Icahn Enterprises(US:IEP)2023-08-03 16:00PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) Presents Icahn Enterprises L.P.'s unaudited condensed consolidated financial statements for Q2 2023, detailing financial position, performance, and cash flows, including notes on significant events Condensed Consolidated Financial Statements Icahn Enterprises reported a net loss of $777 million for H1 2023, a significant reversal from prior year's income Condensed Consolidated Balance Sheet Highlights (in millions) | Metric | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $22,214 | $27,914 | | Investments | $4,937 | $6,809 | | Total Liabilities | $15,027 | $18,356 | | Total Equity | $7,187 | $9,558 | Condensed Consolidated Statement of Operations Highlights (in millions, except per unit data) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Total Revenues | $5,181 | $7,596 | | Net (Loss) Income | $(777) | $598 | | Net (Loss) Income Attributable to Icahn Enterprises | $(539) | $195 | | Basic and Diluted (Loss) Income per LP unit | $(1.46) | $0.64 | - Net cash provided by operating activities was $1,977 million for the first six months of 2023, down from $2,629 million in the prior-year period, while net cash used in financing activities significantly increased to $1,621 million due to distributions to non-controlling interests20 Note 1. Description of Business Icahn Enterprises L.P. is a diversified holding company operating seven segments, with Carl C. Icahn and affiliates holding 85% ownership - The company operates through seven primary segments: Investment, Energy, Automotive, Food Packaging, Real Estate, Home Fashion, and Pharma23 - As of June 30, 2023, Carl C. Icahn and his affiliates held an approximate 85% ownership stake in the company's outstanding depositary units22 Note 3. Subsidiary Bankruptcy and Deconsolidation Auto Plus, an Automotive segment subsidiary, filed for Chapter 11 bankruptcy, leading to its deconsolidation and a $246 million non-cash charge - Auto Plus, an aftermarket parts distributor in the Automotive segment, filed for Chapter 11 bankruptcy on January 31, 202361 - The company deconsolidated Auto Plus effective January 31, 2023, resulting in a non-cash charge of $246 million and recording its investment in Auto Plus at $063 Note 5. Investments The Investment segment's portfolio decreased to $4.8 billion as of June 30, 2023, from $6.7 billion at year-end 2022 Investment Portfolio Breakdown (in millions) | Position Type | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Long Investments | | | | Equity Securities | $3,686 | $4,619 | | Debt Securities | $1,135 | $2,100 | | Total Long | $4,821 | $6,719 | | Short Positions (Securities sold, not yet purchased) | | | | Equity Securities | $3,198 | $6,326 | | Debt Securities | $172 | $169 | | Total Short | $3,370 | $6,495 | Note 12. Debt Total debt was approximately $7.1 billion as of June 30, 2023, with the Holding Company holding $5.3 billion in senior unsecured notes Total Debt (in millions) | Category | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Holding Company | $5,308 | $5,309 | | Reporting Segments | $1,770 | $1,787 | | Total Debt | $7,078 | $7,096 | - The company and all its subsidiaries were in compliance with all debt covenants as of June 30, 2023118 Note 13. Net Income Per LP Unit The company declared $4.00 per unit distributions for H1 2023 and authorized a $1 billion repurchase program - Declared quarterly distributions of $2.00 per unit for Q1 and Q2 2023, with unitholders having the option for cash or additional units122 - Sold 3,395,353 depository units under the Open Market Sale Agreement for gross proceeds of $175 million in the first six months of 2023124 - In May 2023, the Board approved a repurchase program for up to $500 million of senior notes and $500 million of depositary units, with no repurchases made as of June 30, 2023125127 Note 14. Segment Reporting The Investment segment reported a $386 million net loss for H1 2023, while the Energy segment contributed $218 million in net income Net (Loss) Income Attributable to Icahn Enterprises by Segment (Six Months Ended June 30, in millions) | Segment | 2023 | 2022 | | :--- | :--- | :--- | | Investment | $(386) | $196 | | Energy | $218 | $171 | | Automotive | $(9) | $(43) | | Food Packaging | $11 | $3 | | Real Estate | $3 | $4 | | Home Fashion | $(1) | $(1) | | Pharma | $(4) | $(8) | | Holding Company | $(371) | $(127) | | Consolidated | $(539) | $195 | Note 18. Commitments and Contingencies The company faces legal and regulatory inquiries from the U.S. Attorney's office and SEC, along with class action lawsuits - Received voluntary information requests from the U.S. Attorney's office (SDNY) and the SEC in May/June 2023 regarding governance, capitalization, disclosures, and other matters, with the company cooperating165166 - Two putative securities class action lawsuits were filed against the company in the Southern District of Florida following a short-seller report165 - The company is jointly and severally liable for pension plan obligations of entities within its controlled group, with an aggregate underfunded status of approximately $42 million as of June 30, 2023162 Note 20. Subsequent Events On August 2, 2023, the Board declared a quarterly distribution of $1.00 per depositary unit, reduced from $2.00 - On August 2, 2023, the board declared a quarterly distribution of $1.00 per depositary unit, reduced from the prior $2.00 per unit168 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the Investment segment's negative performance, Auto Plus's bankruptcy impact, and the company's liquidity and capital structure Results of Operations Consolidated results were heavily impacted by the Investment segment's negative performance and Auto Plus deconsolidation, with Investment Funds returning -9.3% for H1 2023 Investment Funds Performance Attribution (Six Months Ended June 30) | Position Type | 2023 | 2022 | | :--- | :--- | :--- | | Long positions | (1.8)% | (4.5)% | | Short positions | (8.9)% | 9.1% | | Other | 1.4% | (0.3)% | | Total Return | (9.3)% | 4.3% | - The negative performance of the Investment Funds in H1 2023 was primarily driven by losses in short positions, particularly a broad market hedge loss of $618 million187 - The Automotive segment's aftermarket parts sales decreased by $324 million (78%) in H1 2023 due to the deconsolidation of Auto Plus214 Liquidity and Capital Resources The Holding Company maintained $1.6 billion cash against $5.3 billion debt, with Mr. Icahn redeeming $1.45 billion from Investment Funds - Holding Company had cash and cash equivalents of approximately $1.6 billion and total debt of $5.3 billion as of June 30, 2023237 - The Investment Funds had a net short notional exposure of 18% as of June 30, 2023, with long exposure at 103% and short exposure at 121%250 - During the six months ended June 30, 2023, Mr. Icahn and his affiliates redeemed $1,452 million from the Investment Funds255 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure is from its Investment segment, where a 10% adverse change would impact securities owned by $482 million - The company's predominant market risk exposure is from the Investment segment's portfolio279 - A hypothetical 10% adverse change in fair value would negatively impact securities owned by approximately $482 million and securities sold, not yet purchased by $337 million, based on June 30, 2023 balances281 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes in internal control - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2023282283 - No material changes were identified in the company's internal control over financial reporting during the second quarter of 2023285 PART II. OTHER INFORMATION Legal Proceedings This section refers to Note 18 for information on legal proceedings, noting no material changes compared to the 2022 Annual Report - The company is subject to litigation from time to time, with details on current proceedings referred to Note 18 of the financial statements288 Risk Factors Material risks include Mr. Icahn's influence, personal loans collateralized by IEP units, and the impact of a short-seller report leading to regulatory inquiries and litigation - Mr. Icahn has pledged a substantial number of his IEP depositary units (320 million as of July 10, 2023) and interests in the Investment Funds to secure personal loans, where a significant decline in IEP's indicative net asset value could trigger margin calls293295 - A May 2, 2023 short-seller report caused a significant decline and high volatility in the price of depositary units and has led to regulatory inquiries from the SEC and SDNY, as well as class-action lawsuits300302 - The company risks being taxed as a corporation if less than 90% of its gross income is 'qualifying income,' with repurchasing debt at a discount potentially generating non-qualifying income304 - Future cash distributions are not guaranteed and depend on numerous factors, with the quarterly distribution reduced to $1.00 per unit for the distribution declared on August 4, 2023306 Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the last fiscal quarter - No director or officer adopted or terminated a Rule 10b5-1 trading plan during the second quarter of 2023308 Exhibits This section lists the exhibits filed with the 10-Q report, including CEO and CFO certifications and Inline XBRL data files - Lists filed exhibits, including Sarbanes-Oxley certifications (31.1, 31.2, 32.1) and XBRL data files309