consolidated statements of operations. The investment in STCN preferred stock had a cost basis of $35,688 as of both December 31, 2020 and 2019. 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 adjustment upon the occurrence of certain events.
(d) In January and February of 2021, the Company sold its remaining ownership interest in Aviat for total proceeds of approximately $24,100.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss of Associated Companies, Net of Taxes
|
|
|
|
Year Ended December 31, 2020
|
|
|
|
2020
|
|
2019
|
|
|
STCN convertible notes
|
$
|
(2,418)
|
|
|
$
|
3,104
|
|
|
|
STCN preferred stock
|
6,401
|
|
|
876
|
|
|
|
STCN common stock
|
10,747
|
|
|
4,404
|
|
|
|
Aviat common stock
|
(10,485)
|
|
|
(341)
|
|
|
|
Other equity method investments
|
(459)
|
|
|
—
|
|
|
|
Total
|
$
|
3,786
|
|
|
$
|
8,043
|
|
|
|
The amount of unrealized gains (losses) that relate to equity securities still held as of December 31, 2020 and 2019 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
Net gains (losses) recognized during the period on equity securities
|
$
|
25,643
|
|
|
$
|
47,315
|
|
Less: Net (losses) gains recognized during the period on equity securities sold during the period
|
(1,102)
|
|
|
(18,666)
|
|
Unrealized gains (losses) recognized during the period on equity securities still held at the end of the period
|
$
|
26,745
|
|
|
$
|
65,981
|
|
Equity Method Investments
The Company's investments in associated companies are accounted for under the equity method of accounting using the fair value option. Associated companies are included in the Corporate and Other segment. Certain associated companies have a
fiscal year end that differs from December 31. Additional information for SPLP's significant investments in associated companies is as follows:
•STCN is a publicly-traded diversified holding company with two wholly-owned subsidiaries, IWCO Direct Holdings, Inc. ("IWCO") and ModusLink Corporation ("ModusLink"). IWCO delivers data-driven marketing solutions for its customers that offer a full range of services including strategy, creative and execution for omnichannel marketing campaigns, along with postal logistics programs for direct mail. ModusLink is a supply chain business process management company serving clients in markets such as consumer electronics, communications, computing, medical devices, software and retail.
•Aviat designs, manufactures and sells a range of wireless networking solutions and services to mobile and fixed telephone service providers, private network operators, government agencies, transportation and utility companies, public safety agencies and broadcast system operators across the globe.
The following summary statement of operations amounts are for STCN as of July 31, 2020 and 2019, and for the years then ended, which are STCN's nearest corresponding full fiscal years to the Company's fiscal years ended December 31, 2020 and 2019, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended July 31,
|
|
|
|
2020
|
|
2019
|
|
|
Summary operating results:
|
|
|
|
|
|
Revenue
|
$
|
782,813
|
|
|
$
|
819,830
|
|
|
|
Gross profit
|
$
|
162,959
|
|
|
$
|
149,730
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(5,284)
|
|
|
$
|
(66,727)
|
|
|
|
Other Investments
WebBank has HTM debt securities which are carried at amortized cost and included in Other non-current assets on the Company's consolidated balance sheets. The amount and contractual maturities of HTM debt securities are noted in the tables below. Actual maturities may differ from expected or contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties. The securities are collateralized by unsecured consumer loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
Amortized Cost
|
|
Gross Unrealized Gains (Losses)
|
|
Estimated Fair Value
|
|
Carrying Value
|
Collateralized securities
|
$
|
16,868
|
|
|
$
|
109
|
|
|
$
|
16,977
|
|
|
$
|
16,868
|
|
|
|
|
|
|
|
|
|
Contractual maturities within:
|
|
|
|
|
|
|
|
One year to five years
|
|
|
|
|
|
|
7,563
|
|
Five years to ten years
|
|
|
|
|
|
|
7,193
|
|
After ten years
|
|
|
|
|
|
|
2,112
|
|
Total
|
|
|
|
|
|
|
$
|
16,868
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
Amortized Cost
|
|
Gross Unrealized Gains (Losses)
|
|
Estimated Fair Value
|
|
Carrying Value
|
Collateralized securities
|
$
|
37,896
|
|
|
$
|
(3)
|
|
|
$
|
37,893
|
|
|
$
|
37,896
|
|
|
|
|
|
|
|
|
|
Contractual maturities within:
|
|
|
|
|
|
|
|
One year to five years
|
|
|
|
|
|
|
23,339
|
|
Five years to ten years
|
|
|
|
|
|
|
12,373
|
|
After ten years
|
|
|
|
|
|
|
2,184
|
|
Total
|
|
|
|
|
|
|
$
|
37,896
|
|
WebBank regularly evaluates each HTM debt security whose value has declined below amortized cost to assess whether the decline in fair value is other-than-temporary. If there is an other-than-temporary impairment in the fair value of any individual security classified as HTM, WebBank writes down the security to fair value with a corresponding credit loss portion charged to earnings, and the non-credit portion charged to AOCI.
12. DEPOSITS
A summary of WebBank deposits is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
Time deposits year of maturity:
|
|
|
|
2020
|
$
|
—
|
|
|
$
|
362,224
|
|
2021
|
138,021
|
|
|
109,111
|
|
2022
|
51,848
|
|
|
26,873
|
|
2023
|
15,094
|
|
|
—
|
|
2024
|
3,324
|
|
|
3,238
|
|
2025
|
—
|
|
|
—
|
|
Total time deposits
|
208,287
|
|
|
501,446
|
|
Savings deposits
|
147,372
|
|
|
253,271
|
|
Total deposits (a)
|
$
|
355,659
|
|
|
$
|
754,717
|
|
Current
|
$
|
285,393
|
|
|
$
|
615,495
|
|
Long-term
|
70,266
|
|
|
139,222
|
|
Total deposits
|
$
|
355,659
|
|
|
$
|
754,717
|
|
(a) WebBank has $5,378 of time deposits with balances greater than $250. 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. The fair value of deposits was $357,616 and $756,968 at December 31, 2020 and 2019, respectively.
13. DEBT
The components of debt and a reconciliation to the carrying amount of long-term debt is presented in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
Short-term debt:
|
|
|
|
Foreign
|
$
|
397
|
|
|
$
|
1,800
|
|
Short-term debt
|
397
|
|
|
1,800
|
|
Long-term debt:
|
|
|
|
Credit Agreement
|
332,350
|
|
|
330,700
|
|
Other debt - foreign
|
230
|
|
|
444
|
|
Other debt - domestic
|
1,173
|
|
|
5,145
|
|
Subtotal
|
333,753
|
|
|
336,289
|
|
Less portion due within one year
|
10,361
|
|
|
14,208
|
|
Long-term debt
|
323,392
|
|
|
322,081
|
|
Total debt
|
$
|
334,150
|
|
|
$
|
338,089
|
|
Long-term debt as of December 31, 2020 matures in each of the next five years as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
|
Thereafter
|
Long-term debt
|
|
$
|
333,753
|
|
|
|
|
$
|
10,361
|
|
|
$
|
323,392
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
As of December 31, 2020, the Company's senior credit agreement, as amended ("Credit Agreement"), includes a revolving credit facility in an aggregate principal amount not to exceed $500,000 and a $182,500 term loan. The Credit Agreement covers substantially all of the Company's subsidiaries, with the exception of WebBank, and includes a $55,000 sub-facility for swing line loans and a $50,000 sub-facility for standby letters of credit. The term loan requires quarterly amortization equating to $2,500 per quarter. 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 (1.00% and 2.00%, respectively, for Base Rate and Euro-Rate borrowings at December 31, 2020), 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 2.18% at December 31, 2020. At December 31, 2020, letters of credit totaling $9,467 had been issued under the Credit Agreement, including $3,166 of the letters of credit guaranteeing various insurance activities, and $6,301 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 $336,289 as of December 31, 2020.
On November 14, 2022, the Credit Agreement will expire and all outstanding amounts will be due and payable. 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, each as defined. The Company was in compliance with all financial covenants as of December 31, 2020.
14. FINANCIAL INSTRUMENTS
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 and are classified within Level 3 in the fair value hierarchy (see Note 19 - "Fair Value Measurements"). As of December 31, 2020, 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 statements of operations 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 basis for the same or similar instruments. WebBank does not enter into derivative contracts for speculative or trading purposes.
Precious Metal and Commodity Inventories
As of December 31, 2020, the Company had the following outstanding forward contracts with settlement dates through January 2021. There were no futures contracts outstanding at December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
|
|
Amount
|
|
Notional Value
|
Silver
|
|
88,024 ounces
|
|
$
|
2,267
|
|
Gold
|
|
1,397 ounces
|
|
$
|
2,620
|
|
Palladium
|
|
822 ounces
|
|
$
|
1,926
|
|
Copper
|
|
310,000 pounds
|
|
$
|
1,088
|
|
Tin
|
|
13 metric tons
|
|
$
|
191
|
|
Of the total forward contracts outstanding, 5,601 ounces of silver and all the of 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 remaining outstanding forward contracts for silver, and all the contracts for gold, palladium and tin, are accounted for as economic hedges.
The forward contracts were made with a counterparty rated Aa2 by Moody'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 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value of Derivative Assets (Liabilities)
|
|
December 31, 2020
|
|
December 31, 2019
|
|
Balance Sheet Location
|
|
Fair Value
|
|
Balance Sheet Location
|
|
Fair Value
|
Derivatives designated as ASC 815 hedges
|
|
|
|
|
|
|
|
Commodity contracts
|
Accrued liabilities
|
|
$
|
(6)
|
|
|
Accrued liabilities
|
|
$
|
(46)
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as ASC 815 hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
Accrued liabilities
|
|
$
|
(163)
|
|
|
Accrued liabilities
|
|
$
|
(335)
|
|
Economic interests in loans
|
Other non-current assets
|
|
$
|
11,599
|
|
|
Other non-current assets
|
|
$
|
18,633
|
|
The effect of cash flow hedge accounting for foreign currency forward contracts on AOCI for the years ended December 31, 2020 and 2019 are not material. The effects of fair value and cash flow hedge accounting in the consolidated statements of operations for the years ended December 31, 2020 and 2019 are not material.
The effects of derivatives not designated as ASC 815 hedging instruments in the consolidated statements of operations for the years ended December 31, 2020 and 2019 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain (Loss) Recognized in Income
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Derivatives Not Designated as Hedging Instruments
|
|
Location of Gain (Loss) Recognized in Income
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
Other (expense) income, net
|
|
$
|
(1,782)
|
|
|
$
|
(1,695)
|
|
|
|
Foreign exchange forward contracts
|
|
Revenue/Cost of goods sold
|
|
—
|
|
|
228
|
|
|
|
|
|
|
|
|
|
|
|
|
Economic interests in loans
|
|
Revenue
|
|
5,657
|
|
|
14,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives
|
|
|
|
$
|
3,875
|
|
|
$
|
13,334
|
|
|
|
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 instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized on the consolidated balance sheets. The contractual amounts of those instruments reflect the extent of involvement WebBank has in particular classes of financial instruments.
As of December 31, 2020 and 2019, WebBank's undisbursed loan commitments totaled $170,611 and $125,861, 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.
15. PENSION AND OTHER POST-RETIREMENT BENEFITS
The Company's significant pension plans are discussed below. The Company's other pension and post-retirement benefit plans are not significant individually or in the aggregate.
The Company's subsidiary, Handy & Harman Ltd. ("HNH") and its subsidiary, Handy & Harman ("H&H"), sponsor a defined benefit pension plan, the WHX Pension Plan, covering many of H&H's employees and certain employees of H&H's former subsidiary, Wheeling-Pittsburgh Corporation ("WPC"). The WHX Pension Plan was established in May 1998 as a result of the merger of the former H&H plans, which covered substantially all H&H employees, and the WPC plan. The WPC plan, covering most United Steel Workers of America-represented employees of WPC, was created pursuant to a collective bargaining agreement ratified on August 12, 1997. Prior to that date, benefits were provided through a defined contribution plan, the Wheeling-Pittsburgh Steel Corporation Retirement Security Plan ("RSP Plan"). The assets of the RSP Plan were merged into the WPC plan as of December 1, 1997. Under the terms of the WHX Pension Plan, the benefit formula and provisions for the WPC and H&H participants continued as they were designed under each of the respective plans prior to the merger.
The qualified pension benefits under the WHX Pension Plan were frozen as of December 31, 2005 and April 30, 2006 for hourly and salaried non-bargaining participants, respectively, with the exception of a single operating unit. In 2011, the benefits were frozen for the remainder of the participants. WPC employees ceased to be active participants in the WHX Pension Plan effective July 31, 2003, and as a result, such employees no longer accrue benefits under the WHX Pension Plan.
HNH's subsidiary, JPS Industries Holdings LLC ("JPS"), sponsors a defined benefit pension plan ("JPS Pension Plan"). Under the JPS Pension Plan, substantially all JPS employees who were employed prior to April 1, 2005 have benefits. The JPS Pension Plan was frozen effective December 31, 2005. Employees no longer earned additional benefits after that date. Benefits earned prior to December 31, 2005 will be paid out to eligible participants following retirement. The JPS Pension Plan was "unfrozen" for employees who were active employees on or after June 1, 2012. This new benefit, calculated based on years of service and a capped average salary, will be added to the amount of any pre-2005 benefit. The JPS Pension Plan was again
frozen for all future accruals effective December 31, 2015, although unvested participants may still vest in accrued but unvested benefits.
Pension benefits under the WHX Pension Plan are based on years of service and the amount of compensation earned during the participants' employment. However, as noted above, the qualified pension benefits have been frozen for all participants.
Pension benefits for the WPC bargained participants include both defined benefit and defined contribution features, since the plan includes the account balances from the RSP Plan. The gross benefit, before offsets, is calculated based on years of service and the benefit multiplier under the plan. The net defined benefit pension plan benefit is the gross amount offset for the benefits payable from the RSP Plan and benefits payable by the Pension Benefit Guaranty Corporation from previously terminated plans. Individual employee accounts established under the RSP Plan are maintained until retirement. Upon retirement, participants who are eligible for the WHX Pension Plan and maintain RSP Plan account balances will normally receive benefits from the WHX Pension Plan. When these participants become eligible for benefits under the WHX Pension Plan, their vested balances in the RSP Plan become assets of the WHX Pension Plan. Although these RSP Plan assets cannot be used to fund any of the net benefit that is the basis for determining the defined benefit plan's net benefit obligation at the end of the year, the Company has included the amount of the RSP Plan accounts of $13,509 and $15,318 on a gross-basis as both assets and liabilities of the plan as of December 31, 2020 and 2019, respectively.
On December 30, 2016, the WHX Pension Plan was split into two plans by spinning off certain plan participants with smaller benefit obligations (which in the aggregate were equal to approximately 3.0% of the assets of the WHX Pension Plan), and assets equal thereto, to a new separate plan, the WHX Pension Plan II. The benefits of participants under the WHX Pension Plan II are equal to their accrued benefits under the benefit formula that was applicable to each participant under the WHX Pension Plan at the time of the plan spin-off. The total benefit liabilities of the two plans after the spin-off were equal to the benefit liabilities of the WHX Pension Plan immediately before the spin-off, and under the applicable spin-off rules, the WHX Pension Plan II was considered fully funded as of the date of the spin-off.
HNH is a wholly owned subsidiary of Steel Excel, Inc. ("Steel Excel") and is within Steel Excel's controlled group of companies. Steel Excel assumed sponsorship of the API Foils North America Pension Plan (the "API Plan") as part of Chapter 11 bankruptcy proceedings involving the API Plan's previous plan sponsor API Americas Inc. (formerly known as API Foils, Inc.) that were initiated on February 2, 2020. The API Plan is a defined benefit pension plan providing benefits based on final pensionable earnings, as defined in the API Plan, funded by the payment of contributions to a separately administered trust fund. Benefits under the API Plan were frozen, and the plan was closed to new participants in December 2008.
Effective December 31, 2020, the WHX Pension Plan was merged with and into the API Foils North America Pension Plan, and all participants of both former plans are now participants of the merged plan. The resulting merged plan was renamed the WHX & API Foils Pension Plan ("WHX & API Plan"), and the plan sponsor of that surviving merged plan remains Steel Excel.
Net actuarial losses are being amortized over the average future lifetime of the participants for the WHX & API Plan and the WHX Pension Plan II, which is expected to be approximately 16 years and 12 years, respectively. The JPS Plan's net actuarial losses are also amortized over the average future lifetime of the population. The Company believes that use of the future lifetime of the participants is appropriate because the plans are inactive.
The following table presents the components of pension expense for the Company's pension plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost
|
$
|
13,282
|
|
|
$
|
18,070
|
|
|
|
|
|
|
|
|
|
Expected return on plan assets
|
(21,585)
|
|
|
(20,039)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of actuarial loss and prior service credit
|
11,479
|
|
|
10,237
|
|
|
|
|
|
|
|
|
|
Settlement/curtailment
|
336
|
|
|
79
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
3,512
|
|
|
$
|
8,347
|
|
|
|
|
|
|
|
|
|
Pension expense is included in Selling, general and administrative expenses in the consolidated statements of operations.
Actuarial assumptions used to develop the components of pension expense were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
Weighted-average discount rate
|
3.04
|
%
|
|
4.10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average expected long-term rate of return on plan assets
|
6.50
|
%
|
|
6.50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summarized below is a reconciliation of the funded status for the Company's qualified defined benefit pension plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at January 1
|
$
|
529,846
|
|
|
$
|
502,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost
|
13,282
|
|
|
18,070
|
|
|
|
|
|
|
|
|
|
Actuarial loss
|
39,824
|
|
|
50,190
|
|
|
|
|
|
|
|
|
|
Settlement/curtailment
|
—
|
|
|
(395)
|
|
|
|
|
|
|
|
|
|
Benefits paid
|
(41,044)
|
|
|
(40,442)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at December 31
|
541,908
|
|
|
529,846
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at January 1
|
345,707
|
|
|
311,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual returns on plan assets
|
49,496
|
|
|
41,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits paid
|
(41,044)
|
|
|
(40,442)
|
|
|
|
|
|
|
|
|
|
Company contributions
|
8,468
|
|
|
33,639
|
|
|
|
|
|
|
|
|
|
Settlement/curtailment
|
—
|
|
|
(395)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at December 31
|
362,627
|
|
|
345,707
|
|
|
|
|
|
|
|
|
|
Funded status
|
$
|
(179,281)
|
|
|
$
|
(184,139)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized on the consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liability
|
$
|
(179,281)
|
|
|
$
|
(184,139)
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
(179,281)
|
|
|
$
|
(184,139)
|
|
|
|
|
|
|
|
|
|
The table below summarizes the weighted-average assumptions used to determine benefit obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
2019
|
|
|
|
|
Weighted-average discount rate
|
2.15
|
%
|
|
3.04
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax amounts included in Accumulated other comprehensive loss are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
$
|
239,305
|
|
|
$
|
239,208
|
|
|
|
|
|
Accumulated other comprehensive loss
|
$
|
239,305
|
|
|
$
|
239,208
|
|
|
|
|
|
The pretax amount of actuarial losses included in Accumulated other comprehensive loss at December 31, 2020 that is expected to be recognized in net periodic benefit cost in 2021 is $11,777.
Other pretax changes in plan assets and benefit obligations recognized in comprehensive income (loss) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
Current year actuarial loss
|
$
|
(11,912)
|
|
|
$
|
(27,379)
|
|
|
|
|
|
|
|
|
|
Amortization of actuarial loss
|
11,815
|
|
|
10,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized in comprehensive (loss) income
|
$
|
(97)
|
|
|
$
|
(17,225)
|
|
|
|
|
|
|
|
|
|
Benefit obligations were in excess of plan assets for each of the pension plans at both December 31, 2020 and 2019. Additional information for the plans with accumulated benefit obligations in excess of plan assets follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
Projected benefit obligation
|
$
|
541,908
|
|
|
$
|
529,846
|
|
|
|
|
|
Accumulated benefit obligation
|
$
|
541,908
|
|
|
$
|
529,846
|
|
|
|
|
|
Fair value of plan assets
|
$
|
362,627
|
|
|
$
|
345,707
|
|
|
|
|
|
In determining the expected long-term rate of return on plan assets, the Company evaluated input from various investment professionals. In addition, the Company considered its historical compound returns, as well as the Company's forward-looking expectations. The Company determines its actuarial assumptions for its pension plans each year to calculate liability information as of December 31, and pension expense or income for the following year. The discount rate assumption is derived from the rate of return on high-quality bonds as of December 31 of each year.
The Company's investment policy is to maximize the total rate of return with a view to long-term funding objectives of the pension plans to ensure that funds are available to meet benefit obligations when due. Pension plan assets are diversified to the extent necessary to minimize risk and to achieve an optimal balance between risk and return. There are no target allocations. Pension plans' assets are diversified as to type of assets, investment strategies employed and number of investment managers used. Investments may include equities, fixed income, cash equivalents, convertible securities and private investment funds. Derivatives may be used as part of the investment strategy. The Company may direct the transfer of assets between investment managers in order to rebalance the portfolio in accordance with asset allocation guidelines established by the Company.
The table below presents the fair value of the Company's plan assets by asset category segregated by level within the fair value hierarchy, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets at Fair Value as of December 31, 2020
|
Asset Class
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Equity securities:
|
|
|
|
|
|
|
|
U.S. mid-cap
|
$
|
32,181
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
32,181
|
|
U.S. and international large-cap
|
114,658
|
|
|
—
|
|
|
—
|
|
|
114,658
|
|
U.S. and international small-cap
|
4,184
|
|
|
—
|
|
|
—
|
|
|
4,184
|
|
Fixed income securities
|
1,556
|
|
|
—
|
|
|
—
|
|
|
1,556
|
|
Mortgage backed securities
|
—
|
|
|
10,488
|
|
|
—
|
|
|
10,488
|
|
U.S. Government debt securities
|
—
|
|
|
9,836
|
|
|
—
|
|
|
9,836
|
|
Corporate bonds and loans
|
7,355
|
|
|
20,056
|
|
|
—
|
|
|
27,411
|
|
Convertible promissory notes
|
—
|
|
|
—
|
|
|
10,330
|
|
|
10,330
|
|
Stock warrants and private company common stock
|
—
|
|
|
—
|
|
|
2,433
|
|
|
2,433
|
|
Subtotal
|
$
|
159,934
|
|
|
$
|
40,380
|
|
|
$
|
12,763
|
|
|
213,077
|
|
Pension assets measured at net asset value (1)
|
|
|
|
|
|
|
|
Hedge funds and hedge fund-related strategies
|
|
|
|
|
|
|
101,886
|
|
Private equity
|
|
|
|
|
|
|
27,680
|
|
Insurance separate account
|
|
|
|
|
|
|
13,735
|
|
Pool separate account
|
|
|
|
|
|
|
1,592
|
|
Total pension assets measured at net asset value
|
|
|
|
|
|
|
144,893
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
10,677
|
|
Net payables
|
|
|
|
|
|
|
(6,020)
|
|
Total pension assets
|
|
|
|
|
|
|
$
|
362,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets at Fair Value as of December 31, 2019
|
Asset Class
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Equity securities:
|
|
|
|
|
|
|
|
U.S. mid-cap
|
$
|
28,729
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
28,729
|
|
U.S. and international large-cap
|
92,725
|
|
|
—
|
|
|
—
|
|
|
92,725
|
|
U.S. small-cap
|
1,252
|
|
|
—
|
|
|
—
|
|
|
1,252
|
|
Fixed income securities
|
1,823
|
|
|
—
|
|
|
—
|
|
|
1,823
|
|
Foreign exchange contracts
|
—
|
|
|
78
|
|
|
—
|
|
|
78
|
|
Mortgage and other asset-backed securities
|
—
|
|
|
11,870
|
|
|
—
|
|
|
11,870
|
|
U.S. Government debt securities
|
—
|
|
|
8,831
|
|
|
—
|
|
|
8,831
|
|
Corporate bonds and loans
|
—
|
|
|
33,084
|
|
|
—
|
|
|
33,084
|
|
Convertible promissory notes
|
—
|
|
|
—
|
|
|
6,702
|
|
|
6,702
|
|
Stock warrants and private company common stock
|
—
|
|
|
—
|
|
|
1,693
|
|
|
1,693
|
|
Subtotal
|
$
|
124,529
|
|
|
$
|
53,863
|
|
|
$
|
8,395
|
|
|
186,787
|
|
Pension assets measured at net asset value (1)
|
|
|
|
|
|
|
|
Hedge funds and hedge fund-related strategies
|
|
|
|
|
|
|
108,743
|
|
Private equity
|
|
|
|
|
|
|
24,347
|
|
Insurance separate account
|
|
|
|
|
|
|
13,464
|
|
Pool separate account
|
|
|
|
|
|
|
2,603
|
|
Total pension assets measured at net asset value
|
|
|
|
|
|
|
149,157
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
11,790
|
|
Net payables
|
|
|
|
|
|
|
(2,027)
|
|
Total pension assets
|
|
|
|
|
|
|
$
|
345,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.
During 2020, the changes to the pension plans' Level 3 assets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
Convertible Promissory Notes
|
|
Stock Warrants
|
|
Private Company Common Stock
|
|
Total
|
Beginning balance as of January 1, 2020
|
$
|
6,702
|
|
|
$
|
643
|
|
|
$
|
1,050
|
|
|
$
|
8,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains or losses included in changes in net assets
|
2,128
|
|
|
390
|
|
|
350
|
|
|
2,868
|
|
|
|
|
|
|
|
|
|
Purchases
|
1,500
|
|
|
—
|
|
|
—
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance as of December 31, 2020
|
$
|
10,330
|
|
|
$
|
1,033
|
|
|
$
|
1,400
|
|
|
$
|
12,763
|
|
During 2019, the changes to the pension plans' Level 3 assets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
Convertible Promissory Notes
|
|
Stock Warrants
|
|
Private Company Common Stock
|
|
Total
|
Beginning balance as of January 1, 2019
|
$
|
4,202
|
|
|
$
|
193
|
|
|
$
|
1,050
|
|
|
$
|
5,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
|
2,500
|
|
|
450
|
|
|
—
|
|
|
2,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance as of December 31, 2019
|
$
|
6,702
|
|
|
$
|
643
|
|
|
$
|
1,050
|
|
|
$
|
8,395
|
|
The Company's policy is to recognize transfers in and transfers out of Level 3 as of the date of the event or change in circumstances that caused the transfer. During 2020 and 2019, there was no transfer in or transfer out of Level 3.
The following tables present the category, fair value, unfunded commitments, redemption frequency and redemption notice period of those assets for which fair value was estimated using the net asset value per share (or its equivalents), as well as plan assets which have redemption notice periods, as of December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class Name
|
|
Fair Value December 31, 2020
|
|
Unfunded Commitments
|
|
Redemption Frequency
|
|
Redemption Notice Period
|
Hedge funds
|
|
$
|
101,886
|
|
|
$
|
20,581
|
|
|
(1)
|
|
60 - 180 days
|
Private equity
|
|
27,680
|
|
|
8,751
|
|
|
(2)
|
|
(2)
|
Insurance separate account
|
|
13,735
|
|
|
—
|
|
|
(3)
|
|
(3)
|
Pooled separate account
|
|
1,592
|
|
|
—
|
|
|
Daily
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class Name
|
|
Fair Value December 31, 2019
|
|
Unfunded Commitments
|
|
Redemption Frequency
|
|
Redemption Notice Period
|
Hedge funds
|
|
$
|
108,743
|
|
|
$
|
20,581
|
|
|
(1)
|
|
60 - 180 days
|
Private equity
|
|
24,347
|
|
|
14,417
|
|
|
(2)
|
|
(2)
|
Insurance separate account
|
|
13,464
|
|
|
—
|
|
|
(3)
|
|
(3)
|
Pooled separate account
|
|
2,603
|
|
|
—
|
|
|
Daily
|
|
None
|
(1) Various. Includes funds with monthly, quarterly and annual redemption frequencies, redemption windows of 1 to 5 years following the anniversary of the initial investments, limited redemptions of 25% per quarter to 20% per annum, as well as subject to 10% holdback.
(2) Voluntary withdrawals are not permitted. The funds have various durations from 3 to 11 years.
(3) Except for benefit payments to participants and beneficiaries and related expenses, withdrawals are restricted for substantially all of the assets in the account, as defined in the contract. However, a suspension or transfer can be requested with 30 days' notice.
Hedge Funds and Hedge Fund-Related Strategies. The strategies include U.S. and international equity, event driven, value driven and long-term capital growth.
Private Equity. The strategies include growth and value oriented private companies and investment funds, as well as asset and revenue based lending.
Insurance Separate Account. The JPS Pension Plan holds a deposit administration group annuity contract with an immediate participation guarantee from Transamerica Life Insurance Company ("TFLIC"). The TFLIC contract unconditionally guarantees benefits to certain salaried JPS Pension Plan participants earned through June 30, 1984 in the plan of a predecessor employer. The assets deposited under the contract are held in a separate custodial account ("TFLIC Assets"). If the TFLIC Assets decrease to the level of the trigger point (as defined in the contract), which represents the guaranteed benefit obligation representing the accumulated plan benefits as of June 30, 1984, TFLIC has the right to cause annuities to be purchased for the individuals covered by these contract agreements.
Contributions
Employer contributions consist of funds paid from employer assets into a qualified pension trust account. The Company's funding policy is to contribute annually an amount that satisfies the minimum funding standards of the Employee Retirement Income Security Act.
For the year ending December 31, 2021, the Company currently estimates it will contribute between $41,700 and $46,700 to its pension plans, which includes 2020 contributions of $27,400 that were deferred until January 4, 2021 under the CARES Act. The final amount of pension contributions to be made by the Company in 2021 is dependent on the Company's election of various implementation options provided to it by the American Rescue Plan Act of 2021, which was signed into law by President Biden in March 2021. 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, including the impact of declines in pension plan assets and interest rates, as well as other changes such as any plan termination or other acceleration events.
Benefit Payments
Estimated future benefit payments for the pension plans are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Years
|
Pension Benefit
Payments
|
|
|
2021
|
$
|
40,916
|
|
|
|
2022
|
39,661
|
|
|
|
2023
|
38,569
|
|
|
|
2024
|
37,189
|
|
|
|
2025
|
36,102
|
|
|
|
2026-2030
|
158,840
|
|
|
|
16. CAPITAL AND ACCUMULATED OTHER COMPREHENSIVE LOSS
As of December 31, 2020, the Company had 22,920,804 Class A units (regular common units) outstanding.
Common Unit Repurchase Program
The Board of Directors has approved the repurchase of up to an aggregate of 5,500,000 of the Company's common units ("Repurchase Program"), which is inclusive of 2,500,000 common units approved in December 2020. 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 year ended December 31, 2020, the Company purchased 2,268,771 common units for an aggregate purchase price of $20,464. Since inception of the Repurchase Program, the Company has purchased 4,357,948 common units for an aggregate purchase price of approximately $54,345. As of December 31, 2020, there remained 1,142,052 units that may yet be purchased under the Repurchase Program.
Incentive Award Plan
The Company's 2018 Incentive Award Plan ("2018 Plan") provides equity-based compensation through the grant of options to purchase the Company's limited partnership 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 (collectively, "LP Units"). On May 18, 2020, the Company's unitholders approved the Amended and Restated 2018 Incentive Award Plan, which increased the number of LP Units issuable under the 2018 Plan by 500,000 to a total of 1,000,000 LP Units. In 2019, 207,499 restricted units were granted under the 2018 Plan. The grants have vesting periods that range from three to ten years from the date of grant. The Company granted 240,900 restricted units on September 1, 2020 under the 2018 Plan. The grants have cliff vesting periods that range from two to three years from the date of grant. As of December 31, 2020, total unrecognized compensation costs related to restricted units were $2,408 and are expected to be recognized over a weighted average remaining period of 3.4 years.
Preferred Units
The Company's 6.0% Series A preferred units, no par value ("SPLP Preferred Units") entitle the holders to a cumulative quarterly cash or in-kind (or a combination thereof) distribution. The Company declared cash distributions of approximately $7,541 and $11,891 to preferred unitholders for the years ended December 31, 2020 and 2019, respectively. The Company declared an in-kind distribution of approximately $2,371 to preferred unitholders for the three months ended June 30, 2020. The SPLP Preferred Units have a term of nine years, ending February 2026, and are redeemable at any time at the Company's option at a $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. On February 6, 2020 ("Redemption Date"), the Company redeemed 1,600,000 units of the SPLP Preferred Units at a price equal to $25 per unit, plus an amount of $0.22 per unit, equal to any accumulated and unpaid distributions up to, but excluding, the Redemption Date, for a total payment of approximately $40,400.
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 December 31, 2020 and 2019 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 statements of operations. As of December 31, 2020, there were 6,422,128 SPLP Preferred Units outstanding, and as of December 31, 2019, there were 7,927,288 SPLP Preferred Units outstanding.
Accumulated Other Comprehensive Loss
Changes, net of tax, in AOCI are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on available-for-sale securities
|
|
Unrealized (loss) gain on derivative financial instruments
|
|
Cumulative translation adjustments
|
|
Change in net pension and other benefit obligations
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2018
|
$
|
(274)
|
|
|
$
|
(277)
|
|
|
$
|
(23,476)
|
|
|
$
|
(152,436)
|
|
|
$
|
(176,463)
|
|
Net other comprehensive income (loss) attributable to common unitholders (a)
|
—
|
|
|
263
|
|
|
(1,690)
|
|
|
(13,532)
|
|
|
(14,959)
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
(274)
|
|
|
(14)
|
|
|
(25,166)
|
|
|
(165,968)
|
|
|
(191,422)
|
|
Net other comprehensive income (loss) attributable to common unitholders (a)
|
—
|
|
|
—
|
|
|
1,816
|
|
|
(524)
|
|
|
1,292
|
|
Deconsolidation of API (see Note 6)
|
—
|
|
|
14
|
|
|
10,522
|
|
|
6,945
|
|
|
17,481
|
|
Balance at December 31, 2020
|
$
|
(274)
|
|
|
$
|
—
|
|
|
$
|
(12,828)
|
|
|
$
|
(159,547)
|
|
|
$
|
(172,649)
|
|
(a) Net of tax benefit of approximately $23 and $4,292 for the years ended December 31, 2020 and 2019, respectively, principally related to changes in pension liabilities and other post-retirement benefit obligations.
Incentive Unit Expense
SPLP has issued to the Manager partnership profits interests in the form of incentive units, a portion of which will be classified as Class C common units of SPLP upon the attainment of certain specified performance goals by SPLP, which are determined as of the last day of each fiscal year. If the performance goals are not met for a fiscal year, no portion of the incentive units will be classified as Class C common units for that year. The number of outstanding incentive units is equal to 100% of the common units outstanding, including common units held by non-wholly-owned subsidiaries. The performance goals and expense related to the classification of a portion of the incentive units as Class C units is measured on an annual basis, but is accrued on a quarterly basis. Accordingly, the expense accrued is adjusted to reflect the fair value of the Class C common units on each interim calculation date. In the event the cumulative incentive unit expense calculated quarterly or for the full year is an amount less than the total previously accrued, the Company records a negative incentive unit expense in the quarter when such over accrual is determined. The expense is recorded in Selling, general and administrative expenses in the Company's consolidated statements of operations. The Company recorded $0 of incentive unit expense for both of the years ended December 31, 2020 and 2019.
17. INCOME TAXES
Details of the Company's tax provision (benefit) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
2019
|
|
|
Income before income taxes and equity method investments
|
|
|
|
|
|
Domestic
|
$
|
116,867
|
|
|
$
|
95,871
|
|
|
|
Foreign
|
8,532
|
|
|
6,206
|
|
|
|
Total
|
$
|
125,399
|
|
|
$
|
102,077
|
|
|
|
|
|
|
|
|
|
Income taxes:
|
|
|
|
|
|
Current:
|
|
|
|
|
|
Federal
|
$
|
5,411
|
|
|
$
|
(2,005)
|
|
|
|
State
|
7,193
|
|
|
3,622
|
|
|
|
Foreign
|
3,205
|
|
|
2,292
|
|
|
|
Total income taxes, current
|
15,809
|
|
|
3,909
|
|
|
|
Deferred:
|
|
|
|
|
|
Federal
|
16,006
|
|
|
11,595
|
|
|
|
State
|
6,446
|
|
|
(949)
|
|
|
|
Foreign
|
(125)
|
|
|
8
|
|
|
|
Total income taxes, deferred
|
22,327
|
|
|
10,654
|
|
|
|
Income tax provision
|
$
|
38,136
|
|
|
$
|
14,563
|
|
|
|
The following is a reconciliation of the income tax provision computed at the federal statutory rate of 21 percent to the actual income tax rate are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
2019
|
|
|
Income before income taxes and equity method investments
|
$
|
125,399
|
|
|
$
|
102,077
|
|
|
|
Federal income tax provision at statutory rate
|
$
|
26,334
|
|
|
$
|
21,436
|
|
|
|
Loss passed through to common unitholders (a)
|
3,503
|
|
|
7,005
|
|
|
|
|
29,837
|
|
|
28,441
|
|
|
|
State income taxes, net of federal effect
|
11,317
|
|
|
6,627
|
|
|
|
Change in valuation allowance
|
2,477
|
|
|
(14,525)
|
|
|
|
Foreign tax rate differences
|
(993)
|
|
|
1,034
|
|
|
|
Uncertain tax positions
|
(982)
|
|
|
111
|
|
|
|
Federal and state audits
|
(33)
|
|
|
(512)
|
|
|
|
Impairment-related adjustments
|
231
|
|
|
(8,642)
|
|
|
|
NOL carryback – rate differential
|
(1,371)
|
|
|
—
|
|
|
|
Permanent differences and other
|
(2,347)
|
|
|
2,029
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
$
|
38,136
|
|
|
$
|
14,563
|
|
|
|
(a) Represents taxes at statutory rate on losses for which no tax benefit is recognizable by SPLP and certain of its subsidiaries which are taxed as pass-through entities. Such losses are allocable directly to SPLP's unitholders and taxed when realized.
The CARES Act made tax law changes to provide financial relief to companies as a result of business impacts of COVID-19. The CARES Act contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020. The modifications to Section 163(j) of the 2017 Tax Cuts and Jobs Act increase the allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income. This modification would increase the allowable interest expense deduction of the Company and result in less taxable income. As a result of the CARES Act, it is anticipated that the Company will fully utilize all interest expense for the year ending December 31, 2020. The CARES Act, among other things, permits U.S. net operating loss ("NOL") carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019 and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company is expecting certain subsidiaries to generate a net operating loss in 2020 and expects to carry back the loss to 2015. The Company has recognized a benefit of $3,426 for the anticipated refund. This refund is recorded in income taxes receivable on the Company's consolidated balance sheet as of December 31, 2020. The Company is electing to take the available relief under the CARES Act to defer payment of certain payroll taxes. The Company has deferred approximately $7,618 of payroll taxes as of December 31 2020.
Deferred income taxes result from temporary differences in the financial basis and tax basis of assets and liabilities. The amounts shown on the following table represent the tax effect of temporary differences between the consolidated tax return basis of assets and liabilities and the corresponding basis for financial reporting, as well as tax credit and operating loss carryforwards.
The effects of temporary differences that give rise to the deferred tax assets and liabilities are presented as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Deferred Tax Assets:
|
|
|
|
Operating loss carryforwards (a)
|
$
|
91,671
|
|
|
$
|
111,128
|
|
Postretirement and postemployment employee benefits
|
45,621
|
|
|
45,007
|
|
Tax credit carryforwards
|
6,577
|
|
|
9,718
|
|
Accrued costs
|
4,802
|
|
|
7,433
|
|
Investment impairments and unrealized losses
|
4,602
|
|
|
5,082
|
|
Inventories
|
5,971
|
|
|
4,853
|
|
Environmental costs
|
5,280
|
|
|
3,166
|
|
|
|
|
|
Capital loss
|
24,072
|
|
|
13,503
|
|
Allowance for doubtful accounts and loan losses
|
7,515
|
|
|
8,106
|
|
Lease liabilities
|
7,158
|
|
|
8,860
|
|
Other
|
3,289
|
|
|
1,681
|
|
Gross deferred tax assets
|
206,558
|
|
|
218,537
|
|
|
|
|
|
Deferred Tax Liabilities:
|
|
|
|
Intangible assets
|
(25,313)
|
|
|
(25,512)
|
|
Fixed assets
|
(27,695)
|
|
|
(24,863)
|
|
|
|
|
|
Unrealized gain on investment
|
(37,254)
|
|
|
(18,359)
|
|
Right of use assets
|
(6,844)
|
|
|
(8,578)
|
|
Other
|
(2,087)
|
|
|
(1,199)
|
|
Gross deferred tax liabilities
|
(99,193)
|
|
|
(78,511)
|
|
Valuation allowance (b)
|
(42,981)
|
|
|
(51,616)
|
|
Net deferred tax assets
|
$
|
64,384
|
|
|
$
|
88,410
|
|
|
|
|
|
Classified on the Company's consolidated balance sheets as follows:
|
|
|
|
Deferred tax assets
|
$
|
66,553
|
|
|
$
|
90,907
|
|
Deferred tax liabilities
|
2,169
|
|
|
2,497
|
|
|
$
|
64,384
|
|
|
$
|
88,410
|
|
(a) The ability for certain subsidiaries to utilize net operating losses and other credit carryforwards may be subject to limitation upon changes in control.
(b) Certain subsidiaries of the Company establish valuation allowances when they determine, based on their assessment, that it is more likely than not that certain deferred tax assets will not be fully realized. This assessment is based on, but not limited to, historical operating results, uncertainty in projections of taxable income and other uncertainties that may be specific to a particular business.
At December 31, 2020, the Company's corporate subsidiaries had carryforwards of U.S. federal NOLs of approximately $266,079 that expire in 2022 through 2037. The Company generated federal NOLs of approximately $227 during the year which have an unlimited carryforward period. In addition, there are federal NOLs that can only be utilized by the corporate subsidiaries that generated the prior year losses, commonly called SRLY NOLs, totaling $132,288, which will expire in 2021 through 2037. $113,229 of these SRLY NOL's may be subject to an Internal Revenue Code Section 382 limitation, and as a result, may not be available to reduce taxable income. The Company has a valuation allowance to reserve its deferred tax asset associated with the SRLY NOLs. The Company has a capital loss carryforward in the amount of $98,197 that expires in 2021 through 2025. In 2019, the Company removed the valuation allowance recorded on the capital loss carryforward as the Company has concluded that it was more likely than not that it will be able to realize the capital loss carryforward within the expiration period. U.S. income taxes were not provided on cumulative undistributed foreign earnings as of December 31, 2020 and 2019. Foreign undistributed earnings remain indefinitely reinvested in foreign operations, therefore, no provision for U.S. income taxes was accrued.
The Company's corporate subsidiaries have NOLs in foreign jurisdictions totaling $22,693 for which a valuation allowance to reserve the associated deferred tax asset has been established. There are NOLs in various states in which the subsidiaries operate. The amount totaled $12,911 and expires in 2021 through 2040. A valuation allowance has been established against a significant portion of the deferred tax asset associated with the state NOLs.
The Company's corporate subsidiaries have federal research and development credit carryforwards of $20,648 that expire in 2021 through 2040, and state research and development credit carryforwards of $19,784 for which a significant amount
do not expire. The Company has a valuation allowance to reserve a significant portion of its deferred tax assets associated with the credit carryforwards.
Unrecognized Tax Benefits
U.S. GAAP provides that the tax effects from an uncertain tax position can be recognized in the consolidated financial statements only if the position is more likely than not of being sustained on audit, based on the technical merits of the position. The change in the amount of unrecognized tax benefits for 2020 and 2019 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2018
|
$
|
51,725
|
|
Additions for tax positions related to current year
|
995
|
|
Additions for tax positions related to prior years
|
69
|
|
|
|
|
|
Reductions due to lapsed statutes of limitations and expiration of credits
|
(4,082)
|
|
Balance at December 31, 2019
|
48,707
|
|
Additions for tax positions related to current year
|
266
|
|
Payments
|
(2,640)
|
|
Reductions due to lapsed statutes of limitations and expiration of credits
|
(3,954)
|
|
Balance at December 31, 2020
|
$
|
42,379
|
|
The Company's total gross unrecognized tax benefits were $42,379 and $48,707 at December 31, 2020 and 2019, respectively, of which $38,625, if recognized, would affect the provision for income taxes. In 2020, the Company reversed $3,954 of reserves upon the expiration of the statutes of limitations with applicable taxing authorities and the expiration of time for utilizing certain credits for which a full reserve is maintained. As of December 31, 2020, it is reasonably possible that unrecognized tax benefits may decrease by $322 in the next 12 months due to the expiration of statutes of limitations. The Company recognizes interest and penalties (if applicable) related to uncertain tax positions in its income tax provision in the consolidated statement of operations. For 2020 and 2019, the amount of such interest and penalties recognized was not significant.
The Company is subject to U.S. federal income tax, as well as income taxes in various domestic states and foreign jurisdictions in which the Company operated or formerly operated in. The Company is generally no longer subject to federal, state or local income tax examinations by tax authorities for any year prior to 2016. However, NOLs generated in prior years are subject to examination and potential adjustment by the taxing authorities upon their utilization in subsequent years' tax returns.
The Company is not currently under tax examination in any foreign jurisdictions. The Company has ongoing state audits in various state tax jurisdictions. The Company has not identified any material adjustments with respect to the state audits to date.
18. NET INCOME (LOSS) PER COMMON UNIT
The following data was used in computing net income (loss) per common unit shown in the Company's consolidated statements of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
Net income from continuing operations
|
$
|
83,477
|
|
|
$
|
79,471
|
|
|
|
|
|
Net (income) loss attributable to noncontrolling interests in consolidated entities (continuing operations)
|
(603)
|
|
|
97
|
|
|
|
|
|
Net income from continuing operations attributable to common unitholders
|
82,874
|
|
|
79,568
|
|
|
|
|
|
Net loss from discontinued operations attributable to common unitholders
|
(10,199)
|
|
|
(81,165)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to common unitholders
|
72,675
|
|
|
(1,597)
|
|
|
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
Interest expense from SPLP Preferred Units (a), (b)
|
12,002
|
|
|
—
|
|
|
|
|
|
Net income attributable to common unitholders – assuming dilution
|
$
|
84,677
|
|
|
$
|
(1,597)
|
|
|
|
|
|
Net income (loss) per common unit - basic
|
|
|
|
|
|
|
|
Net income from continuing operations
|
$
|
3.34
|
|
|
$
|
3.19
|
|
|
|
|
|
Net loss from discontinued operations
|
(0.41)
|
|
|
(3.25)
|
|
|
|
|
|
Net income (loss) attributable to common unitholders
|
$
|
2.93
|
|
|
$
|
(0.06)
|
|
|
|
|
|
Net income (loss) per common unit – diluted
|
|
|
|
|
|
|
|
Net income attributable to common unitholders
|
$
|
1.85
|
|
|
$
|
3.19
|
|
|
|
|
|
Net loss from discontinued operations
|
(0.20)
|
|
|
(3.25)
|
|
|
|
|
|
Net income (loss) attributable to common unitholders
|
$
|
1.65
|
|
|
$
|
(0.06)
|
|
|
|
|
|
Denominator for net income (loss) per common unit - basic
|
24,809,751
|
|
|
24,964,643
|
|
|
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested restricted common units
|
16,668
|
|
|
—
|
|
|
|
|
|
SPLP Preferred Units
|
26,564,553
|
|
|
—
|
|
|
|
|
|
Denominator for net income (loss) per common unit - diluted (a), (b)
|
51,390,972
|
|
|
24,964,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Assumes the SPLP Preferred Units were redeemed in common units as described in Note 16 - "Capital and Accumulated Other Comprehensive Loss."
(b) For the year ended December 31, 2019, the diluted per unit calculation does not include the potential impact of 15,086,857 SPLP Preferred Units, since the impact would have been anti-dilutive.
19. FAIR VALUE MEASUREMENTS
Financial assets and liabilities measured at fair value on a recurring basis in the Company's consolidated financial statements as of December 31, 2020 and 2019 are summarized by type of inputs applicable to the fair value measurements as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets:
|
|
|
|
|
|
|
|
Marketable securities (a)
|
$
|
88
|
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
106
|
|
Long-term investments (a)
|
242,863
|
|
|
—
|
|
|
48,434
|
|
|
291,297
|
|
|
|
|
|
|
|
|
|
Precious metal and commodity inventories recorded at fair value
|
27,324
|
|
|
—
|
|
|
—
|
|
|
27,324
|
|
Economic interests in loans
|
—
|
|
|
—
|
|
|
11,599
|
|
|
11,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
|
—
|
|
|
—
|
|
|
2,618
|
|
|
2,618
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
270,275
|
|
|
$
|
18
|
|
|
$
|
62,651
|
|
|
$
|
332,944
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts on precious metal and commodity inventories
|
$
|
—
|
|
|
$
|
169
|
|
|
$
|
—
|
|
|
$
|
169
|
|
Other precious metal liabilities
|
28,315
|
|
|
—
|
|
|
—
|
|
|
28,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
28,315
|
|
|
$
|
169
|
|
|
$
|
—
|
|
|
$
|
28,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets:
|
|
|
|
|
|
|
|
Marketable securities (a)
|
$
|
170
|
|
|
$
|
50
|
|
|
$
|
—
|
|
|
$
|
220
|
|
Long-term investments (a)
|
222,178
|
|
|
—
|
|
|
53,658
|
|
|
275,836
|
|
|
|
|
|
|
|
|
|
Precious metal and commodity inventories recorded at fair value
|
11,377
|
|
|
—
|
|
|
—
|
|
|
11,377
|
|
Economic interests in loans
|
—
|
|
|
—
|
|
|
18,633
|
|
|
18,633
|
|
|
|
|
|
|
|
|
|
Warrants
|
—
|
|
|
—
|
|
|
2,086
|
|
|
2,086
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
233,725
|
|
|
$
|
50
|
|
|
$
|
74,377
|
|
|
$
|
308,152
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts on precious metal and commodity inventories
|
$
|
—
|
|
|
$
|
381
|
|
|
$
|
—
|
|
|
$
|
381
|
|
Other precious metal liabilities
|
11,481
|
|
|
—
|
|
|
—
|
|
|
11,481
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
11,481
|
|
|
$
|
381
|
|
|
$
|
—
|
|
|
$
|
11,862
|
|
(a) For additional detail of the marketable securities and long-term investments see Note 11 - "Investments."
There were no transfers of securities among the various measurement input levels during the years ended December 31, 2020 or 2019.
The fair value of the Company's financial instruments, such as cash and cash equivalents, trade and other receivables and accounts payable, approximates carrying value due to the short-term nature of these assets and liabilities. Carrying cost approximates fair value for long-term debt, which has variable interest rates.
The precious metal and commodity inventories associated with the Company's fair value hedges (see Note 14 - "Financial Instruments") are reported at fair value. Fair values of these inventories are based on quoted market prices on commodity exchanges and are considered Level 1 measurements. The derivative instruments that the Company purchases in connection with its precious metal and commodity inventories, specifically commodity futures and forward contracts, are also valued at fair value. The futures contracts are Level 1 measurements since they are traded on a commodity exchange. The forward contracts are entered into with a counterparty and are considered Level 2 measurements.
The Company measures certain assets, such as goodwill, at fair value on a non-recurring basis, which are evaluated for impairment. As discussed in Note 9 - "Goodwill and Other Intangible Assets, Net" to the Company's consolidated financial statements, the Company recorded goodwill impairment charges of $1,100 and $15,924 in Goodwill impairment charges in the accompanying consolidated statements of operations for the years ended December 31, 2020 and 2019, respectively. The goodwill impairment was determined by measuring and comparing the fair value of the business, using an income and market approach, to its carrying amount. The valuation of the Company's businesses was a nonrecurring fair value measurement and was classified as a Level 3 measurement due to the degree of unobservable inputs in the valuation. Such inputs included estimates of the amount and timing of expected future cash flows and assumptions in determining risk-adjusted discount rates. Changes in these unobservable inputs might have resulted in a higher or lower fair value measurement.
Following is a summary of changes in financial assets measured using Level 3 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in Associated Companies (a)
|
|
|
|
|
|
Marketable Securities and Other (b)
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2018
|
$
|
40,643
|
|
|
|
|
|
|
$
|
21,524
|
|
|
$
|
62,167
|
|
Purchases
|
14,943
|
|
|
|
|
|
|
932
|
|
|
15,875
|
|
Sales and cash collections
|
—
|
|
|
|
|
|
|
(15,173)
|
|
|
(15,173)
|
|
Realized gains on sale
|
—
|
|
|
|
|
|
|
14,853
|
|
|
14,853
|
|
Unrealized gains
|
—
|
|
|
|
|
|
|
1
|
|
|
1
|
|
Unrealized losses
|
(3,346)
|
|
|
|
|
|
|
—
|
|
|
(3,346)
|
|
Balance at December 31, 2019
|
52,240
|
|
|
|
|
|
|
22,137
|
|
|
74,377
|
|
Purchases
|
—
|
|
|
|
|
|
|
340
|
|
|
340
|
|
Sales and cash collections
|
(1,683)
|
|
|
|
|
|
|
(13,126)
|
|
|
(14,809)
|
|
Realized gains on sale
|
460
|
|
|
|
|
|
|
6,189
|
|
|
6,649
|
|
Unrealized gains
|
2,419
|
|
|
|
|
|
|
22
|
|
|
2,441
|
|
Unrealized losses
|
(6,347)
|
|
|
|
|
|
|
—
|
|
|
(6,347)
|
|
Balance at December 31, 2020
|
$
|
47,089
|
|
|
|
|
|
|
$
|
15,562
|
|
|
$
|
62,651
|
|
(a) Unrealized gains and losses are recorded in Loss of associated companies, net of taxes in the Company's consolidated statements of operations.
(b) Realized and unrealized gains and losses are recorded in Realized and unrealized gains on securities, net or Revenue in the Company's consolidated statements of operations.
Long-Term Investments - Valuation Techniques
The Company estimates the value of its investments in STCN preferred stock and the STCN convertible note using a Monte Carlo simulation. Key inputs in these valuations include the trading price and volatility of STCN's common stock, the risk-free rate of return, as well as the dividend rate, conversion price, redemption date of the preferred stock and maturity date of the note.
Marketable Securities and Other - Valuation Techniques
The fair value of the derivatives held by WebBank (see Note 14 - "Financial Instruments") represent the estimated amounts that WebBank would receive or pay to terminate the contracts at the reporting date and is based on discounted cash flows analyses that consider credit, performance and prepayment. Unobservable inputs used in the discounted cash flow analyses are: a constant prepayment rate of 7.46% to 35.45%, a constant default rate of 1.89% to 17.96% and a discount rate of 2.16% to 26.87%.
Assets Measured at Fair Value on a Nonrecurring Basis
The Company's non-financial assets and liabilities measured at fair value on a non-recurring basis include goodwill and other intangible assets, any assets and liabilities acquired in a business combination, or its long-lived assets written down to fair value. To measure fair value for such assets and liabilities, the Company uses techniques including an income approach, a market approach and/or appraisals (Level 3 inputs). The income approach is based on a discounted cash flow analysis and calculates the fair value by estimating the after-tax cash flows attributable to an asset or liability and then discounting the after-tax cash flows to a present value using a risk-adjusted discount rate. Assumptions used in the discounted cash flow analysis ("DCF") require the exercise of significant judgment, including judgment about appropriate discount rates and terminal values, growth rates and the amount and timing of expected future cash flows. The discount rates, which are intended to reflect the risks inherent in future cash flow projections, used in the DCF are based on estimates of the weighted-average cost of capital of a market participant. Such estimates are derived from analysis of peer companies and consider the industry weighted-average return on debt and equity from a market participant perspective. A market approach values a business by considering the prices at which shares of capital stock, or related underlying assets, of reasonably comparable companies are trading in the public market or the transaction price at which similar companies have been acquired. If comparable companies are not available, the market approach is not used.
20. COMMITMENTS AND CONTINGENCIES
Environmental and Litigation Matters
As discussed in more detail below, certain of the Company's subsidiaries have been designated as potentially responsible parties ("PRPs") by federal and state agencies with respect to certain sites with which they may have had direct or indirect involvement and as defendants in certain litigation matters. Most such legal proceedings and environmental investigations involve unspecified amounts of potential damage claims or awards, are in an initial procedural phase, involve significant uncertainty as to the outcome or involve significant factual issues that need to be resolved, such that it is not possible for the Company to estimate a range of possible loss. For matters that have progressed sufficiently through the investigative process such that the Company is able to reasonably estimate a range of possible loss, an estimated range of possible loss is provided, in excess of the accrued liability (if any) for such matters. Any estimated range is or will be based on currently available information and involves elements of judgment and significant uncertainties. Any estimated range of possible loss may not represent the Company's maximum possible loss exposure. The circumstances of such legal proceedings and environmental investigations will change from time to time, and actual results may vary significantly from the current estimate. For current proceedings not specifically reported below, management does not anticipate that the liabilities, if any, arising from such proceedings would have a material effect on the financial position, liquidity or results of operations of the Company.
The environmental claims are in various stages of administrative or judicial proceedings and include demands for recovery of past governmental costs, and for future investigations and remedial actions. In many cases, the dollar amounts of the claims have not been specified and, with respect to a number of the PRP claims, have been asserted against a number of other entities for the same cost recovery or other relief as was asserted against certain of the Company's subsidiaries. The Company accrues costs associated with environmental and litigation matters on an undiscounted basis, when they become probable and reasonably estimable. As of December 31, 2020, on a consolidated basis, the Company has recorded liabilities of $1,066 and
$24,716 in Accrued liabilities and Other non-current liabilities, respectively, on the consolidated balance sheet, which represent the current estimate of environmental remediation liabilities as well as reserves related to the litigation matters discussed below. Expenses relating to these costs, and any recoveries, are included in Selling, general and administrative expenses in the Company's consolidated statements of operations. In addition, the Company has insurance coverage available for several of these matters and believes that excess insurance coverage may be available as well. Estimates of the Company's liability for remediation of a particular site and the method and ultimate cost of remediation require a number of assumptions that are inherently difficult to make, and the ultimate outcome may be materially different from current estimates.
Environmental Matters
Certain subsidiaries of HNH have existing and contingent liabilities relating to environmental matters, including costs of remediation, capital expenditures, and potential fines and penalties relating to possible violations of national and state environmental laws. Those subsidiaries have remediation expenses on an ongoing basis, although such costs are continually being readjusted based upon the emergence of new findings, techniques and alternative methods. HNH recorded liabilities of approximately $24,433 related to estimated environmental investigation and remediation costs as of December 31, 2020.
Included among these liabilities, certain HNH subsidiaries have been identified as PRPs under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") or similar state statutes at sites and are parties to administrative consent orders in connection with certain properties. Those subsidiaries may be subject to joint and several liabilities imposed by CERCLA on PRPs. Due to the technical and regulatory complexity of remedial activities and the difficulties attendant in identifying PRPs and allocating or determining liability among them, the subsidiaries are unable to reasonably estimate the ultimate cost of compliance with such laws at some of the sites at which HNH subsidiaries are PRP's.
Based upon information currently available, the HNH subsidiaries do not expect that their respective environmental costs, including the incurrence of additional fines and penalties, if any, will have a material adverse effect on them or that the resolution of these environmental matters will have a material adverse effect on the financial position, results of operations or cash flows of such subsidiaries or the Company, but there can be no such assurances. The Company anticipates that the subsidiaries will pay any such amounts out of their respective working capital, although there is no assurance that they will have sufficient funds to pay them. In the event that an HNH subsidiary is unable to fund its liabilities, claims could be made against its respective parent companies for payment of such liabilities.
The sites where certain HNH subsidiaries have environmental liabilities include the following:
HNH has been working with the Connecticut Department of Energy and Environmental Protection ("CTDEEP") with respect to its obligations under a 1989 consent order that applies to a former HNH manufacturing facility located in Fairfield, Connecticut. An ecological risk assessment of the wetlands portion was submitted in the second quarter of 2016 to the CTDEEP for their review and approval. Company officials met with CTDEEP representatives during the third quarter of 2020 to further discuss wetlands remediation goals and plans. Additional investigation of the wetlands is expected to start in 2021, pending approval of a mutually acceptable wetlands work plan. An updated work plan to investigate the upland portion of the parcel was prepared by the Company and approved by the CTDEEP in March 2018 and completed during 2019 and 2020. Additional upland investigatory work will be required to fully define the areas requiring remediation and is also dependent upon CTDEEP requirements and approval. Based on currently known information, the Company reasonably estimates that it may incur aggregate losses over a period of multiple years of between $10,500 to $17,500. During the second quarter of 2020, the Company increased its reserve for future remediation costs by $14,000, which is our best estimate within this range of potential losses. Due to the uncertainties, there can be no assurance that the final resolution of this matter will not be material to the financial position, results of operations or cash flows of HNH or the Company.
In 1986, Handy & Harman Electronic Materials Corporation ("HHEM"), a subsidiary of HNH, entered into an administrative consent order ("ACO") with the New Jersey Department of Environmental Protection ("NJDEP") with regard to property in Montvale, New Jersey that it purchased in 1984. The ACO involves investigation and remediation activities to be performed with regard to soil and groundwater contamination. HHEM is actively remediating the property and is continuing to investigate effective methods for achieving compliance with the ACO. Pursuant to a settlement agreement with the former owner/operator of the site, the responsibility for site investigation and remediation costs and other related costs are contractually allocated 75% to the former owner/operator and 25% jointly to HHEM and HNH, all after having the first $1,000 paid by the former owner/operator. Additionally, HHEM had been reimbursed indirectly through insurance coverage for a portion of the costs for which it is responsible. There is no assurance that the former owner/operator or guarantors will continue to timely reimburse HHEM for expenditures and/or will be financially capable of fulfilling their obligations under the settlement agreement and the guaranties. There is no assurance that there will be any additional insurance reimbursement. A reserve of approximately $1,000 has been established for HHEM's expected 25% share of anticipated costs at this site, which is based upon the recent selection of a final remedy, on-going operations and maintenance, additional investigations and monitored natural
attenuation testing over the next 30 years. On December 18, 2019, the State of New Jersey ("State") filed a complaint against HHEM, the Company and other non-affiliated corporations related to former operations at this location. The State is seeking unspecified damages, including reimbursement for all cleanup and removal costs and other damages that the State has incurred, including the lost value of, and reasonable assessment costs for, any natural resource injured as a result of the alleged discharge of hazardous substances and pollutants, as well as attorneys' fees and costs. The Company intends to assert all legal and procedural defenses available. Based upon currently available information, the Company has determined that a range of potential loss cannot be reasonably estimated at this time. There can be no assurance that the resolution of this matter will not be material to the financial position, results of operations or cash flows of HHEM, HNH or the Company.
HNH's subsidiary, SL Industries, Inc. ("SLI"), may incur environmental costs in the future as a result of the past activities of its former subsidiary, SL Surface Technologies, Inc. ("SurfTech"), in Pennsauken, New Jersey ("Pennsauken Site"), in Camden, New Jersey and at its former subsidiary, SGL Printed Circuits in Wayne, New Jersey. At the Pennsauken Site, in 2013, SLI entered into a consent decree with both the U.S. Department of Justice and the U.S. Environmental Protection Agency ("EPA") and has since completed the remediation required by the consent decree and has paid the EPA a fixed sum for its past oversight costs. Separate from the consent decree, in December 2012, the NJDEP made a settlement demand of $1,800 for past and future cleanup and removal costs and natural resource damages ("NRD"). To avoid the time and expense of litigating the matter, SLI offered to pay approximately $300 to fully resolve the claim presented by the State. SLI's settlement offer was rejected. On December 6, 2018, the State filed a complaint against SLI related to its operations at the Pennsauken Site. The State is seeking treble damages and attorneys' fees, NRD for loss of use of groundwater, as well as a request for relief that SLI pay all cleanup and removal costs that the State has incurred and will incur at the Pennsauken Site. The State did not specifically identify its alleged damages in the complaint. SLI intends to assert all legal and procedural defenses available to it. Based upon currently available information, the Company has determined that a range of potential loss can no longer be reasonably estimated at this time. Accordingly, there can be no assurance that the resolution of this matter will not be material to the financial position, results of operations or cash flows of SLI, HNH or the Company.
SLI reported soil contamination and a groundwater contamination in 2003 from the SurfTech site located in Camden, New Jersey. Substantial investigation and remediation work have been completed under the direction of the licensed site remediation professional ("LSRP") for the site. Additional soil excavation and chemical treatment is planned for the second quarter of 2021. Post-remediation groundwater monitoring will be conducted and a full-scale groundwater bioremediation is expected to be implemented following completion of soil excavation. A reserve of $2,600 has been established for anticipated costs at this site, but there can be no assurance that there will not be potential additional costs associated with the site which cannot be reasonably estimated at this time. Accordingly, there can be no assurance that the resolution of this matter will not be material to the financial position, results of operations or cash flows of SLI, HNH or the Company.
SLI is currently participating in environmental assessment and cleanup at a commercial facility located in Wayne, New Jersey. Contaminated soil and groundwater have undergone remediation with the NJDEP and LSRP oversight, but contaminants of concern in groundwater and surface water, which extend off-site, remain above applicable NJDEP remediation standards. A reserve of approximately $1,200 has been established for anticipated costs, but there can be no assurance that there will not be potential additional costs associated with the site, which cannot be reasonably estimated at this time. Accordingly, there can be no assurance that the resolution of this matter will not be material to the financial position, results of operations or cash flows of SLI, HNH or the Company.
Litigation Matters
On December 8, 2017, a stockholder class action, captioned Sciabacucchi v. DeMarco, et al., was filed in the Court of Chancery of the State of Delaware by a purported former stockholder of HNH challenging the Company's acquisition, through a subsidiary, of all of the outstanding shares of common stock of HNH not already owned by the Company or any of its affiliates. The action named as defendants the former members of the HNH board of directors, the Company and SPH GP, and alleged, among other things, that the defendants breached their fiduciary duties to the former public stockholders of HNH in connection with the aforementioned acquisition. The complaint sought, among other relief, unspecified monetary damages, attorneys' fees and costs. On July 9, 2019, the Company entered into a settlement of the case, solely to avoid the substantial burden, expense, inconvenience and distraction of continued litigation and to resolve each of the plaintiff's claims against the defendant parties. In the settlement, the defendants agreed to pay the plaintiff class $30,000, but denied that they engaged in any wrongdoing or committed any violation of law or breach of duty and stated that they believe they acted properly, in good faith, and in a manner consistent with their legal duties. The settlement was approved by the court on December 2, 2019. Our insurance carriers agreed to contribute an aggregate of $17,500 toward the settlement amount. The Company recorded a charge of $12,500 in Selling, general and administrative expenses in the consolidated statement of operations for the twelve months ended December 31, 2019, which consisted of the legal settlement of $30,000, reduced by the $17,500 of insurance recoveries. The settlement was paid on December 17, 2019. The Company made a demand of an aggregate of $10,000 in further contributions from two
insurance carriers, which the carriers declined, and it is pursuing claims in court to endeavor to recover this sum, although there can be no assurance as to the outcome of this litigation.
On April 13, 2018, a purported shareholder of STCN, Donald Reith, filed a verified complaint, Reith v. Lichtenstein, et al., 2018-0277 (Del. Ch.) in the Delaware Court of Chancery. The plaintiff seeks to assert claims against the Company and certain of its affiliates and against the members of STCN's board of directors in connection with the acquisition of $35,000 of STCN's Series C Preferred Stock by an affiliate of the Company and equity grants made to three individual defendants. The complaint includes claims for breach of fiduciary duty as STCN directors against all the individual defendants; claims for aiding and abetting breach of fiduciary duty against the Company; a claim for breach of fiduciary duty as controlling stockholder against the Company; and a derivative claim for unjust enrichment against the Company and the three individuals who received equity grants. The complaint demands damages in an unspecified amount for STCN and its stockholders, together with rescission, disgorgement and other equitable relief. The defendants moved to dismiss the complaint for failure to plead demand futility and failure to state a claim. On June 28, 2019, the Court of Chancery issued an opinion denying in substantial part the motion. The Company will continue to vigorously defend itself against these claims; however, the outcome of this matter is uncertain.
A subsidiary of BNS Holdings Liquidating Trust ("BNS Sub") has been named as a defendant in multiple alleged asbestos-related toxic-tort claims filed over a period beginning in 1994 through December 31, 2020. In many cases these claims involved more than 100 defendants. There remained approximately 35 pending asbestos claims as of December 31, 2020. BNS Sub believes it has significant defenses to any liability for toxic-tort claims on the merits. None of these toxic-tort claims has gone to trial and, therefore, there can be no assurance that these defenses will prevail. BNS Sub has insurance policies covering asbestos-related claims for years beginning 1974 through 1988. BNS Sub annually receives retroactive billings or credits from its insurance carriers for any increase or decrease in claims accruals as claims are filed, settled or dismissed, or as estimates of the ultimate settlement costs for the then-existing claims are revised. As of both December 31, 2020 and 2019, BNS Sub has accrued $1,349 relating to the open and active claims against BNS Sub. This accrual includes the amount of unpaid retroactive billings submitted to the Company by the insurance carriers and also the Company's best estimate of the likely costs for BNS Sub to settle these claims outside the amounts funded by insurance. There can be no assurance that the number of future claims and the related costs of defense, settlements or judgments will be consistent with the experience to-date of existing claims and that BNS Sub will not need to significantly increase its estimated liability for the costs to settle these claims to an amount that could have a material effect on the consolidated financial statements.
OMG was party to litigation with the U.S. Government regarding whether materials purchased by OMG from a foreign supplier are subject to antidumping duty and countervailing duty orders ("ADD/CVD Orders"). The ADD/CVD Orders were issued in 2015 by the U.S. Government, and this matter was subject to ongoing litigation since 2016, at which time OMG paid $949 to the U.S. Government and recorded an additional $4,100 accrual for its then expected resolution of this matter. On August 28, 2020, the U.S. Court of Appeals for the Federal Circuit issued an opinion in favor of OMG on the matter. The U.S. Government did not appeal this decision to the U.S. Supreme Court within the 150 days appeal deadline, which expired on January 25, 2021. As such, OMG is not expected to incur any liability with respect to the ADD/CVD Orders. Therefore, as of December 31, 2020, the $4,100 prior accrual for this matter was reversed and a receivable of $949 was recorded for the expected refund of the amounts previously paid to the U.S. Government. The $5,049 total for both items was recorded as a reduction to cost of goods sold in the consolidated statement of operations for the year ended December 31, 2020.
In the ordinary course of our business, the Company is subject to other periodic lawsuits, investigations, claims and proceedings, including, but not limited to, contractual disputes, employment, environmental, health and safety matters, as well as claims associated with our historical acquisitions and divestitures. There is insurance coverage available for many of the foregoing actions. Although the Company cannot predict with certainty the ultimate resolution of lawsuits, investigations, claims and proceedings asserted against the Company, it does not believe any currently pending legal proceeding to which it is a party will have a material adverse effect on its business, prospects, financial condition, cash flows, results of operations or liquidity.
21. RELATED PARTY TRANSACTIONS
The components of receivables from related parties and payables from related parties for the years ended December 31, 2020 and 2019 are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
Receivable from related parties:
|
|
|
|
Receivable from associated companies - STCN
|
$
|
1,572
|
|
|
$
|
1,806
|
|
Receivable from other related parties
|
501
|
|
415
|
Total
|
$
|
2,073
|
|
|
$
|
2,221
|
|
Payables to related parties:
|
|
|
|
Accrued management fees
|
$
|
2,319
|
|
|
$
|
27
|
|
Payables to other related parties
|
1,761
|
|
|
454
|
Total
|
$
|
4,080
|
|
|
$
|
481
|
|
Management Agreement with SP General Services LLC
SPLP is managed by the Manager, pursuant to the terms of the Management Agreement, which receives a fee at an annual rate of 1.5% of total Partners' capital ("Management Fee"), payable on the first day of each quarter and subject to quarterly adjustment. In addition, SPLP may issue to the Manager partnership profits interests in the form of incentive units, which will be classified as Class C common units of SPLP, upon the attainment of certain specified performance goals by SPLP, which are determined as of the last day of each fiscal year (see Note 16 - "Capital and Accumulated Other Comprehensive Loss" for additional information on the incentive units).
The Management Agreement is automatically renewed each December 31 for successive one-year terms unless otherwise determined at least 60 days prior to each renewal date by a majority of the Company's independent directors. The Management Fee was $6,706 and $7,781 for the years ended December 31, 2020 and 2019, respectively. The Management Fee is included in Selling, general and administrative expenses in the Company's consolidated statements of operations. Unpaid amounts for management fees included in Payables to related parties on the Company's consolidated balance sheets were $2,319 and $27 at December 31, 2020 and 2019, respectively.
SPLP will bear (or reimburse the Manager with respect to) all its reasonable costs and expenses of the managed entities, the Manager, SPH GP or their affiliates, including but not limited to: legal, tax, accounting, auditing, consulting, administrative, compliance, investor relations costs related to being a public entity rendered for SPLP or SPH GP, as well as expenses incurred by the Manager and SPH GP which are reasonably necessary for the performance by the Manager of its duties and functions under the Management Agreement and certain other expenses incurred by managers, officers, employees and agents of the Manager or its affiliates on behalf of SPLP. Reimbursable expenses incurred by the Manager in connection with its provision of services under the Management Agreement were approximately $2,514 and $6,668 during the years ended December 31, 2020 and 2019, respectively. Unpaid amounts for reimbursable expenses were approximately $1,594 and $409 at December 31, 2020 and 2019, respectively, and are included in Payables to other related parties on the Company's consolidated balance sheets.
Corporate Services
The Company's subsidiary, Steel Services Ltd ("Steel Services"), through management services agreements with its subsidiaries and portfolio companies, provides services, which include assignment of C-Level management personnel, legal, tax, accounting, treasury, consulting, auditing, administrative, compliance, environmental health and safety, human resources, marketing, investor relations, operating group management and other similar services. In addition to its servicing agreements with SPLP and its consolidated subsidiaries, which are eliminated in consolidation, Steel Services has management services agreements with other companies considered to be related parties, including J. Howard Inc., Steel Partners, Ltd. and affiliates, and STCN. In total, Steel Services currently charges approximately $4,474 annually to these companies. All amounts billed under these service agreements are classified as a reduction of Selling, general and administrative expenses. The receivable from STCN of $1,572 as of December 31, 2020 includes $1,230 for amounts receivable for the management services agreement and a $342 receivable of interest for the STCN New Notes.
Mutual Securities, Inc.
Pursuant to the Management Agreement, the Manager is responsible for selecting executing brokers. Securities transactions for SPLP are allocated to brokers on the basis of reliability and best price and execution. The Manager has selected Mutual Securities, Inc. as an introducing broker and may direct a substantial portion of the managed entities' trades to such firm, among others. An officer of the Manager and SPH GP is affiliated with Mutual Securities, Inc. The commissions paid by SPLP to Mutual Securities, Inc. were not significant in any period.
Other
At December 31, 2020 and 2019, several related parties and consolidated subsidiaries had deposits totaling $1,164 and $1,156, respectively, at WebBank. Approximately $88 and $100 of these deposits, including interest which was not significant, have been eliminated in consolidation as of December 31, 2020 and 2019, respectively.
22. SEGMENT INFORMATION
SPLP operates through the following segments: Diversified Industrial, Energy and Financial Services which are managed separately and offer different products and services. The Diversified Industrial segment is comprised of manufacturers of engineered niche industrial products, including joining materials, tubing, building materials, performance materials, electrical products, cutting replacement products and services, and metallized films and packaging businesses. The Energy segment provides drilling and production services to the oil and gas industry and owns a youth sports business. The Financial Services segment consists primarily of the operations of WebBank, a Utah chartered industrial bank, which engages in a full range of banking activities.
Corporate and Other consists of several consolidated subsidiaries, including Steel Services, equity method and other investments, and cash and cash equivalents. Its income or loss includes certain unallocated general corporate expenses. Steel Services has management services agreements with our consolidated subsidiaries and other related companies as further discussed in Note 21 - "Related Party Transactions."
Steel Services charged the Diversified Industrial, Energy and Financial Services segments $28,285, $5,263 and $1,677, respectively, for the year ended December 31, 2020. For the year ended December 31, 2019, Steel Services charged the Diversified Industrial, Energy and Financial Services segments $25,181, $6,962 and $3,712, respectively, for these services. These service fees are reflected as expenses in the segment income (loss) below, but are eliminated in consolidation.
Segment information is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
2019
|
|
|
Revenue:
|
|
|
|
|
|
Diversified Industrial
|
$
|
1,058,745
|
|
|
$
|
1,119,642
|
|
|
|
Energy
|
107,831
|
|
|
163,972
|
|
|
|
Financial Services
|
144,060
|
|
|
171,434
|
|
|
|
Total
|
$
|
1,310,636
|
|
|
$
|
1,455,048
|
|
|
|
Income (loss) before interest expense and income taxes:
|
|
|
|
|
|
Diversified Industrial
|
$
|
70,849
|
|
|
$
|
41,744
|
|
|
|
Energy
|
(1,887)
|
|
|
(3,846)
|
|
|
|
Financial Services
|
59,799
|
|
|
69,385
|
|
|
|
Corporate and Other
|
22,366
|
|
|
25,586
|
|
|
|
Income before interest expense and income taxes
|
151,127
|
|
|
132,869
|
|
|
|
Interest expense
|
29,514
|
|
|
38,835
|
|
|
|
Income tax provision
|
38,136
|
|
|
14,563
|
|
|
|
Net income from continuing operations
|
$
|
83,477
|
|
|
$
|
79,471
|
|
|
|
Loss of associated companies, net of taxes:
|
|
|
|
|
|
Corporate and Other
|
$
|
3,786
|
|
|
$
|
8,043
|
|
|
|
Total
|
$
|
3,786
|
|
|
$
|
8,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
|
Capital
Expenditures
|
|
Depreciation and
Amortization
|
Diversified industrial
|
$
|
19,809
|
|
|
$
|
49,451
|
|
Energy
|
3,083
|
|
|
15,006
|
|
Financial services
|
313
|
|
|
717
|
|
Corporate and other
|
21
|
|
|
159
|
|
Total
|
$
|
23,226
|
|
|
$
|
65,333
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
|
Capital
Expenditures
|
|
Depreciation and
Amortization
|
Diversified industrial
|
$
|
32,957
|
|
|
$
|
48,055
|
|
Energy
|
5,999
|
|
|
17,548
|
|
Financial services
|
710
|
|
|
423
|
|
Corporate and other
|
150
|
|
|
154
|
|
Total
|
$
|
39,816
|
|
|
$
|
66,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
Total Assets:
|
|
|
|
|
Diversified industrial
|
|
$
|
777,495
|
|
|
$
|
862,988
|
|
Energy
|
|
168,696
|
|
|
148,791
|
|
Financial services
|
|
2,723,897
|
|
|
1,004,152
|
|
|
|
|
|
|
Corporate and other
|
|
264,290
|
|
|
257,561
|
|
Segment total
|
|
3,934,378
|
|
|
2,273,492
|
|
Discontinued operations
|
|
—
|
|
|
58,279
|
|
Total
|
|
$
|
3,934,378
|
|
|
$
|
2,331,771
|
|
The following table presents geographic revenue and long-lived asset information as of and for the years ended December 31, 2020 and 2019. Foreign revenue is based on the country in which the legal subsidiary generating the revenue is domiciled. Long-lived assets in 2020 and 2019 consist of property, plant and equipment, non-current operating lease right-of-use assets, plus approximately $4,843 and $5,378, respectively, of land and buildings from previously operating businesses and other non-operating assets. Such assets are carried at the lower of cost or fair value less cost to sell and are included in Other non-current assets on the Company's consolidated balance sheets as of December 31, 2020 and 2019. Neither revenue nor long-lived assets from any single foreign country were material to the consolidated financial statements of the Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
Revenue
|
|
Long-lived Assets
|
|
Revenue
|
|
Long-lived Assets
|
|
|
|
|
Geographic information:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
1,229,406
|
|
|
$
|
235,166
|
|
|
$
|
1,373,505
|
|
|
$
|
260,456
|
|
|
|
|
|
Foreign
|
|
81,230
|
|
|
28,384
|
|
|
81,543
|
|
|
29,379
|
|
|
|
|
|
Total
|
|
$
|
1,310,636
|
|
|
$
|
263,550
|
|
|
$
|
1,455,048
|
|
|
$
|
289,835
|
|
|
|
|
|
23. REGULATORY MATTERS
WebBank is subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain actions by regulators that, if undertaken, could have a direct material effect on WebBank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, WebBank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. WebBank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
As a result of Basel III becoming fully implemented as of January 1, 2019, WebBank's minimum requirements increased for both the quantity and quality of capital held by WebBank. The rules include a new common equity Tier 1 capital to risk-weighted assets ratio ("CET1 Ratio") of 4.5% and a capital conservation buffer of 2.5% of risk-weighted assets, which as
fully phased-in, effectively results in a minimum CET1 Ratio of 7.0%. Basel III raises the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0% (which, with the capital conservation buffer, effectively results in a minimum Tier 1 capital ratio of 8.5% as fully phased-in), and effectively results in a minimum total capital to risk-weighted assets ratio of 10.5% (with the capital conservation buffer fully phased-in), and requires a minimum leverage ratio of 4.0%. Basel III also made changes to risk weights for certain assets and off-balance-sheet exposures. WebBank expects that its capital ratios under Basel III will continue to exceed the well capitalized minimum capital requirements, and such amounts are disclosed in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Capital Required
|
|
Actual
|
|
For Capital Adequacy Purposes
|
|
Minimum Capital Adequacy With Capital Buffer
|
|
To Be Well Capitalized Under Prompt Corrective Provisions
|
As of December 31, 2020
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
Total Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to risk-weighted assets)
|
$
|
212,002
|
|
|
34.30
|
%
|
|
$
|
49,512
|
|
|
8.00
|
%
|
|
$
|
64,985
|
|
|
10.50
|
%
|
|
$
|
61,891
|
|
|
10.00
|
%
|
Tier 1 Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to risk-weighted assets)
|
$
|
204,028
|
|
|
33.00
|
%
|
|
$
|
37,134
|
|
|
6.00
|
%
|
|
$
|
52,607
|
|
|
8.50
|
%
|
|
$
|
49,512
|
|
|
8.00
|
%
|
Common Equity Tier 1 Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to risk-weighted assets)
|
$
|
204,028
|
|
|
33.00
|
%
|
|
$
|
27,851
|
|
|
4.50
|
%
|
|
$
|
43,323
|
|
|
7.00
|
%
|
|
$
|
40,229
|
|
|
6.50
|
%
|
Tier 1 Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to average assets)
|
$
|
204,028
|
|
|
32.40
|
%
|
|
$
|
25,219
|
|
|
4.00
|
%
|
|
n/a
|
|
n/a
|
|
$
|
31,523
|
|
|
5.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to risk-weighted assets)
|
$
|
178,930
|
|
|
19.50
|
%
|
|
$
|
73,525
|
|
|
8.00
|
%
|
|
$
|
96,502
|
|
|
10.50
|
%
|
|
$
|
91,907
|
|
|
10.00
|
%
|
Tier 1 Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to risk-weighted assets)
|
$
|
167,131
|
|
|
18.20
|
%
|
|
$
|
55,144
|
|
|
6.00
|
%
|
|
$
|
78,121
|
|
|
8.50
|
%
|
|
$
|
73,525
|
|
|
8.00
|
%
|
Common Equity Tier 1 Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to risk-weighted assets)
|
$
|
167,131
|
|
|
18.20
|
%
|
|
$
|
41,358
|
|
|
4.50
|
%
|
|
$
|
64,335
|
|
|
7.00
|
%
|
|
$
|
59,739
|
|
|
6.50
|
%
|
Tier 1 Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to average assets)
|
$
|
167,131
|
|
|
18.30
|
%
|
|
$
|
36,489
|
|
|
4.00
|
%
|
|
n/a
|
|
n/a
|
|
$
|
45,611
|
|
|
5.00
|
%
|
The Federal Reserve, Office of the Comptroller of Currency and Federal Deposit Insurance Corporation issued an interim final rule that excludes loans pledged as collateral to the Federal Reserve's PPP Lending Facility from supplementary leverage ratio exposure and average total consolidated assets. Additionally, PPP loans will receive a zero percent risk weight under the risk-based capital rules of the federal banking agencies.
24. SUPPLEMENTAL CASH FLOW INFORMATION
A summary of supplemental cash flow information for the years ended December 31, 2020 and 2019 is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
2019
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
Interest
|
$
|
34,028
|
|
|
$
|
49,089
|
|
|
|
Taxes
|
$
|
36,843
|
|
|
$
|
8,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25. RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS
As described in Note 1 - "Nature of the Business and Basis of Presentation," we have reported API as discontinued operations for all periods presented in our consolidated financial statements. Furthermore, as described in Note 2 - "Summary of Significant Accounting Policies," in connection with the preparation of the consolidated financial statements for the year ended December 31, 2020, the Company identified errors in its previously filed annual consolidated financial statements and unaudited quarterly consolidated financial statements. The prior period errors, some of which originated prior to 2019, primarily relate to the Electrical Products Misstatements, and the division's accounting primarily related to inventories, revenue recognition and trade receivables, and accounts payable.
The impact of correcting these errors would be material in the aggregate if corrected solely in the consolidated financial statements as of and for the year ended December 31, 2020. As a result, the Company has corrected for these errors by restating its previously filed 2019 annual consolidated financial statements, including the impact to beginning Partners' capital, in
connection with the filing of this 2020 Annual Report on Form 10-K. The 2019 restated annual consolidated financial statements also include corrections of other immaterial errors, including two errors, discussed below, that had been previously disclosed and adjusted for as out of period corrections in the periods identified. Those two previously disclosed errors include an error in the Energy segment that was corrected during the second quarter of 2020 ("Energy Misstatement") and errors related to the subsequent income tax impacts of the sale of Arlon, LLC ("Arlon") in 2015 that were corrected during the second and third quarters of 2019 ("Arlon Misstatements"). These prior errors have been corrected in these financial statements to record the impacts in the periods to which the errors relate.
Previously Reported Energy Misstatement
During the second quarter of 2020, the Company determined that the trade receivables balance within the youth sports business in its Energy segment was overstated. The overstatement related primarily to trade receivables recorded prior to 2018, which have been determined to be uncollectible. To correct the overstatement in the appropriate periods, the Company recorded adjustments to reduce the opening balance of Partners' capital as of December 31, 2018 by $3,100 and to increase Selling, general and administrative expenses by $300 in the year ended December 31, 2019.
Previously Reported Arlon Misstatements
During the second quarter of 2019, the Company became aware of an error related to its January 2015 sale of Arlon, a discontinued operation, whereby the tax-basis of Arlon at the time of sale was incorrectly calculated. The error was discovered in connection with an Internal Revenue Service ("IRS") examination of the Company's 2015 income tax filing. To correct the error in the appropriate period the Company recorded adjustments to increase the opening balance of Partners' capital as of December 31, 2018 by $1,211. The adjustment included the IRS' final assessment for this matter, as well as associated state taxes and interest.
Impact of Restatement
The following errors in the Company's 2019 annual consolidated financial statements were identified and corrected as a result of the Electrical Products Misstatements, as well as the two errors discussed above and other immaterial errors:
a.Cash and cash equivalents – As a result of the correction of a prior period balance sheet presentation error, apart from the Electrical Products Misstatements, Cash and cash equivalents decreased by $1,519 as of December 31, 2019. Correction of this presentation error increased Loans receivable, including loans held for sale by $1,519 as of December 31, 2019.
b.Trade and other receivables – net of allowance for doubtful accounts – Primarily as a result of correction of the Energy Misstatement, and to a lesser extent errors from the Electrical Product Misstatements, Trade and other receivables – net of allowance for doubtful accounts decreased by $5,216 as of December 31, 2019.
c.Loans receivable, including loans held for sale – Loans receivable, including loans held for sale increased by $1,519 as of December 31, 2019, due to the balance sheet presentation correction discussed above for Cash and cash equivalents.
d.Inventories, net – Primarily as a result of correction of the Electrical Products Misstatements resulting from improper valuation of inventories, inadequate inventory cutoff procedures and physical inventory variances not recorded in the appropriate period, Inventories, net decreased by $3,188 as of December 31, 2019.
e.Prepaid expenses and other current assets – As a result of the correction of a prior period balance sheet understatement error apart from the Electrical Products Misstatements, Prepaid expenses and other current assets increased by $8,070 as of December 31, 2019 and also increased Other current liabilities by $8,070 as of December 31, 2019. The adjustment is to present the gross amount of tax due for certain loan transactions with corresponding amounts due as these are contractual liabilities of the Company's marketing partners.
f.Deferred tax assets – Deferred tax assets increased by $2,262 as of December 31, 2019 to reflect the tax impacts of the error corrections.
g.Other non-current assets – Separate from the Electrical Products Misstatements, the Company corrected a prior period balance sheet presentation classification error related to presentation of debt issuance costs, which decreased Other non-
current assets by $1,543 as of December 31, 2019. Correction of this presentation error also decreased Current portion of preferred unit liability by $268 and decreased Preferred unit liability by $1,275 as of December 31, 2019.
h.Property, plant and equipment, net – As a result of the correction of errors in the Electrical Products Misstatements, Property, plant and equipment, net decreased by $92 as of December 31, 2019.
i.Assets of discontinued operations – The Company corrected a prior period error apart from the Electrical Products Misstatements, which decreased Assets of discontinued operations by $876 as of December 31, 2019. The error is due to the recognition of an asset impairment charge not previously recorded.
j.Accounts payable – The Company corrected certain errors for the Electrical Products Misstatements, which increased Accounts payable by $2,348 as of December 31, 2019. The errors relate to irregularities in recognition of certain prior period expenses that were inappropriately not recorded in Accounts payable.
k.Accrued liabilities – As a result of the correction of errors apart from the Electrical Products Misstatements, Accrued liabilities decreased by $11,194 as of December 31, 2019. The correction is primarily due to a balance sheet presentation error of $10,501 in which the Company reclassified certain Non-current liabilities from Accrued liabilities to Other non-current liabilities as of December 31, 2019.
l.Current portion of preferred unit liability – As a result of the correction of the balance sheet presentation error noted above for Other non-current assets, the Current portion of preferred unit liability decreased by $268 as of December 31, 2019.
m.Other current liabilities – The Company corrected certain errors separate from the Electrical Products Misstatements, which increased Other current liabilities by $9,091 as of December 31, 2019. This correction is primarily do the balance sheet presentation error discussed above in Prepaid expenses and other current assets.
n.Preferred unit liability – As a result of the correction of the balance sheet presentation error noted above for Other non-current assets, the Preferred unit liability decreased by $1,275 as of December 31, 2019.
o.Other non-current liabilities – The Company corrected the classification of certain environmental liabilities from Accrued liabilities to Other non-current liabilities as of December 31, 2019 resulting in an increase in Other non-current liabilities of $10,501, with a corresponding decrease in Accrued Liabilities.
p.Revenue – The Company corrected certain errors in the application of its revenue recognition policy under U.S. GAAP, which decreased total Revenue by $334 for the year ended December 31, 2019. These adjustments are primarily for correction of errors separate from the Electrical Products Misstatements.
q.Cost of goods sold – Primarily as a result of the correction of the Electrical Products Misstatements, Cost of goods sold increased by $3,781 for the year ended December 31, 2019. These Electric Products Misstatements were due primarily to irregularities in revenue recognition journal entries, irregularities relating to Accounts payable noted above and improper valuation of inventories noted above.
r.Selling, general and administrative expenses – Primarily as a result of error corrections separate from the Electrical Products Misstatements, Selling, general and administrative expenses increased by $501 for the year ended December 31, 2019.
s.Interest expense – As a result of the net impact of the error corrections, Interest expense for the Company's Credit Agreement increased by $147 for the year ended December 31, 2019 due to the impact of covenant calculations.
t.Income tax provision – As a result of the net impact of the error corrections, Income tax provision increased by $232 for the year ended December 31, 2019.
u.Loss from discontinued operations, net of taxes – The Company corrected errors apart from the Electrical Products Misstatements, which increased Loss from discontinued operations, net of taxes by $552 for the year ended December 31, 2019 due primarily to recognition of an asset impairment charge.
The following tables present the impacts of reporting API as discontinued operations and of the revisions of the previously filed annual consolidated financial statements to correct for prior period errors, including the impact to Partners' capital as of January 1, 2019 to correct for that portion of the errors which originated in years prior to 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
As Previously Reported
|
|
Reclassification for Discontinued Operations
|
|
Adjustments for Error Corrections
|
|
|
|
|
|
|
|
Consolidated Balance Sheet
|
|
|
|
As Corrected
|
ASSETS
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
148,348
|
|
|
$
|
(8,881)
|
|
|
$
|
(1,519)
|
|
|
$
|
137,948
|
|
|
|
|
|
|
|
|
|
Marketable securities
|
220
|
|
|
—
|
|
|
—
|
|
|
220
|
|
Trade and other receivables - net of allowance for doubtful accounts
|
188,410
|
|
|
(13,367)
|
|
|
(5,216)
|
|
|
169,827
|
|
Receivables from related parties
|
2,221
|
|
|
—
|
|
|
—
|
|
|
2,221
|
|
Loans receivable, including loans held for sale
|
546,908
|
|
|
—
|
|
|
1,519
|
|
|
548,427
|
|
Inventories, net
|
167,833
|
|
|
(16,192)
|
|
|
(3,188)
|
|
|
148,453
|
|
Prepaid expenses and other current assets
|
36,261
|
|
|
(2,572)
|
|
|
8,070
|
|
|
41,759
|
|
Assets of discontinued operations
|
—
|
|
|
41,012
|
|
|
—
|
|
|
41,012
|
|
Total current assets
|
1,090,201
|
|
|
—
|
|
|
(334)
|
|
|
1,089,867
|
|
Long-term loans receivable, net
|
196,145
|
|
|
—
|
|
|
—
|
|
|
196,145
|
|
Goodwill
|
149,626
|
|
|
—
|
|
|
—
|
|
|
149,626
|
|
Other intangible assets, net
|
158,593
|
|
|
—
|
|
|
—
|
|
|
158,593
|
|
Deferred tax assets
|
88,645
|
|
|
—
|
|
|
2,262
|
|
|
90,907
|
|
Other non-current assets
|
70,666
|
|
|
(50)
|
|
|
(1,543)
|
|
|
69,073
|
|
Property, plant and equipment, net
|
262,277
|
|
|
(12,052)
|
|
|
(92)
|
|
|
250,133
|
|
Operating lease right-of-use assets
|
40,365
|
|
|
(6,041)
|
|
|
—
|
|
|
34,324
|
|
Long-term investments
|
275,836
|
|
|
—
|
|
|
—
|
|
|
275,836
|
|
Assets of discontinued operations
|
—
|
|
|
18,143
|
|
|
(876)
|
|
|
17,267
|
|
Total Assets
|
$
|
2,332,354
|
|
|
$
|
—
|
|
|
$
|
(583)
|
|
|
$
|
2,331,771
|
|
LIABILITIES AND CAPITAL
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
99,844
|
|
|
$
|
(14,027)
|
|
|
$
|
2,348
|
|
|
$
|
88,165
|
|
Accrued liabilities
|
119,642
|
|
|
(4,701)
|
|
|
(11,194)
|
|
|
103,747
|
|
|
|
|
|
|
|
|
|
Deposits
|
615,495
|
|
|
—
|
|
|
—
|
|
|
615,495
|
|
Payables to related parties
|
481
|
|
|
—
|
|
|
—
|
|
|
481
|
|
Short-term debt
|
3,197
|
|
|
(1,397)
|
|
|
—
|
|
|
1,800
|
|
Current portion of long-term debt
|
14,208
|
|
|
—
|
|
|
—
|
|
|
14,208
|
|
Current portion of preferred unit liability
|
39,782
|
|
|
—
|
|
|
(268)
|
|
|
39,514
|
|
Other current liabilities
|
43,172
|
|
|
(1,131)
|
|
|
9,091
|
|
|
51,132
|
|
Liabilities of discontinued operations
|
—
|
|
|
21,256
|
|
|
—
|
|
|
21,256
|
|
Total current liabilities
|
935,821
|
|
|
—
|
|
|
(23)
|
|
|
935,798
|
|
Long-term deposits
|
139,222
|
|
|
—
|
|
|
—
|
|
|
139,222
|
|
Long-term debt
|
391,136
|
|
|
(69,055)
|
|
|
—
|
|
|
322,081
|
|
|
|
|
|
|
|
|
|
Preferred unit liability
|
144,247
|
|
|
—
|
|
|
(1,275)
|
|
|
142,972
|
|
Accrued pension liabilities
|
196,077
|
|
|
(12,849)
|
|
|
—
|
|
|
183,228
|
|
Deferred tax liabilities
|
3,614
|
|
|
(1,117)
|
|
|
—
|
|
|
2,497
|
|
Long-term operating lease liabilities
|
31,262
|
|
|
(4,804)
|
|
|
—
|
|
|
26,458
|
|
Other non-current liabilities
|
14,556
|
|
|
—
|
|
|
10,501
|
|
|
25,057
|
|
Liabilities of discontinued operations
|
—
|
|
|
87,825
|
|
|
—
|
|
|
87,825
|
|
Total Liabilities
|
1,855,935
|
|
|
—
|
|
|
9,203
|
|
|
1,865,138
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
Capital:
|
|
|
|
|
|
|
|
Partners' capital
|
664,035
|
|
|
—
|
|
|
(9,786)
|
|
|
654,249
|
|
Accumulated other comprehensive loss
|
(191,422)
|
|
|
—
|
|
|
—
|
|
|
(191,422)
|
|
Total Partners' Capital
|
472,613
|
|
|
—
|
|
|
(9,786)
|
|
|
462,827
|
|
Noncontrolling interests in consolidated entities
|
3,806
|
|
|
—
|
|
|
—
|
|
|
3,806
|
|
Total Capital
|
476,419
|
|
|
—
|
|
|
(9,786)
|
|
|
466,633
|
|
Total Liabilities and Capital
|
$
|
2,332,354
|
|
|
$
|
—
|
|
|
$
|
(583)
|
|
|
$
|
2,331,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
|
|
|
As Previously Reported
|
|
Reclassification for Discontinued Operations
|
|
Adjustments for Error Corrections
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Operations
|
|
|
|
As Corrected
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
Diversified Industrial net sales
|
$
|
1,226,365
|
|
|
$
|
(106,389)
|
|
|
$
|
(334)
|
|
|
$
|
1,119,642
|
|
|
|
Energy net revenue
|
163,972
|
|
|
—
|
|
|
—
|
|
|
163,972
|
|
|
|
Financial Services revenue
|
171,434
|
|
|
—
|
|
|
—
|
|
|
171,434
|
|
|
|
Total revenue
|
1,561,771
|
|
|
(106,389)
|
|
|
(334)
|
|
|
1,455,048
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
1,052,241
|
|
|
(103,952)
|
|
|
3,781
|
|
|
952,071
|
|
|
|
Selling, general and administrative expenses
|
356,803
|
|
|
(22,736)
|
|
|
501
|
|
|
334,566
|
|
|
|
Goodwill impairment charges
|
41,853
|
|
|
(25,929)
|
|
|
—
|
|
|
15,924
|
|
|
|
Asset impairment charges
|
30,506
|
|
|
(29,657)
|
|
|
—
|
|
|
849
|
|
|
|
Finance interest expense
|
16,279
|
|
|
—
|
|
|
—
|
|
|
16,279
|
|
|
|
Provision for loan losses
|
43,373
|
|
|
—
|
|
|
—
|
|
|
43,373
|
|
|
|
Interest expense
|
41,409
|
|
|
(2,721)
|
|
|
147
|
|
|
38,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized and unrealized gains on securities, net
|
(47,315)
|
|
|
—
|
|
|
—
|
|
|
(47,315)
|
|
|
|
Other income, net
|
(1,139)
|
|
|
(472)
|
|
|
—
|
|
|
(1,611)
|
|
|
|
Total costs and expenses
|
1,534,010
|
|
|
(185,467)
|
|
|
4,429
|
|
|
1,352,971
|
|
|
|
Income (loss) before income taxes and equity method investments
|
27,761
|
|
|
79,078
|
|
|
(4,763)
|
|
|
102,077
|
|
|
|
Income tax provision (benefit)
|
15,865
|
|
|
(1,534)
|
|
|
232
|
|
|
14,563
|
|
|
|
Loss of associated companies, net of taxes
|
8,043
|
|
|
—
|
|
|
—
|
|
|
8,043
|
|
|
|
Net income from continuing operations
|
3,853
|
|
|
80,612
|
|
|
(4,995)
|
|
|
79,471
|
|
|
|
Discontinued operations (see Note 6)
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of taxes
|
—
|
|
|
(80,612)
|
|
|
(552)
|
|
|
(81,165)
|
|
|
|
Net loss on deconsolidation of discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
Loss from discontinued operations, net of taxes
|
—
|
|
|
(80,612)
|
|
|
(552)
|
|
|
(81,165)
|
|
|
|
Net income (loss)
|
3,853
|
|
|
—
|
|
|
(5,547)
|
|
|
(1,694)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to noncontrolling interests in consolidated entities (continuing operations)
|
97
|
|
|
—
|
|
|
—
|
|
|
97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common unitholders
|
$
|
3,950
|
|
|
$
|
—
|
|
|
$
|
(5,547)
|
|
|
$
|
(1,597)
|
|
|
|
Net income (loss) per common unit - basic and diluted
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
$
|
0.16
|
|
|
$
|
3.23
|
|
|
$
|
(0.20)
|
|
|
$
|
3.19
|
|
|
|
Net loss from discontinued operations
|
—
|
|
|
(3.23)
|
|
|
(0.02)
|
|
|
(3.25)
|
|
|
|
Net income (loss) attributable to common unitholders
|
$
|
0.16
|
|
|
$
|
—
|
|
|
$
|
(0.22)
|
|
|
$
|
(0.06)
|
|
|
|
Net income (loss) per common unit - diluted
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
$
|
0.16
|
|
|
$
|
3.23
|
|
|
$
|
(0.20)
|
|
|
$
|
3.19
|
|
|
|
Net loss from discontinued operations
|
—
|
|
|
(3.23)
|
|
|
(0.02)
|
|
|
(3.25)
|
|
|
|
Net income (loss) attributable to common unitholders
|
$
|
0.16
|
|
|
$
|
—
|
|
|
$
|
(0.22)
|
|
|
$
|
(0.06)
|
|
|
|
Weighted-average number of common units outstanding - basic
|
24,964,643
|
|
|
24,964,643
|
|
|
24,964,643
|
|
|
24,964,643
|
|
|
|
Weighted-average number of common units outstanding - diluted
|
24,965,209
|
|
|
24,965,209
|
|
|
24,964,643
|
|
|
24,964,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
|
As Previously Reported
|
|
Reclassification for Discontinued Operations
|
|
Adjustments for Error Corrections
|
|
|
|
|
|
|
|
Consolidated Statement of Comprehensive Income (Loss)
|
|
|
|
As Corrected
|
Net income (loss)
|
$
|
3,853
|
|
|
$
|
—
|
|
|
$
|
(5,547)
|
|
|
$
|
(1,694)
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross unrealized gains on derivative financial instruments
|
263
|
|
|
—
|
|
|
—
|
|
|
263
|
|
Currency translation adjustments
|
(1,690)
|
|
|
—
|
|
|
—
|
|
|
(1,690)
|
|
Changes in pension liabilities and other post-retirement benefit obligations
|
(12,755)
|
|
|
—
|
|
|
(781)
|
|
|
(13,536)
|
|
Other comprehensive loss
|
(14,182)
|
|
|
—
|
|
|
(781)
|
|
|
(14,963)
|
|
Comprehensive loss
|
(10,329)
|
|
|
—
|
|
|
(6,328)
|
|
|
(16,657)
|
|
Comprehensive loss attributable to noncontrolling interests
|
97
|
|
|
—
|
|
|
—
|
|
|
97
|
|
Comprehensive loss attributable to common unitholders
|
$
|
(10,232)
|
|
|
$
|
—
|
|
|
$
|
(6,328)
|
|
|
$
|
(16,560)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Previously Reported
|
|
Reclassification for Discontinued Operations
|
|
Adjustments for Error Corrections
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Changes in Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Corrected
|
Balance at December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
492,508
|
|
|
$
|
—
|
|
|
$
|
(3,458)
|
|
|
$
|
489,050
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,853
|
|
|
—
|
|
|
(5,547)
|
|
|
(1,694)
|
|
Unrealized gains on derivative financial instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
263
|
|
|
—
|
|
|
—
|
|
|
263
|
|
Currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,690)
|
|
|
—
|
|
|
—
|
|
|
(1,690)
|
|
Changes in pension liabilities and post-retirement benefit obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,755)
|
|
|
—
|
|
|
(781)
|
|
|
(13,536)
|
|
Equity compensation - restricted units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
961
|
|
|
—
|
|
|
—
|
|
|
961
|
|
Purchases of SPLP common units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,721)
|
|
|
—
|
|
|
—
|
|
|
(6,721)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
476,419
|
|
|
$
|
—
|
|
|
$
|
(9,786)
|
|
|
$
|
466,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
|
|
|
As Previously Reported
|
|
Reclassification for Discontinued Operations
|
|
Adjustments for Error Corrections
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Cash Flows
|
|
|
|
As Corrected
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
3,853
|
|
|
$
|
—
|
|
|
$
|
(5,547)
|
|
|
$
|
(1,694)
|
|
|
|
Loss from discontinued operations
|
—
|
|
|
(80,612)
|
|
|
(552)
|
|
|
(81,165)
|
|
|
|
Net income from continuing operations
|
3,853
|
|
|
80,612
|
|
|
(4,995)
|
|
|
79,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
43,373
|
|
|
—
|
|
|
—
|
|
|
43,373
|
|
|
|
Loss of associated companies, net of taxes
|
8,043
|
|
|
—
|
|
|
—
|
|
|
8,043
|
|
|
|
Realized and unrealized gains on securities, net
|
(47,315)
|
|
|
—
|
|
|
—
|
|
|
(47,315)
|
|
|
|
Derivative gains on economic interests in loans
|
(14,801)
|
|
|
57
|
|
|
—
|
|
|
(14,744)
|
|
|
|
Deferred income taxes
|
13,038
|
|
|
(1,057)
|
|
|
(863)
|
|
|
11,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
72,266
|
|
|
(6,178)
|
|
|
92
|
|
|
66,180
|
|
|
|
Non-cash lease expense
|
11,177
|
|
|
—
|
|
|
—
|
|
|
11,177
|
|
|
|
Equity-based compensation
|
779
|
|
|
—
|
|
|
—
|
|
|
779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill impairment charges
|
41,853
|
|
|
(25,929)
|
|
|
—
|
|
|
15,924
|
|
|
|
Asset impairment charges
|
30,506
|
|
|
(29,657)
|
|
|
—
|
|
|
849
|
|
|
|
Other
|
2,593
|
|
|
(1,127)
|
|
|
—
|
|
|
1,465
|
|
|
|
Net change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Trade and other receivables
|
20,694
|
|
|
(10,472)
|
|
|
699
|
|
|
10,921
|
|
|
|
Inventories
|
(9,491)
|
|
|
(4,262)
|
|
|
1,273
|
|
|
(12,480)
|
|
|
|
Prepaid expenses and other assets
|
2,751
|
|
|
559
|
|
|
(6,527)
|
|
|
(3,217)
|
|
|
|
Accounts payable, accrued and other liabilities
|
(30,706)
|
|
|
5,685
|
|
|
10,321
|
|
|
(14,700)
|
|
|
|
Net increase in loans held for sale
|
(36,870)
|
|
|
—
|
|
|
(1,519)
|
|
|
(38,389)
|
|
|
|
Net cash provided by operating activities - continuing operations
|
111,743
|
|
|
8,231
|
|
|
(1,519)
|
|
|
118,455
|
|
|
|
Net cash used in operating activities - discontinued operations
|
—
|
|
|
(8,231)
|
|
|
—
|
|
|
(8,231)
|
|
|
|
Net cash provided by (used in) operating activities
|
111,743
|
|
|
—
|
|
|
(1,519)
|
|
|
110,224
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchases of investments
|
(90,815)
|
|
|
—
|
|
|
—
|
|
|
(90,815)
|
|
|
|
Proceeds from sales of investments
|
31,576
|
|
|
—
|
|
|
—
|
|
|
31,576
|
|
|
|
Proceeds from maturities of investments
|
92,049
|
|
|
—
|
|
|
—
|
|
|
92,049
|
|
|
|
Loan originations, net of collections
|
(205,874)
|
|
|
—
|
|
|
—
|
|
|
(205,874)
|
|
|
|
Purchases of property, plant and equipment
|
(43,024)
|
|
|
3,208
|
|
|
—
|
|
|
(39,816)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlements of short positions, net
|
(14,611)
|
|
|
—
|
|
|
—
|
|
|
(14,611)
|
|
|
|
Proceeds from sales of assets
|
1,293
|
|
|
—
|
|
|
—
|
|
|
1,293
|
|
|
|
Acquisition, net of cash acquired
|
(45,559)
|
|
|
—
|
|
|
—
|
|
|
(45,559)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities - continuing operations
|
(274,965)
|
|
|
3,208
|
|
|
—
|
|
|
(271,757)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities - discontinued operations
|
—
|
|
|
(3,208)
|
|
|
—
|
|
|
(3,208)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
(274,965)
|
|
|
—
|
|
|
—
|
|
|
(274,965)
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Net revolver repayments
|
(64,712)
|
|
|
2,664
|
|
|
—
|
|
|
(62,048)
|
|
|
|
Repayments of term loans
|
(7,304)
|
|
|
(442)
|
|
|
—
|
|
|
(7,746)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of the Company's common units
|
(6,721)
|
|
|
—
|
|
|
—
|
|
|
(6,721)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred finance charges
|
(815)
|
|
|
—
|
|
|
—
|
|
|
(815)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in deposits
|
43,406
|
|
|
—
|
|
|
—
|
|
|
43,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities - continuing operations
|
(36,146)
|
|
|
2,222
|
|
|
—
|
|
|
(33,924)
|
|
|
|
Net cash used in financing activities - discontinued operations
|
—
|
|
|
(2,222)
|
|
|
—
|
|
|
(2,222)
|
|
|
|
Net cash used in financing activities
|
(36,146)
|
|
|
—
|
|
|
—
|
|
|
(36,146)
|
|
|
|
Net change for the period
|
(199,368)
|
|
|
—
|
|
|
(1,519)
|
|
|
(200,887)
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
398
|
|
|
—
|
|
|
—
|
|
|
398
|
|
|
|
Cash, cash equivalents and restricted cash at beginning of period
|
347,318
|
|
|
—
|
|
|
—
|
|
|
347,318
|
|
|
|
Cash and cash equivalents at end of period, including cash of discontinued operations
|
$
|
148,348
|
|
|
$
|
—
|
|
|
$
|
(1,519)
|
|
|
$
|
146,829
|
|
|
|
Less: Cash and cash equivalents of discontinued operations
|
—
|
|
|
8,881
|
|
|
|
|
8,881
|
|
|
|
Cash and cash equivalents at end of period
|
$
|
148,348
|
|
|
$
|
(8,881)
|
|
|
$
|
(1,519)
|
|
|
$
|
137,948
|
|
|
|