Icahn Enterprises(IEP) - 2023 Q3 - Quarterly Report

Forward-Looking Statements This section identifies forward-looking statements, outlining their nature as predictions and forecasts, and the associated risks and uncertainties - Forward-looking statements are identified by phrases such as 'believes,' 'expects,' 'potential,' and 'anticipates,' and are subject to risks and uncertainties[9] - Key risks include economic downturns, geopolitical conflicts (Russia/Ukraine, Middle East), investment activities, and risks related to the Investment Company Act of 1940[10] - Specific business segment risks cover energy (volatility, demand, crack spread, fertilizer demand), automotive (adverse conditions, Chapter 11 filing), food packaging (competition, raw materials), real estate (tenant bankruptcies), and home fashion (raw materials, manufacturing disruptions)[10] PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, changes in equity, and cash flows, along with detailed notes Condensed Consolidated Balance Sheets (Unaudited) The condensed consolidated balance sheets provide a snapshot of the company's financial position, showing decreases in total assets, total equity, and total liabilities Condensed Consolidated Balance Sheets (in millions) | Metric | Sep 30, 2023 (in millions) | Dec 31, 2022 (in millions) | Change (in millions) | | :------------------------------------------ | :----------- | :----------- | :----- | | Assets | | | | | Cash and cash equivalents | $2,890 | $2,337 | +$553 | | Cash held at consolidated affiliated partnerships and restricted cash | $3,222 | $2,549 | +$673 | | Investments | $3,300 | $6,809 | -$3,509 | | Due from brokers | $4,677 | $7,051 | -$2,374 | | Total Assets | $21,757 | $27,914 | -$6,157 | | Liabilities | | | | | Securities sold, not yet purchased, at fair value | $3,801 | $6,495 | -$2,694 | | Debt | $7,075 | $7,096 | -$21 | | Total Liabilities | $15,129 | $18,356 | -$3,227 | | Equity | | | | | Equity attributable to Icahn Enterprises | $3,453 | $3,900 | -$447 | | Total Equity | $6,628 | $9,558 | -$2,930 | Condensed Consolidated Statements of Operations (Unaudited) The condensed consolidated statements of operations show a significant shift from net income to a net loss, primarily due to investment activities and subsidiary deconsolidation Condensed Consolidated Statements of Operations (in millions, except per unit data) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenues: Net sales | $2,991 | $3,334 | $8,433 | $10,098 | | Net (loss) gain from investment activities | $(332) | $(187) | $(1,275) | $310 | | Total Revenues | $2,989 | $3,404 | $8,170 | $11,000 | | Expenses: Cost of goods sold | $2,377 | $3,026 | $6,947 | $8,738 | | Loss on deconsolidation of subsidiary | $0 | $0 | $246 | $0 | | Total Expenses | $2,923 | $3,626 | $8,892 | $10,524 | | Net (loss) income | $(30) | $(215) | $(807) | $383 | | Net (loss) income attributable to Icahn Enterprises | $(6) | $(123) | $(545) | $72 | | Basic and Diluted (loss) income per LP unit | $(0.01) | $(0.37) | $(1.47) | $0.23 | | Distributions declared per LP unit | $1.00 | $2.00 | $5.00 | $6.00 | Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited) The condensed consolidated statements of comprehensive income show a comprehensive loss for both periods, primarily driven by the net loss Condensed Consolidated Statements of Comprehensive (Loss) Income (in millions) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net (loss) income | $(30) | $(215) | $(807) | $383 | | Other comprehensive (loss) income, net of tax | $(6) | $(5) | $1 | $(12) | | Comprehensive (loss) income | $(36) | $(220) | $(806) | $371 | | Comprehensive (loss) income attributable to Icahn Enterprises | $(12) | $(128) | $(544) | $60 | Condensed Consolidated Statements of Changes in Equity (Unaudited) The condensed consolidated statements of changes in equity reflect a decrease in total equity due to net losses and partnership distributions Condensed Consolidated Statements of Changes in Equity (in millions) | Metric | Dec 31, 2022 (in millions) | Sep 30, 2023 (in millions) | Change (in millions) | | :------------------------------------------ | :----------- | :----------- | :----- | | Balance, Total Equity | $9,558 | $6,628 | -$2,930 | - Net loss attributable to Icahn Enterprises for the nine months ended September 30, 2023, was $(545) million[16] - Partnership distributions payable for the nine months ended September 30, 2023, totaled $(724) million, with a reversal of $724 million, and additional distributions of $(155) million and $(39) million[16] Condensed Consolidated Statements of Cash Flows (Unaudited) The condensed consolidated statements of cash flows show a net increase in cash and restricted cash, primarily from operating activities despite significant financing cash outflows Condensed Consolidated Statements of Cash Flows (in millions) | Metric | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $3,621 | $3,340 | | Net cash used in investing activities | $(81) | $(171) | | Net cash used in financing activities | $(2,314) | $(403) | | Net increase in cash and cash equivalents and restricted cash | $1,226 | $2,774 | | Cash and cash equivalents, end of period | $6,112 | $7,210 | - Operating cash flows were positively impacted by proceeds from sales of securities ($3,905 million) and changes in receivables and payables relating to securities transactions ($2,094 million)[21] - Financing cash flows were significantly impacted by investment segment distributions to non-controlling interests ($(2,033) million) in 2023[21] Notes to Condensed Consolidated Financial Statements Note 1. Description of Business Icahn Enterprises L.P. is a diversified holding company with interests across various segments, with its Automotive segment experiencing a significant bankruptcy event - Icahn Enterprises is a diversified holding company operating in Investment, Energy, Automotive, Food Packaging, Real Estate, Home Fashion, and Pharma segments[25] - Carl C. Icahn and his affiliates own approximately 85% of outstanding depositary units and control the general partner[24] - The Automotive segment's subsidiary, Auto Plus, filed for Chapter 11 bankruptcy on January 31, 2023, leading to its deconsolidation[31] Subsidiary Ownership | Subsidiary | Ownership (as of Sep 30, 2023) | | :---------------- | :----------------------------- | | CVR Energy, Inc. | ~66% | | Viskase Companies, Inc. | ~90% | Note 2. Basis of Presentation and Summary of Significant Accounting Policies The company operates to avoid investment company classification and partnership taxation, with unaudited financial statements prepared under SEC rules - The company structures its activities to avoid being deemed an investment company and to be taxed as a partnership[37] - Condensed consolidated financial statements are unaudited and prepared in accordance with SEC rules for interim statements, with certain disclosures condensed or omitted[39] - The company consolidates wholly and majority-owned subsidiaries and Variable Interest Entities (VIEs) where it is the primary beneficiary, such as Icahn Enterprises Holdings[40][42][44] - Adoption of ASU 2020-04 (Reference Rate Reform) and ASU 2022-04 (Supplier Finance Programs) had no significant material impact on financial statements[61][62] - ASU 2022-03 (Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions) is effective January 1, 2024, and its impact is currently being assessed[63] Note 3. Subsidiary Bankruptcy and Deconsolidation Auto Plus, an Automotive segment subsidiary, filed for Chapter 11 bankruptcy and was deconsolidated, resulting in a significant non-cash charge - Auto Plus, an Automotive segment subsidiary, filed for Chapter 11 bankruptcy on January 31, 2023, and was subsequently deconsolidated[64][65] - The deconsolidation resulted in a non-cash charge of $246 million for the nine months ended September 30, 2023[65] - The Bankruptcy Court approved asset sales, with AEP PLC acquiring $10 million of Aftermarket Parts inventory[64][73] Note 4. Related Party Transactions Related party transactions primarily involve Mr. Icahn's investment redemptions, expense-sharing, and a significant write-off of a note receivable from Auto Plus - Mr. Icahn and his affiliates redeemed $2,022 million from the Investment Funds during the nine months ended September 30, 2023[68] - An expense-sharing arrangement with Investment Funds resulted in $10 million reimbursement for the nine months ended September 30, 2023[69] - A related party note receivable from Auto Plus resulted in a $127 million write-off for the nine months ended September 30, 2023, with an estimated $59 million to be collected[72] - Brett Icahn serves as portfolio manager for a designated portfolio within the Investment Funds, with his investments totaling $36 million as of September 30, 2023[74] Note 5. Investments The Investment segment's total investments and securities sold, not yet purchased, significantly decreased, resulting in unrealized losses Investment Segment Financials (in millions) | Metric | Sep 30, 2023 (in millions) | Dec 31, 2022 (in millions) | Change (in millions) | | :------------------------------------------ | :----------- | :----------- | :----- | | Investments (Assets) | $3,185 | $6,719 | -$3,534 | | Securities sold, not yet purchased (Liabilities) | $3,801 | $6,495 | -$2,694 | - Unrealized losses on securities still held by the Investment segment were $(255) million for the three months and $(286) million for the nine months ended September 30, 2023[76] - Equity securities in Communications, Consumer Cyclical, Technology, and Industrial sectors saw significant decreases in investment value[76] Note 6. Fair Value Measurements Assets and liabilities measured at fair value decreased significantly, with non-recurring measurements for CVR Partners' equity interest and the Auto Plus note receivable - Fair value measurements are classified into Level 1 (quoted prices), Level 2 (observable inputs), and Level 3 (unobservable inputs)[79][80][81] Fair Value Measurements (in millions) | Metric | Sep 30, 2023 (in millions) | Dec 31, 2022 (in millions) | | :------------------------------------------ | :----------- | :----------- | | Total Assets Measured at Fair Value | $3,315 | $7,527 | | Total Liabilities Measured at Fair Value | $5,029 | $7,878 | - The estimated fair value of the note receivable from Auto Plus was $59 million at September 30, 2023, determined using the income approach with Level 3 inputs[86] Note 7. Financial Instruments The Investment segment uses various derivative instruments for capital appreciation or hedging, while the Energy segment uses commodity derivatives to manage price risk - Investment Funds trade various financial instruments including futures, options, swaps, and securities sold, not yet purchased, for capital appreciation or hedging[87] Notional Exposure of Derivative Contracts (in millions) | Primary Underlying Risk | Sep 30, 2023 Long Notional (in millions) | Sep 30, 2023 Short Notional (in millions) | Dec 31, 2022 Long Notional (in millions) | Dec 31, 2022 Short Notional (in millions) | | :---------------------- | :------------------------- | :-------------------------- | :------------------------- | :-------------------------- | | Equity contracts | $2,075 | $2,833 | $1,816 | $5,354 | | Credit contracts | $0 | $495 | $0 | $945 | | Commodity contracts | $0 | $562 | $0 | $22 | - Energy segment derivative losses were $(106) million for the three months and $(65) million for the nine months ended September 30, 2023, included in cost of goods sold[110] Note 8. Related Party Notes Receivable, Net Related party notes receivable, net, totaled $59 million, with a significant credit loss provision and write-off recorded Related Party Notes Receivable, Net (in millions) | Metric | Sep 30, 2023 (in millions) | | :------------------------------------------ | :----------- | | Related party notes receivable, gross | $71 | | Less: Allowance for expected credit losses | $12 | | Related party notes receivable, net | $59 | - A credit loss provision of $139 million was recorded, and $127 million was written off for the nine months ended September 30, 2023[111] Note 9. Inventories, Net Inventories, net, decreased significantly, primarily due to the deconsolidation of Auto Plus Inventories, Net (in millions) | Metric | Sep 30, 2023 (in millions) | Dec 31, 2022 (in millions) | Change (in millions) | | :------------------------------------------ | :----------- | :----------- | :----- | | Raw materials | $354 | $335 | +$19 | | Work in process | $99 | $105 | -$6 | | Finished goods | $632 | $1,091 | -$459 | | Total Inventories, net | $1,085 | $1,531 | -$446 | - The deconsolidation of Auto Plus accounted for a $440 million decrease in inventories[112] Note 10. Goodwill and Intangible Assets, Net Goodwill remained stable, while intangible assets, net, decreased due to amortization of definite-lived assets Goodwill by Segment (in millions) | Segment | Sep 30, 2023 Net Carrying Amount (in millions) | Dec 31, 2022 Net Carrying Amount (in millions) | | :---------------- | :-------------------------------- | :-------------------------------- | | Automotive | $250 | $250 | | Food Packaging | $6 | $6 | | Home Fashion | $19 | $19 | | Pharma | $13 | $13 | | Total Goodwill | $288 | $288 | Intangible Assets, Net (in millions) | Type | Sep 30, 2023 Net Carrying Amount (in millions) | Dec 31, 2022 Net Carrying Amount (in millions) | Change (in millions) | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :----- | | Definite-lived intangible assets | $404 | $450 | -$46 | | Indefinite-lived intangible assets | $83 | $83 | $0 | | Total Intangible assets, net | $487 | $533 | -$46 | - Amortization expense for definite-lived intangible assets was $44 million for the nine months ended September 30, 2023[113] Note 11. Leases Operating and finance lease assets and liabilities increased, with total lease costs and segment-specific lease revenues reported Lease Assets and Liabilities (in millions) | Metric | Sep 30, 2023 (in millions) | Dec 31, 2022 (in millions) | | :------------------------------------------ | :----------- | :----------- | | Operating Leases: Right-of-use assets | $511 | $478 | | Operating Leases: Lease liabilities | $520 | $484 | | Financing Leases: Right-of-use assets | $54 | $48 | | Financing Leases: Lease liabilities | $70 | $64 | - Total lease cost for the nine months ended September 30, 2023, was $143 million ($134 million operating, $5 million amortization, $4 million interest)[118] - Automotive segment operating lease revenues were $43 million, and Real Estate segment operating lease revenues were $15 million for the nine months ended September 30, 2023[120][121] Note 12. Debt Total debt remained stable, primarily consisting of Holding Company senior unsecured notes, with the company in compliance with all debt covenants Total Debt (in millions) | Category | Sep 30, 2023 (in millions) | Dec 31, 2022 (in millions) | Change (in millions) | | :------------------------------------------ | :----------- | :----------- | :----- | | Holding Company Senior Unsecured Notes | $5,308 | $5,309 | -$1 | | Reporting Segments Debt | $1,767 | $1,787 | -$20 | | Total Debt | $7,075 | $7,096 | -$21 | - The company and all subsidiaries are in compliance with all debt covenants and restrictions[124] - Non-cash charges to interest expense (amortization of deferred financing costs and debt discounts/premiums) were $4 million for the nine months ended September 30, 2023[125] Note 13. Net Income Per LP Unit Basic and diluted loss per LP unit was reported, alongside declared distributions and details on depositary unit sales and a repurchase program Basic and Diluted (Loss) Income Per LP Unit | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic and Diluted (loss) income per LP unit | $(0.01) | $(0.37) | $(1.47) | $0.23 | - Quarterly distributions of $2.00, $2.00, and $1.00 per depositary unit were declared for the nine months ended September 30, 2023, totaling $5.00 per unit[127][128] - 3,395,353 depositary units were sold for $175 million through at-the-market offerings during the nine months ended September 30, 2023[130] - A repurchase program for up to $500 million of senior unsecured notes and $500 million of depositary units was authorized on May 9, 2023, but no repurchases have been made as of September 30, 2023[131] Note 14. Segment Reporting Segment performance is assessed by net income, with the Investment segment reporting a net loss and the Energy segment reporting net income, while Automotive was impacted by deconsolidation - Segment operating results are assessed based on net income from continuing operations attributable to Icahn Enterprises[133] Net (Loss) Income Attributable to Icahn Enterprises by Segment (in millions) | Segment | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :---------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Investment | $(166) | $(81) | $(552) | $115 | | Energy | $235 | $60 | $453 | $231 | | Automotive | $7 | $(21) | $(2) | $(64) | | Food Packaging | $0 | $(3) | $11 | $0 | | Real Estate | $10 | $4 | $13 | $8 | | Home Fashion | $(1) | $(9) | $(2) | $(10) | | Pharma | $0 | $(7) | $(4) | $(15) | | Holding Company | $(91) | $(66) | $(462) | $(193) | | Consolidated | $(6) | $(123) | $(545) | $72 | Energy Segment Net Sales (in millions) | Product | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :---------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Petroleum products | $2,392 | $2,543 | $6,505 | $7,593 | | Nitrogen fertilizer products | $130 | $156 | $540 | $623 | | Total | $2,522 | $2,699 | $7,045 | $8,216 | Automotive Segment Net Sales and Other Revenues (in millions) | Service/Product | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :---------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Automotive Services | $406 | $410 | $1,167 | $1,156 | | Aftermarket Parts | $24 | $202 | $116 | $618 | | Total | $430 | $612 | $1,283 | $1,774 | Note 15. Income Taxes The company recorded income tax expense on both pre-tax income and loss, resulting in varying effective tax rates primarily due to partnership losses and valuation allowance changes Income Tax (in millions) | Period | Pre-Tax (Loss) Income (in millions) | Income Tax (Expense) Benefit (in millions) | Effective Tax Rate | | :------------------------------------------ | :-------------------------------- | :--------------------------------- | :----------------- | | 3 Months Ended Sep 30, 2023 | $66 | $(96) | 144% | | 3 Months Ended Sep 30, 2022 | $(222) | $7 | 3.2% | | 9 Months Ended Sep 30, 2023 | $(725) | $(82) | (11.2)% | | 9 Months Ended Sep 30, 2022 | $476 | $(93) | 19.5% | - The effective tax rate differs from the statutory federal rate (21%) primarily due to partnership losses with no tax benefit and changes in the valuation allowance[145][148] Note 16. Changes in Accumulated Other Comprehensive Loss Accumulated other comprehensive loss remained stable, with a minor increase from post-retirement benefits Accumulated Other Comprehensive Loss (in millions) | Metric | Dec 31, 2022 (in millions) | Sep 30, 2023 (in millions) | Change (in millions) | | :------------------------------------------ | :----------- | :----------- | :----- | | Balance, Total | $(70) | $(69) | +$1 | Note 17. Other Loss, Net Other loss, net, was primarily driven by dividend expense, partially offset by equity earnings and gains on asset disposition Other Loss, Net (in millions) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Dividend expense | $(21) | $(26) | $(68) | $(61) | | Equity earnings from non-consolidated affiliates | $4 | $2 | $9 | $7 | | Gain on disposition of assets, net | $2 | $1 | $5 | $3 | | Total Other loss, net | $(16) | $(28) | $(57) | $(150) | Note 18. Commitments and Contingencies The company faces environmental liabilities, RFS obligations, and various litigations, including regulatory inquiries and securities lawsuits, while also managing pension obligations - Consolidated environmental liabilities were $20 million as of September 30, 2023, primarily within the Energy segment[151] - The Energy segment's RFS position was $413 million as of September 30, 2023, a decrease from $692 million at December 31, 2022, due to compliance costs and revaluation[159] - The company is cooperating with inquiries from the U.S. Attorney's office and SEC, and is a defendant in securities class action and derivative lawsuits, but does not currently believe these will have a material impact[169][170] - Pension plans sponsored by Viskase and ACF Industries LLC would be underfunded by approximately $35 million if voluntarily terminated, with Starfire Holding Corporation providing an indemnity[166][168] Note 19. Supplemental Cash Flow Information Supplemental cash flow information includes cash payments for interest and income taxes for the nine months ended September 30, 2023 Supplemental Cash Flow Information (in millions) | Metric | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Cash payments for interest | $(299) | $(303) | | Cash payments for income taxes, net of payments | $(95) | $(139) | Note 20. Subsequent Events A quarterly distribution of $1.00 per depositary unit was declared on November 1, 2023, with an option for cash or additional units - A quarterly distribution of $1.00 per depositary unit was declared on November 1, 2023, with an option for cash or additional units[173] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, highlighting investment performance, Auto Plus deconsolidation, and segment-specific drivers Executive Overview Icahn Enterprises is a diversified holding company whose consolidated results are significantly influenced by investment performance, energy market dynamics, and the Auto Plus deconsolidation, with geopolitical conflicts posing global risks - Icahn Enterprises is a diversified holding company with segments including Investment, Energy, Automotive, Food Packaging, Real Estate, Home Fashion, and Pharma[176] - Consolidated financial results are primarily affected by Investment Funds' performance, Energy segment product demand/pricing, and the deconsolidation of Auto Plus[182] - Geopolitical conflicts (Israel/Hamas, Russia/Ukraine) pose significant risks to global oil, fertilizer, and agriculture markets, potentially impacting the company's business[181] Results of Operations The company experienced a consolidated net loss for both the three and nine months ended September 30, 2023, primarily due to negative investment performance and the deconsolidation of Auto Plus Consolidated Net (Loss) Income (in millions) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Consolidated Net (Loss) Income | $(30) | $(215) | $(807) | $383 | | Net (Loss) Income Attributable to Icahn Enterprises | $(6) | $(123) | $(545) | $72 | Investment Segment The Investment segment reported negative returns for both periods, driven by net losses in various short and long positions, contrasting with prior year's positive performance Investment Funds' Returns | Period | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Investment Funds' Returns | (4.4)% | (1.9)% | (13.3)% | 2.4% | - For the three months ended September 30, 2023, negative performance was driven by net losses in short positions (energy sector: $401 million, credit default swaps: $102 million) and long positions (healthcare: $115 million, utility: $95 million)[191] - For the nine months ended September 30, 2023, negative performance was driven by net losses in short positions (broad market hedge: $439 million, energy investments: $226 million) and long positions (healthcare: $163 million, materials: $145 million)[195] Energy Segment The Energy segment experienced decreased net sales due to lower prices but significantly improved gross margin driven by reduced RFS costs and favorable inventory valuations Energy Segment Performance (in millions, except percentages) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net sales | $2,522 | $2,699 | $7,045 | $8,216 | | Gross margin | $474 | $130 | $1,081 | $809 | | Gross margin as % of net sales | 19% | 5% | 15% | 10% | - Decrease in net sales was due to lower refined product prices (lower crude oil prices) and decreased urea ammonium nitrate (UAN) and ammonia pricing[204][208] - Gross margin improvement was primarily due to lower RFS costs, favorable inventory valuations, and a favorable RINs liability revaluation[205][209] - The segment completed a renewable diesel project in April 2022 and plans to add pretreating capabilities by Q4 2023 to reduce RFS exposure[202] Automotive Segment The Automotive segment's net sales significantly decreased due to the deconsolidation of Auto Plus, while Automotive Services revenue remained relatively stable Automotive Segment Performance (in millions, except percentages) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net sales and other revenues from operations | $430 | $612 | $1,283 | $1,774 | | Change YoY | -30% | | -28% | | - The decrease in revenue was primarily due to an 81-88% decrease in Aftermarket Parts sales following the deconsolidation of Auto Plus[218][220] - Automotive Services revenue saw a slight decrease of $4 million (1%) for the three months and an increase of $11 million (1%) for the nine months, influenced by pricing actions and lower car counts from closed stores[218][220] Food Packaging Segment The Food Packaging segment experienced a decrease in net sales for the three months but an increase for the nine months, with gross margin improving in both periods - Net sales decreased by $6 million (5%) for the three months ended September 30, 2023, due to lower volumes, but increased by $18 million (6%) for the nine months, driven by price and product mix[224][226] - Gross margin as a percentage of net sales improved to 21% (3 months) and 22% (9 months) in 2023, up from 17% and 18% in 2022, respectively[225][226] Real Estate Segment The Real Estate segment's net sales significantly increased due to an investment property sale, while other revenues from operations also grew from improved occupancy and fees - Net sales increased by $15 million (107%) for the three months ended September 30, 2023, due to the sale of an investment property[228] - Other revenues from operations increased by $3 million (16%) for the three months and $15 million (35%) for the nine months, driven by improved occupancy/rates at the resort, increased country club membership fees, a lease termination, and related party leases[229][231] Home Fashion Segment The Home Fashion segment's net sales decreased due to normalized demand and slowed retail sales, but gross margin improved from lower costs - Net sales decreased by $3 million (6%) for the three months and $41 million (24%) for the nine months ended September 30, 2023[233][234] - The decline was attributed to normalized hospitality demand, absence of a 2022 FIFA World Cup textile award, and slowed retail sales with trimmed inventory[233][234] - Gross margin as a percentage of net sales improved to 20% (3 months) and 21% (9 months) in 2023, up from 14% and 17% in 2022, respectively, due to lower costs[233][234] Pharma Segment The Pharma segment experienced significant increases in net sales and gross margin, driven by higher prescription growth - Net sales increased by $12 million (92%) for the three months and $22 million (48%) for the nine months ended September 30, 2023, driven by higher prescription growth[236][237] - Gross margin as a percentage of net sales improved to 40% (3 months) and 40% (9 months) in 2023, up from 15% and 24% in 2022, respectively[236][237] Holding Company The Holding Company's results reflect a significant loss on subsidiary deconsolidation and a credit loss on a related party note, alongside decreased SG&A costs and increased interest expense - The Holding Company recorded a $246 million loss on deconsolidation of a subsidiary and a $139 million credit loss on a related party note receivable for the nine months ended September 30, 2023[239][240] - Consolidated selling, general and administrative costs decreased by $96 million (31%) for the three months and $268 million (29%) for the nine months ended September 30, 2023, primarily due to the deconsolidation of Auto Plus[241][242] - Consolidated interest expense increased by $9 million (6%) for the three months and $2 million (0%) for the nine months ended September 30, 2023, mainly due to higher rates on broker balances and increased short corporate bond exposure in the Investment segment[243][244] Liquidity and Capital Resources The company's liquidity relies on various funding sources, with the Holding Company maintaining compliance with debt covenants and the Investment segment managing significant notional exposures - Holding Company cash flow depends on divestitures, equity offerings, debt financings, interest income, and distributions from subsidiaries[246] Holding Company Financials (in millions) | Metric | Sep 30, 2023 (in millions) | Dec 31, 2022 (in millions) | | :------------------------------------------ | :----------- | :----------- | | Cash and cash equivalents | ~$1,800 | ~$1,720 | | Total Debt | $5,308 | $5,309 | | Investments in Investment Funds | ~$3,600 | ~$4,200 | - The Holding Company is in compliance with all debt covenants, but is not permitted to incur additional indebtedness, though debt refinancings are allowed[255] - The Investment Funds had a net short notional exposure of 41% as of September 30, 2023 (88% long, 128% short)[263] - Mr. Icahn and his affiliates redeemed $2,022 million from the Investment Funds during the nine months ended September 30, 2023[269] - The Energy segment paid $178 million in dividends to the Holding Company during the nine months ended September 30, 2023, with an additional $133 million expected post-September 30[285] Critical Accounting Estimates This section refers to the critical accounting estimates detailed in the Annual Report on Form 10-K for the year ended December 31, 2022 - Critical accounting estimates are consistent with those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[293][294] Recently Issued Accounting Standards This section refers to Note 2 for a discussion of recent accounting pronouncements applicable to the company - Refer to Note 2 for details on recently issued accounting standards[295] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk stems from its Investment segment's exposure to fair value movements, with a 10% adverse change potentially impacting investments, securities sold, and derivatives significantly - Predominant market risk exposure is related to the Investment segment and fair value movements of its investments[297][298] - A 10% adverse change in fair value of investments, securities sold not yet purchased, and derivatives could negatively impact them by approximately $318 million, $380 million, and $760 million, respectively[299] - The impact on the company's share of net gain/loss from investment activities would be less than the total change in fair value due to its approximately 60% interest in the Investment Funds[299] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of September 30, 2023[300] - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2023[301] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is subject to various lawsuits in the normal course of business, with no material changes reported compared to the prior annual report - The company is involved in routine litigation, with no material changes reported compared to the prior annual report[305] - Further information on lawsuits and proceedings is incorporated by reference from Note 18, 'Commitments and Contingencies'[305] Item 1A. Risk Factors Key risk factors include the significant influence of the general partner and Mr. Icahn, potential impacts from pledged units or withdrawals, short-selling strategies, regulatory investigations, and the risk of losing partnership tax status - Mr. Icahn, through affiliates, owns 85% of outstanding depositary units and controls the general partner, giving him significant influence[308] - Mr. Icahn has pledged 335,617,140 depositary units and approximately $1.4 billion of Investment Funds interests as collateral for personal loans[310] - A significant decline in the company's indicative net asset value or Investment Funds' value could trigger margin calls on Mr. Icahn's pledged assets[313] - The company is subject to short-selling strategies, regulatory inquiries (U.S. Attorney's office, SEC), and related securities class action and derivative lawsuits, but does not currently believe these will have a material impact[317][319] - Risk of becoming taxable as a corporation if less than 90% of gross income is 'qualifying' income, which would significantly reduce funds available for distributions and debt payments[320][321] - Future cash distributions to unitholders are not assured and depend on various factors, including cash flow, capital requirements, financing restrictions, and Mr. Icahn's election to receive units instead of cash[324][325] Item 5. Other Information No director or officer adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the last fiscal quarter - No director or officer adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the last fiscal quarter[327] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications and Inline XBRL Taxonomy Extension documents - Exhibits include CEO and CFO certifications under Section 302(a) and Section 906 of the Sarbanes-Oxley Act, and Inline XBRL Taxonomy Extension documents[327]