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Steel Excel Inc. Reports 2016 Third Quarter Financial Results

WHITE PLAINS, N.Y.--(BUSINESS WIRE)--Nov. 3, 2016-- Steel Excel Inc. (Other OTC:SXCL) (“Steel Excel” or the “Company”), which operates Energy and Sports segments, today announced operating results for the third quarter and nine months ended September 30, 2016.

Steel Excel reported net revenues of $27.2 million for the third quarter of 2016, as compared to $33.5 million for the same period of 2015. The Company incurred a loss before income taxes and equity method income of $4.5 million in the third quarter of 2016, as compared to a loss of $3.7 million in the 2015 period. The net loss attributable to Steel Excel for the third quarter of 2016 was $2.4 million, or $0.23 per diluted common share, as compared to a net loss of $14.5 million, or $1.27 per diluted common share, for the same period in 2015. At September 30, 2016, the Company had cash and marketable securities totaling $165.3 million and total debt of $42.9 million.

For the nine months ended September 30, 2016, Steel Excel reported net revenues of $68.9 million, as compared to $108.0 million for the same period of 2015. The Company incurred a loss before income taxes and equity method income of $14.2 million in the first nine months of 2016, as compared to a loss of $31.8 million in the 2015 period. The net loss attributable to Steel Excel for the first nine months of 2016 was $5.0 million, or $0.47 per diluted common share, as compared to a net loss of $32.3 million, or $2.81 per diluted common share, for the same period in 2015.

For the third quarter of 2016, net revenues in the Energy segment were $19.1 million, as compared to $23.8 million in the 2015 quarter; net revenues in the Sports segment were $8.1 million in the 2016 quarter, as compared to $9.7 million in the comparable 2015 period. For the first nine months of 2016, net revenues in the Energy segment were $53.1 million, as compared to $90.4 million in the 2015 period; net revenues in the Sports segment were $15.8 million in the first nine months of 2016, as compared to $17.6 million in the comparable 2015 period.

Selling, general and administrative expenses during the nine months ended September 30, 2016, were favorably impacted by a legal settlement associated with a historical acquisition, which reduced expenses by $4.2 million.

On April 13, 2016, the Company's Board of Directors authorized a stock repurchase program to acquire up to 1,000,000 shares of the Company's common stock in addition to purchases authorized under previously approved repurchase programs. Any repurchases under the repurchase programs 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. The current repurchase program is expected to continue indefinitely, unless shortened by the Board of Directors. During the nine months ended September 30, 2016, the Company repurchased 1,130,391 shares of its common stock under the repurchase programs; no such repurchases were made during the three months ended September 30, 2016. The maximum number of shares that may yet be repurchased under the current program was 401,234 as of September 30, 2016.

About Steel Excel

Steel Excel, through its two business segments, Energy and Sports, is committed to acquiring, strengthening and growing profitable businesses. The Energy segment provides drilling and production services to the oil and gas industry. The Sports segment is a social impact organization that strives to provide a first-class youth sports experience emphasizing positive experiences and instilling the core values of discipline, teamwork, safety, respect, and integrity.

The Company is based in White Plains, N.Y. (Other OTC:SXCL). Website: www.steelexcel.com.

Forward-Looking Statements

This press release contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that reflect the Company's current expectations and projections about its future results, performance, prospects, and opportunities. The Company has tried to identify these forward-looking statements by using words such as "may," "should," "expect," "hope," "anticipate," "believe," "intend," "plan," "estimate," and similar expressions. These forward-looking statements are based on information currently available to the Company and are subject to a number of risks, uncertainties, and other factors that could cause its actual results, performance, prospects, or opportunities in 2016 and beyond to differ materially from those expressed in, or implied by, these forward-looking statements. These risks include, but are not limited to, our ability to deploy our capital in a manner that maximizes stockholder value; the ability to identify suitable acquisition candidates or business and investment opportunities; the inability to realize the benefits of our net operating losses; the ability to consolidate and manage any newly acquired businesses; fluctuations in the price of oil and other factors resulting in volatility for the demand for our services, especially in our Energy segment; the hazardous nature of operations in the oilfield services industry, which could result in personal injury, property damage, or damage to the environment; environmental and other health and safety laws and regulations, including those relating to climate change, and general economic conditions. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable and achievable, such statements involve significant risks and uncertainties, and no assurance can be given that the actual results will be consistent with these forward-looking statements. Except as otherwise required by Federal securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances, or any other reason.

 

Steel Excel Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

       
Three Months Ended September 30, Nine Months Ended September 30,
2016   2015 2016   2015
(in thousands, except per-share data)
Net revenues $ 27,154 $ 33,480 $ 68,868 $ 107,975
 
Cost of revenues 21,872   26,136   56,831   84,784  
 
Gross profit 5,282   7,344   12,037   23,191  
 
Operating expenses:
Selling, general and administrative expenses 8,634 8,461 22,765 25,418
Amortization of intangibles 1,402   1,992   4,326   6,229  
Total operating expenses 10,036   10,453   27,091   31,647  
 
Operating loss (4,754 ) (3,109 ) (15,054 ) (8,456 )
 
Interest expense (398 ) (627 ) (1,171 ) (1,883 )
Impairment of marketable securities (7,886 ) (1,470 ) (30,626 )
Other income (expense), net 670   7,905   3,449   9,177  
 
Loss before income taxes and equity method income (4,482 ) (3,717 ) (14,246 ) (31,788 )
 
Benefit from (provision for) income taxes 1,287 (2,393 ) 2,032 4,267
Income (loss) from equity method investees, net of taxes 885   (8,153 ) 6,976   (4,818 )
 
Net loss (2,310 ) (14,263 ) (5,238 ) (32,339 )
 
Net loss (income) attributable to non-controlling interests in consolidated entities (101 ) (211 ) 212   79  
 
Net loss attributable to Steel Excel Inc. $ (2,411 ) $ (14,474 ) $ (5,026 ) $ (32,260 )
 
Basic income (loss) per share attributable to Steel Excel Inc.:
Net loss $ (0.23 ) $ (1.27 ) $ (0.47 ) $ (2.81 )
 
Diluted income (loss) per share attributable to Steel Excel Inc.:
Net loss $ (0.23 ) $ (1.27 ) $ (0.47 ) $ (2.81 )
 
Shares used in computing income (loss) per share:
Basic 10,301 11,421 10,753 11,489
Diluted 10,301 11,421 10,753 11,489
 
       

Steel Excel Inc.

CONSOLIDATED BALANCE SHEETS

(unaudited)

 
September 30,
2016

December 31,
2015

(in thousands, except par value)
Assets:
Current assets:
Cash and cash equivalents $ 84,568 $ 31,707
Restricted cash 12,446 21,639
Marketable securities 80,736 96,189
Other current investments 3,000
Receivable from securities sales not settled 23,229
Accounts receivable (net of allowance for doubtful accounts of $70 in 2016 and $38 in 2015) 12,537 10,614
Prepaid expenses and other current assets 4,187   3,937  
Total current assets 197,474 187,315
Property and equipment, net 85,302 95,793
Goodwill 12,594 12,594
Intangible assets, net 15,893 20,219
Other long-term investments 511 3,555
Investments in equity method investees ($6,227 in 2016 and $21,954 in 2015 reported at fair value) 8,923 24,815
Deferred income taxes 269
Other long-term assets 515   531  
Total assets $ 321,481   $ 344,822  
 
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable $ 2,424 $ 2,781
Accrued expenses and other liabilities 6,534 8,458
Financial instrument obligations 12,446 21,639
Current liabilities of discontinued operations 450   450  
Total current liabilities 21,854 33,328
Long-term debt (net of unamortized debt issuance costs of $194 in 2016 and $280 in 2015) 42,752 42,666
Deferred income taxes 531 737
Other long-term liabilities 256   236  
Total liabilities 65,393   76,967  
 
Commitments and contingencies
 
Stockholders' equity:

Common stock ($0.001 par value, 18,000 shares authorized; 14,476 and 14,392 shares issued in 2016
and 2015, respectively; 10,300 and 11,347 shares outstanding in 2016 and 2015, respectively)

14 14
Additional paid-in capital 271,819 270,516
Accumulated other comprehensive loss (2,302 ) (5,546 )
Retained earnings 84,203 89,229
Treasury stock, at cost (4,176 and 3,045 shares in 2016 and 2015, respectively) (97,261 ) (85,967 )
Total Steel Excel Inc. stockholders' equity 256,473 268,246
Non-controlling interest (385 ) (391 )
Total stockholders' equity 256,088   267,855  
Total liabilities and stockholders' equity $ 321,481   $ 344,822  
 
     

Steel Excel Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 
Nine Months Ended September 30,
2016   2015
(in thousands)
Cash Flows From Operating Activities:
Net loss $ (5,238 ) $ (32,339 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Loss (income) from equity method investees (6,976 ) 4,818
Stock-based compensation expense 1,598 2,338
Depreciation and amortization 15,823 17,768
Impairment of marketable securities 1,470 30,626
Deferred income tax benefit (2,367 ) (5,230 )
Loss (gain) on sales of marketable securities (594 ) 1,430
Gain on financial instrument obligations (119 ) (1,063 )
Loss on change to equity method at fair value 2,807
Gain on non-monetary exchange (9,326 )
Other (507 ) 627
Changes in operating assets and liabilities:
Accounts receivable (1,955 ) 13,865
Prepaid expenses and other assets (281 ) (1,281 )
Accounts payable and other liabilities (2,162 ) (2,568 )
Net cash provided by (used in) operating activities (1,308 ) 22,472  
 
Cash Flows From Investing Activities:
Purchases of property and equipment (1,619 ) (4,477 )
Proceeds from sale of property and equipment 808 39
Purchases of marketable securities (13,113 ) (25,590 )
Proceeds from sales of marketable securities 47,246 39,446
Proceeds from sales of equity method investees 22,868
Proceeds from issuance of financial instrument obligations 144 374
Repayments of financial instrument obligations (63 ) (451 )
Reclassification of restricted cash 9,193   1,140  
Net cash provided by investing activities 65,464   10,481  
 
Cash Flows From Financing Activities:
Repurchases of common stock - treasury shares (11,294 ) (4,612 )
Repayments of capital lease obligations (589 )
Repayments of long-term debt   (9,910 )
Net cash used in financing activities (11,294 ) (15,111 )
 
Net increase in cash and cash equivalents 52,862 17,842
Effect of foreign currency translation on cash and cash equivalents (1 ) (6 )
Cash and cash equivalents at beginning of period 31,707   51,910  
 
Cash and cash equivalents at end of period $ 84,568   $ 69,746  

Source: Steel Excel Inc.

Steel Excel Inc.
Douglas Woodworth, 914-461-1300
Chief Financial Officer
dwoodworth@steelpartners.com


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