Description

Important Note as of 4/20/2012: Shares Outstanding

On April 11, 2012, SPLP issued 6,403,002 unregistered Class B common units to the Manager as an estimated payment for the deferred fee payable. The number issued is estimated based on the value of the Deferred Fee Account as of February 29, 2012. The common units have a lock-up provision of one year. As a result, this dilutes existing shareholders and increases total shares outstanding from 25.2 million common units outstanding to 31.6 million.

Summary

Steel Partners Holdings (“SPH” or “the Company” or NYSE: “SPLP”) is a holding company created as the successor to Warren G. Lichtenstein’s Steel Partners II (SPII) hedge fund.  The creation of SPH was necessitated by extensive redemptions from SPII in 2008.  SPH is designed to provide liquidity for legacy investors that chose not to be cashed out of SPII in kind through the use of a publicly traded limited partnership vehicle.  In addition, the company has made strides to conduct and transition its business operations so as to not to be deemed an investment company under the Investment Company Act of 1940 (“40 Act”).

Using safe harbors under the 40 Act, SPH initially listed on the Pink Sheets under ticker SPHNU while transitioning its business from an investment company to a non-investment company.  On April 10, 2012, SPH re-listed on the NYSE under ticker symbol SPLP.

SPH believes that operating under investment company status is limiting because of restrictive and potentially adverse regulations relating to operating method execution, management, capital structure, dividends and transactions with affiliates.  For example, as an investment company SPH would not be able to implement global unit scale economies on overhead purchases and cost saving initiatives that all portfolio companies/subsidiaries could utilize.  Although we understand the validity and need for these efforts, we believe it could potentially create added complexity and ambiguity in reviewing holding company cash availability from operating subsidiaries, management influence/control over certain subsidiary operations, and management subsidiary favoritism based on 40 Act compliance not value.

SPH’s current market cap is $401 million, at $12.70 per common unit. We believe SPH assets could be worth approximately $462 million, or $14.62 per common unit, neglecting any value for earning power of wholly owned businesses or the value of significant NOL’s held on the balance sheets of certain subsidiaries. This represents a discount of at least 15% to NAV, or $1.91 per common unit.

We believe that SPLP is attractive, because management has a decent track record as owner/operators in reshaped businesses.  So far, they have done a good job of reshaping the businesses they acquire and have refocused SPH for the long-run.  There is also a potential catalyst in the form of selling legacy investor overhang. 

We believe that SPH trades at an apparently significant discount to NAV due to low liquidity, operating structural complexities and Lichtenstein’s mixed historical reputation. We believe that over the next few months legacy investors may attempt to exit causing sustained pressure on the stock.  Given these factors, we recommend that buying SPLP below $11 per share (35% discount to Adj. NAV) could provide an attractive investment opportunity and a margin of safety in a group of stable and resilient businesses.

Company Overview

Steel Partners Holdings L.P. is a global diversified holding company that engages in multiple businesses through consolidated subsidiaries, associated companies and other interests.  It owns and operates businesses directly and indirectly through shell companies with NOL’s, and provides corporate services to the subsidiaries via SPH Services.  It has significant interests in leading companies in various industries, including diversified industrial products, energy, defense, banking, insurance, food products and services, oilfield services, sports, training, education, and the entertainment and lifestyle industries.  Descriptions of each business are in the attached appendix.

SPH was created as a method of liquidity for Warren Lichtenstein’s Steel Partners II Fund after investors, most prominently Carl Icahn, sought to withdraw 38 percent of their money.  Redemptions from the fund were halted in December 2008, and an Exchange Transaction was executed to form Steel Partners Holdings L.P.  Icahn along with Michael Price, the Getty Trust and several college endowments sued to stop the Exchange Transaction and force a liquidation of the fund.  They lost the case in the Cayman Islands and withdrew the case in Delaware after losing a motion for an injunction against the exchange transaction.  It is assumed that the plaintiffs took their distributions in kind from the Exchange Transaction and exited SPII prior to the transfer of assets to SPH, as none of them show up as 5% holders in public filings.

Exchange Transaction

On December 9, 2008, redemptions from investors in net assets held by SPII, SPII Onshore and SPII Offshore (together, the “SPII Fund”), were temporarily suspended.  On July 15, 2009, SPII Fund lifted its temporary suspension of withdrawals and implemented a plan for the full redemption of its limited partners, where SPII Fund investors were entitled to receive a pro-rata share of SPII’s net cash and assets held by SPII.  Each SPII Fund investor elected whether to receive their redemption proceeds directly or contribute their redemption proceeds in exchange for SPH common units.  Subsequently, on November 23, 2009, SPII Offshore shareholders were all redeemed in full.

Effective July 15, 2009, SPH acquired certain assets from certain former investors of SPII Fund, through which SPH acquired from the SPII Fund net assets with a fair value of $454 million, which included interests in DGT, JPS, HNH, Steel Excel, various other companies and a 43.75% interest in SPII Liquidating Trust (see description below) and $252 million in cash.  In exchange, the contributing SPII Fund investors received 25,761,587 SPH common units.  Some assets are still held in SPII Liquidating Trust awaiting liquidation.

The SPII Liquidating Trust, a Delaware statutory trust, was formed and commenced operations on July 15, 2009.  The purpose of the SPII Liquidating Trust is to effect the orderly liquidation of certain assets previously held by SPII in connection with the withdrawal of the limited partners of SPII Onshore.  On July 15, 2009, SPII contributed $244 million of non-cash assets and $39 million of cash to the SPII Liquidating Trust and became the initial beneficiary of each series of the SPII Liquidating Trust.  In connection with the full withdrawal of the limited partners of SPII Onshore on July 15, 2009, 56.25% of the beneficial interests of each series were transferred to certain of the withdrawing limited partners, and SPII retained 43.75% of the beneficial interests of each series.

Positives

SPH is a thinly traded and undervalued stock, which just listed on the New York Stock Exchange under the ticker SPLP.  Previously, the stock traded on the Pink Sheets and may have missed the notice of large institutional investors.  Management has a history of producing strong returns through an activist investor approach, and has developed a platform in SPH that is poised to make multiple acquisitions through CoSine Communications and Steel Excel, two subsidiaries that are primarily cash and NOLs.

SPH’s CEO, Warren Lichtenstein, as the head of SPII returned 22%, before fees, between 1993 and 2007, and 2008 was its first losing year.  Under the new holding company structure, Lichtenstein will need to take controlling, long term stakes in companies, but given his activist history this should fit within his style.

SPH’s primary vehicle for growth is Steel Excel.  SPH controls Steel Excel with 40% ownership, 3 of the 6 board seats and by holding the Chairman and CEO positions.  Steel Excel is also trading at a discount to tangible book value.  Steel Excel has $323 million in cash on-hand and only $17 million in liabilities.  At the current stock price Steel Excel’s market cap is $293 million, $47 million less than cash minus liabilities.  In addition Steel Excel has PP&E of $21 million, and A/R of $5 million.  At December 31, 2011, Steel Excel had NOLs of $208.7 million for federal and $154.3 million for state purposes that expire in various years beginning in 2019 for federal and 2011 for state purposes.

SPH’s NAV is estimated to be worth approximately $567 million, 48% more than its current market cap of $411 million. We have applied an 18% illiquidity discount due to the thin volumes on both SPH and the underlying public companies. Even with the illiquidity discount, SPH is estimated to be worth $462 million, or 12% more than its $411 million market cap. Due to listing on the NYSE, SPH’s market cap should more closely reflect the value of the underlying assets. Details of our valuation are in the Asset Valuation section of this write-up.

Negatives

SPH has a few areas of concern.  In its current form there are many related party transactions involving Lichtenstein, his associates, SPH and SPH’s subsidiaries.  Although not as impactful at this stage, SPH is also at risk of being deemed an investment company, which would significantly curtail the company’s investment strategy (described below). For valuing SPH, the public values of the underlying assets were taken at face value, as well as SPH’s internal valuations of debt holdings and foreign holdings.

Lichtenstein’s management company effectively has complete control of SPH and many of the underlying assets, serving as the Chairman, and/or CEO for many of the assets, including:

• HNH – Chairman of the board, 4 of 8 board seats, CEO, CFO, Chief Legal Office and VP
• BNS Holding – 2 of 3 board seats, CEO and CFO
• DGT Holdings – 2 of 5 board seats, CEO and CFO
• WebBank – Chairman of the board, wholly owned
• SL Industries – Chairman of the board and 2 of 6 board seats
• Steel Excel – Chairman of the board and 3 of 6 board seats
• CoSine Communications – 2 of 4 board seats, CEO and CFO
• Fox and Hound – 2 of 4 board seats

It is currently unclear and complex how much total compensation and consulting fees, if any, SPH’s management receives from subsidiaries, beside typical Director Compensation. SPH is managed by SP General Services LLC (the “Manager”). Technically, executive officers/employees of the Manager do not receive cash compensation from SPH or any of its subsidiaries for serving officers of SPH. However, the Manager is paid 1.5% of total partner’s capital on a quarterly basis, and an annual incentive fee of 15% of the increase in EV, paid in shares. Management compensation and Manager Disbursements are buried within SPH’s consolidated income statement. Of note, the largest liability on SPH’s balance sheet as of 12/31/2011 was a $58.7 million deferred fee to be paid to WGL Capital, a Lichtenstein controlled company, which is to be paid in installments from the present through 2018. This figure represents historical carry.  As of 4/12/2012, the company issued 6.4 million class B common units in lieu of this liability payment.

If SPH is deemed an investment company by the SEC, it may significantly harm the value of the business.  SPH would be restricted as to the type of related party transactions it could perform to gain synergies from its holdings of similar companies, its ability to invest in insurance companies (e.g. Barbican, its struggling Lloyds syndicated reinsurer), and its borrowing would be limited to 1/3 of total assets.  The Company has filed with the SEC a request for an extension order under the 40 Act to provide it additional time to restructure its holdings to qualify as a non-investment company under the 40 Act.  If the order is granted, the Company would be required to meet these tests (or otherwise not be subject to the Act) within one year following the order date.  The SEC has not yet provided public notice that it intends to consider the application and there can be no assurance that the requested relief will be granted. 

Simplistically, to qualify as a non-investment company under the 40 Act, SPH has to be able to demonstrate that no more than 45% of its assets/income are engaged in investing-related functions (the “forty-five percent test”).  However, it can automatically qualify as a non-investment company if it can demonstrate that less than 40% of its assets are related to investing functions (the “forty percent test”) or the company is a bank, a non-option.   SPH passed the forty-five percent test as of December 31, 2011, but it did not meet the forty percent test.  Nevertheless, SPH should be expected to meet the forty percent test in relatively short order, as it has been rapidly adjusting its assets to come into compliance.

SPH’s assets are difficult to value, and some simplifying estimates were relied upon for valuing multiple non-publicly traded assets.  For publicly traded securities, market values were used, but many of these have discontinued filing with the SEC, are thinly traded on the Pink Sheets and the listed values may be distorted due to the illiquidity of the issues.  As such, our valuation of SPH may be incorrect.  We have tried to correct for this by applying conservative valuation metrics and applying an 18% illiquidity discount to the entire asset base.

SPH Valuation Considerations

SPH’s asset value is made up of the consolidated holdings, which include directly owned assets and assets owned indirectly by the liquidating trust, as well as securities that are not consolidated and we expect will be liquidated to meet the holding company asset requirements.

Privately held WebBank, an UT industrial bank, was valued at 2x tangible book, given that it has had strong grown and ROEs above 25% for the last two years.  The business is mainly “specialty finance” unsecured lending business to eBay and Dell customers.  We also discounted this value by a 20% private market discount.  Privately held Barbican Group Holdings Limited was valued at 0.25x Gross Written Premiums.  This business has struggled considerably versus other peers.  As a result, we have discounted Barbican vs. Lloyds peers that typically trade above 0.5x (for so/so insurers) and 1.0x (for good insurers) underwriting capacity (i.e. Gross Premiums).

SPH is under the Manager’s agreement (renewed on an annual basis) wherein it is obligated to pay WGL Capital an annual performance incentive fee. We added a potential liability to reflect this fee.  Although the actual incentive fee computation is more complicated, we simplified it for this analysis.  Finally, due to the illiquidity of SPH and the underlying assets we have applied an 18% illiquidity discount to the NAV.  The illiquidity adjusted NAV is valued at $462 million, $50 million, 12% more than the current market cap of SPH’s stock.

Recommendation and Investment Strategy

SPH’s listing on the NYSE should increase the value of the stock as more institutional investors become aware of the opportunity. We believe that SPH trades at a significant discount to NAV due to low liquidity, operating structural complexities and Lichtenstein’s mixed historical reputation. We believe that over the next few months legacy investors may attempt to exit causing volatility and pressure on the stock.  We believe that there are a number of legacy investors who do desire an exit but may be fearful of realizing loss positions against historical cost basis.  Until inertia is reached, institutional investors may find this stock too thinly traded for consideration.  We recommend that patiently layering in bids and buying below $11 per common unit (36% discount to Adj. NAV) in SPLP could provide an attractive investment opportunity and a margin of safety in a group of stable and resilient businesses.  At today's prices it is not as cheap, but that is also against often less than 6K of daily volume. 

Since this stock is very thinly traded (< 500,000 shares per day), building a position in SPLP may require a few weeks.  Therefore monitoring for block trades is critical.

Risks

The risks of investing in SPH are: i) many of the underlying assets are either private or do not file regularly with the SEC; ii) although minor, SPH is at risk of being deemed an investment company by the SEC, which would significantly deteriorate its value and operating execution strategies; iii) management of SPH have many related party transactions with SPH and its subsidiaries raising potential agency problems with investors; iv) the stock is very thinly traded and could remain volatile due to legacy investor overhang and micro-cap subsidiaries geared on an economic recovery; v) as of the date of this report (4/20/2012), the correct share count has NOT been updated by Bloomberg, and it is unclear if price or market cap will move as result; and vi) the deferred fee payment in common units seems to be a big give from shareholders, which highlights what proper management compensation should be going forward.   

Additional Unanswered Questions for Management

• What is the company’s current unrestricted holding company cash position? Is there any considerations for dividend and share repurchase programs while share prices remain low?
• What are the effects and magnitude of dilution under current agreements?
• What is the mechanism for shareholders to determine if the current Manager’s agreement is the proper compensation structure going forward, particularly since SPH will no longer be an “investment” company?
• Outlook for SPH meeting the forty percent test?
• Which new companies you retain small positions in (e.g. Moduslink, Nathans, Selectica, Unisys) look the most promising for your consolidation strategy?  Moduslink has gone through activist interest.

Appendix A – Company Profiles (Sourced from most recent 10K)

Handy & Harman Ltd.

 Our Ownership Interest

We have an ownership interest of approximately 55.6% as of March 16, 2012 in Handy & Harman Ltd. (NASDAQ (CM): HNH), formerly known as WHX Corporation prior to January 3, 2011, a Delaware corporation (“HNH”).  On May 7, 2010, our ownership interest in HNH exceeded 50%, and as a result, HNH became a controlled subsidiary of SPH and is consolidated from that date.  We hold as of March 16, 2012, $20,715 principal amount of 10% subordinated secured notes issued by a subsidiary of HNH that mature on October 15, 2017 (the “Subordinated Notes”), which are eliminated in consolidation, and warrants (the “Warrants”) to purchase 406,324 shares of HNH common stock.  The Subordinated Notes bear interest at a rate of 10% per annum, 6% of which is payable in cash and 4% of which is payable in-kind.  The Warrants have an exercise price of $11.00 per share and are exercisable beginning October 14, 2013.

Four of our representatives serve on HNH’s eight-member board of directors, one of whom serves as Chairman.  Our representatives also serve as the Chief Executive Officer, Chief Financial Officer, Chief Legal Officer and as a Vice President of HNH.

 Description of Business

HNH is a diversified manufacturer of engineered niche industrial products with leading market positions in many of the markets it serves.  Through its operating subsidiaries, HNH focuses on high margin products and innovative technology and serves customers across a wide range of end markets.  HNH’s diverse product offerings are marketed throughout the United States and internationally.  For the years ended December 31, 2011 and 2010, HNH generated net sales of $664,017and $568,212, respectively.

DGT Holdings Corp.

Our Ownership Interest

We have an ownership interest of approximately 51.5% as of March 16, 2012 in DGT Holdings Corp. (OTC: DGTC.OB), a New York corporation (“DGT”).  Prior to July 5, 2011, we had an ownership interest of approximately 46.1% in DGT.  On July 5, 2011, our ownership interest in DGT increased to 51.1%, and as a result, DGT became a controlled subsidiary of SPH and is consolidated from that date.  Two of our representatives serve on DGT’s five-member board of directors, one of which serves as DGT’s President and Chief Executive Officer.  Another of our representatives serves as DGT’s Chief Financial Officer.

Description of Business

DGT operates through its subsidiary, RFI Corporation (“RFI”), which comprises DGT’s Power Conversion Group.  For its fiscal year ended July 30, 2011, RFI generated revenue of $10,783.  In November 2011, DGT sold its subsidiary, Villa Sistemi Medicali S.p.A. (“Villa”), which comprised its Medical Systems Group division, which accounted for approximately 84% of DGT’s total consolidated revenues for the year ended July 30, 2011.  As a result, the operations of Villa are reflected as discontinued operations in our consolidated financial statements for the period from July 5, 2011.

RFI designs, manufactures, markets and sells high voltage precision components and sub-assemblies and electronic noise suppression components for a variety of applications.  These products are utilized by OEMs who build systems that are used in a broad range of markets.  RFI’s products are sold under the following industry brands: RFI, Filtron, Sprague and Stanley.

Noise suppression filters and components are used to help isolate and reduce the electromagnetic interference (commonly referred to as “noise”) among the different components in a system sharing the same power source.  Examples of systems that use RFI’s noise suppression products include aviation electronics, mobile and land-based telecommunication systems and missile guidance systems. 

RFI also provides subsystems and components which are used in the manufacture of medical electronics, military and industrial applications in the following markets:  aerospace; defense and homeland security; telecommunications; industrial/commercial and medical.

SPH Services, Inc.

Our Ownership Interest

SPH Services, Inc. (“SPH Services”) is our wholly-owned subsidiary.  Three of our representatives serve as members, including as the Chairman, of the board of directors of SPH Services.  These representatives also serve as SPH Services’ Chief Executive Officer, President, Secretary, Chief Financial Officer and Treasurer.

Description of Business

SPH Services is a newly-formed subsidiary of SPH, which commenced operations on January 1, 2012, that was created to consolidate the executive and corporate functions of SPH and certain of our affiliates, including SP Corporate and Steel Partners LLC, to provide such services, including, without limitation, legal, tax, accounting, treasury, consulting, auditing, administration, compliance, environmental health and safety, human resources, marketing, investor relations and other similar services, to other companies.  In connection with the formation of SPH Services, we acquired SP Corporate and Steel Partners LLC, as well as certain assets from HNH, on January 1, 2012.  Prior to our acquisition of Steel Partners LLC, our former manager, Steel Partners LLC transferred certain assets, including its interest in our management agreement, to SP General Services LLC.

SPH Services operates through its wholly owned subsidiaries, SP Corporate and Steel Partners LLC.  SP Corporate has management services agreements with HNH, BNS, CoSine (as defined below), DGT, NOVT Corporation (“NOVT”), Ore Holdings, Inc., Steel Excel (as defined below) and WebBank.

By consolidating corporate overhead and back office functions, SPH believes it will achieve cost savings over time for its affiliated companies while delivering more efficient and effective services.  As a result of the synergies associated with SP Corporate's specialization and capabilities across a broad range of corporate and executive functions that are provided to SPH and other companies, SP Corporate believes that it will be able to create high value business partnerships by delivering higher quality services and more efficient professional transaction processing which will result in significant cost savings that can be achieved through standardization, clear processes and procedures, the elimination of non-value adding activities and economies of scale.

WebBank

Our Ownership Interest

SPH’s wholly owned subsidiary, WebFinancial Holding Corporation conducts financial operations through its wholly-owned subsidiary, WebBank (“WebBank”).  John McNamara is Chairman of the Board and James Henderson is a director.

Description of Business

WebBank is a Utah chartered industrial bank subject to the regulation, examination, and supervision of the Federal Deposit Insurance Corporation (“FDIC”) and the State of Utah Department of Financial Institutions (“UDFI”).  WebBank is not considered a “bank” for Bank Holding Company Act purposes and, as such, SPH is not regulated as a bank holding company.  WebBank, whose deposits are insured by the FDIC, generates commercial, real estate, government guaranteed and consumer loans.

Revenue is largely derived from several strategic partnerships that provide fee income and interest income on loans held, such as eBay’s Bill Me Later and Dell Financial Services. 

SL Industries, Inc.

We have an ownership interest of approximately 21.7% as of March 16, 2012 in SL Industries, Inc. (AMEX:SLI), a New Jersey corporation (“SLI”).  Two of our representatives serve on SLI’s six-member board of directors, one of whom serves as Chairman.  SLI designs, manufactures and markets power electronics, motion control, power protection, power quality electromagnetic and specialized communication equipment.  SLI’s products are used in a variety of medical, commercial and military aerospace, computer, datacom, industrial, telecom, transportation, utility, rail and highway equipment applications.

Steel Excel Inc.

We have an ownership interest of approximately 40.3% as of March 16, 2012 in Steel Excel Inc., a Delaware corporation formerly known as ADPT Corporation (“Steel Excel”) (OTC: SXCL.PK).  Three of our representatives serve on Steel Excel’s six-member board of directors, one of whom serves as Chairman and another of whom serves as the Chief Executive Officer.  One of our representatives also serves as Chief Financial Officer.  Steel Excel is primarily focused on capital redeployment and identification of new business operations in which it can utilize its existing working capital and maximize the use of its net tax operating losses (“NOLs”) in the future.  The identification of new business operations includes, but is not limited to, the oilfield servicing, sports, training, education, entertainment, and lifestyle businesses. On December 8, 2011, Steel Excel acquired the business and assets of Rogue Pressure Services, LLC, a Wyoming limited liability company (“Rogue”).  The purchase price for Rogue was approximately $29 million, which was paid in cash, with the sellers receiving the opportunity to earn additional consideration based upon Rogue’s achievement of certain performance levels pursuant to an earn-out. This acquisition marked the launch of Steel Excel’s new strategy to focus a portion of its acquisition efforts on new opportunities in the United States oilfield service industry presented by technological advances in horizontal drilling and hydraulic fracturing. On February 9, 2012, Steel Excel acquired the business and assets of Eagle Well Services, Inc., a leader in the oilfield service industry serving customers in the Bakken based in North Dakota and Montana.  The purchase price of this acquisition was $48.1 million in cash.  At December 31, 2011, the Company had net operating loss carryforwards of $208.7 million for federal and $154.3 million for state purposes that expire in various years beginning in 2019 for federal and 2011 for state purposes.

CoSine Communications, Inc.

We have an ownership interest of approximately 46.8% as of March 16, 2012 in CoSine Communications, Inc. (OTC: COSN.PK), a Delaware corporation (“CoSine”).  Two of our representatives serve on CoSine’s four-member board of directors, one of whom serves as the Chief Executive Officer and Chief Financial Officer.  CoSine is currently in the business of seeking to acquire one or more business operations.  CoSine is pursuing opportunities to redeploy its assets through an acquisition of one or more operating businesses.  It currently has approximately $21.2 million of assets and $354 million of NOLs. 

API Group PLC

We have an ownership interest of approximately 32.4% as of March 16, 2012 in API Group PLC (API.  LN), an English corporation (“API”).  One of our representatives serves on API’s six-member board of directors.  API is a leading manufacturer of specialized materials for packaging premium branded goods.  The main end use markets for API’s products are in premium, fast-moving consumer goods such as alcoholic drinks, perfumery, cosmetics, healthcare, specialty food and tobacco.  These sectors use high impact finishes and effects on labeling and packaging to reinforce and authenticate brand image. Effective December 31, 2011, we reclassified our investment in API to Investments at fair value on our Consolidated Balance Sheet. Previously we classified it as an associated company. For additional information, see Note 5- “Associated Companies” to the SPH financial statements included elsewhere in this Form 10-K. On February 8, 2012, the Company sent a letter to API expressing its belief that the market price of API does not reflect its intrinsic value and that this value will only be realized through a sale of API.

JPS Industries, Inc.

We have an ownership interest of approximately 39.3% as of March 16, 2012 in JPS Industries, Inc. (OTC: JPST.PK), a Delaware corporation (“JPS”).  JPS Industries, Inc. is a major U.S. manufacturer of extruded urethanes, ethylene vinyl acetates and mechanically formed glass and aramid substrate materials for specialty applications in a wide expanse of markets requiring highly engineered components.  JPS’s products are used in a wide range of applications including: printed electronic circuit boards; advanced composite materials; civilian and military aerospace components; filtration and insulation products; specialty commercial construction substrates; high performance glass laminates for security and transportation applications; photovoltaic solar modules; paint protection films; plasma display screens; medical, automotive and industrial components; and soft body armor for civilian and military applications.  Headquartered in Greenville, South Carolina, JPS operates four manufacturing locations in Anderson and Slater, South Carolina; Statesville, North Carolina; and Easthampton, Massachusetts. Effective December 31, 2011, we reclassified our investment in JPS to an available for sale security. Previously we classified it as an associated company. For additional information, see Note 5- “Associated Companies” to the SPH financial statements included elsewhere in this Form 10-K.

 GenCorp Inc.

We have an ownership interest of approximately 6.9% as of March 16, 2012 in GenCorp Inc. (NYSE: GY), an Ohio corporation (“GenCorp”).  One of our representatives serves on GenCorp’s eight-member board of directors.  GenCorp’s continuing operations are comprised of two segments, Aerospace and Defense and Real Estate.  GenCorp’s Aerospace and Defense segment includes the operations of Aerojet-General Corporation, which develops and manufactures propulsion systems for defense and space applications, armament systems for precision tactical weapon systems and munitions applications.  GenCorp’s Real Estate segment includes the entitlement, sale and leasing of its excess real estate.

Barbican Group Holdings Limited

We have an economic interest, direct and indirect, of approximately 19.6% as of March 16, 2012 in Barbican Group Holdings Limited and its subsidiaries (“Barbican”).  In addition, one of our affiliates shares 50/50 control over Barbican with another investor.  Two of our representatives serve on Barbican’s seven-member board of directors.  Barbican is a privately-held company incorporated in Guernsey, which underwrites property and casualty insurance and reinsurance through its subsidiaries and its Lloyds of London syndicate.

Fox & Hound Restaurant Group

We had an indirect ownership interest of approximately 21.3% as of December 31, 2011 in Fox & Hound Restaurant Group, a Delaware corporation (“Fox & Hound”).  Two of our representatives serve on Fox & Hound’s four-member board of directors.  Fox & Hound is a privately held owner and operator of a chain of approximately 130 company-owned and 14 franchised social destination casual dining and entertainment based restaurants in 32 states. On March 19, 2012, we invested $10,923 as part of a recapitalization of Fox & Hound which involved the issuance by Fox & Hound of new common equity in conjunction with a long-term refinancing of Fox & Hound’s debt. As a result of the transaction, as of March 19, 2012 we have an indirect ownership interest of 43.6% in Fox & Hound.

Catalyst