Icahn Enterprises(IEP) - 2023 Q4 - Annual Report

PART I Item 1. Business Icahn Enterprises L.P. is a diversified holding company focused on activist investing and operating across multiple industrial and service segments Business Overview Icahn Enterprises L.P. is a diversified holding company, a Delaware master limited partnership, with Carl C. Icahn and affiliates controlling approximately 86% of outstanding units - Icahn Enterprises L.P. is a master limited partnership formed in Delaware (1987) and headquartered in Sunny Isles Beach, Florida[22] - The company is a diversified holding company with subsidiaries in Investment, Energy, Automotive, Food Packaging, Real Estate, Home Fashion, and Pharma[22] - Carl C. Icahn and his affiliates owned approximately 86% of outstanding depositary units as of December 31, 2023, and control the general partner[23] Business Strategy and Core Strengths The 'Icahn Strategy' involves identifying undervalued companies using the Graham & Dodd tradition and actively engaging to unlock shareholder value through influence or control - The 'Icahn Strategy' involves finding undervalued companies based on Graham & Dodd methodology and actively engaging to improve shareholder value[25] - Activist approaches include influencing management, acquiring controlling interests, or outright ownership to implement necessary changes[25][31] - Core strengths include identifying undervalued assets, increasing value through management/financial/operational changes, and managing complex legal, regulatory, or financial issues[34] Business Description Icahn Enterprises operates seven diversified reporting segments, with Investment managing proprietary capital and Energy and Automotive being major revenue contributors - The Investment segment invests proprietary capital through private investment funds, led by Mr. Icahn, focusing on undervalued securities and activist engagement[42][43][46] - The Energy segment, primarily CVR Energy, is involved in petroleum refining and nitrogen fertilizer manufacturing, accounting for 83% of consolidated net sales in 2023[49][51] - The Automotive segment's Aftermarket Parts distributor, Auto Plus, filed for Chapter 11 bankruptcy in January 2023, leading to its deconsolidation and a significant reduction in the segment's net sales[63][64] - Other operating segments include Food Packaging (Viskase), Real Estate, Home Fashion (WestPoint Home), and Pharma (Vivus); the Metals segment was sold in December 2021[67][68][70][71][72] - The company has approximately 15,000 employees across its operating segments, with 38 at the Holding Company and Investment segment[73] - Icahn Enterprises is a diversified holding company with seven continuing operating businesses: Investment, Energy, Automotive, Food Packaging, Real Estate, Home Fashion, and Pharma[22] - The core business strategy is activist investing, identifying undervalued companies and actively engaging to improve shareholder value, potentially through management influence, acquiring controlling interests, or outright ownership[25][31][39] - The Investment segment derives revenue from gains and losses from investment transactions, while other operating segments primarily generate revenue from net sales of products and services[40] Consolidated Net Sales Contribution by Segment (2021-2023) | Segment | 2023 (%) | 2022 (%) | 2021 (%) | | :------------- | :------- | :------- | :------- | | Energy | 83 | 81 | 70 | | Automotive | 9 | 13 | 17 | | Other Segments | 8 | 6 | 13 | Item 1A. Risk Factors Investing in Icahn Enterprises' securities involves significant risks across its structure, liquidity, investment segment, operating subsidiaries, and general economic conditions Risks Relating to Our Structure Structural risks include the significant influence of the general partner and controlling unitholder, potential for becoming an investment company, and adverse tax implications - Carl C. Icahn and his affiliates own approximately 86% of outstanding depositary units, giving them significant influence over operations and affairs[79] - Mr. Icahn has pledged 352,677,938 depositary units and approximately $1.3 billion of Investment Funds interests as collateral for personal loans, with margin calls now based on indicative net asset value rather than market price[81][82] - The company is subject to the risk of inadvertently becoming an investment company, which would lead to extensive, restrictive regulations and potential corporate taxation[89][90] - Unitholders may be required to pay U.S. federal income tax on their allocated share of income even if they do not receive cash distributions[99] - As a 'controlled company' under Nasdaq rules, the company is exempt from certain corporate governance requirements, such as having a majority of independent directors or independent compensation/nominating committees[117][119] - The company and its subsidiaries are jointly and severally liable for certain pension plan obligations of entities where Mr. Icahn has at least an 80% ownership interest, such as Viskase and ACF, with an aggregate underfunding of approximately $34 million as of December 31, 2023[113][114] - The company has been subject to short selling strategies, regulatory investigations (SEC, U.S. Attorney's office), and class action lawsuits since May 2023, which have impacted unit price and increased volatility[127][128] Risks Relating to Liquidity and Capital Requirements Liquidity risks stem from dependence on subsidiary cash flows, substantial indebtedness, and potential negative performance of the Investment Funds - As a holding company, liquidity and ability to meet debt obligations and make distributions depend on cash flow from subsidiaries, which may be restricted by law or debt agreements[131][132][133] - Failure to comply with debt covenants could result in an event of default, materially affecting financial condition[135] - Significant investments in the Investment Funds (approximately $3.2 billion fair value as of December 31, 2023) mean negative performance could materially impact operating results, cash flows, and financial position[138] - Future cash distributions to unitholders are not assured and depend on various factors, including cash flow, capital requirements, and financing restrictions[139][140] - Mr. Icahn and his affiliates, owning 86% of units, have elected to receive distributions in a mix of cash and units, which could reduce cash available for other unitholders[140] Risks Relating to Our Investment Segment The Investment segment faces substantial risks from market volatility, concentration of investments, and amplified losses due to leverage - Investment success is subject to significant uncertainties, including interest rate fluctuations, economic conditions, lack of diversification, and the effectiveness of activist strategies[142][150] - Historical financial information for the Investment Funds is not indicative of future performance due to changing market conditions and investment decisions[145] - The Investment Funds' strategy involves numerous risks, including potential loss of all investments, magnified by concentration (top five holdings were approximately $1.9 billion, or 35% of AUM, as of December 31, 2023) and investments in undervalued/distressed securities[146][148][149][150][171] - The use of leverage (e.g., options, short sales, swaps, margin borrowings) can significantly enhance the possibility of substantial losses[160][161] - Increased regulation, such as the Dodd-Frank Act, could impose additional burdens and adversely affect profitability[166][167] - Hedging activities may not always be successful or effective in limiting potential risks of loss due to imperfect correlation or timing challenges[168][169] - Investments in non-U.S. companies expose the funds to additional risks like currency exchange fluctuations, political instability, and less stringent regulatory oversight[172] Risks Relating to our Consolidated Operating Subsidiaries Operating subsidiaries face risks from evolving regulations, catastrophic operational disruptions, environmental liabilities, and highly volatile commodity prices - Changes in regulations and regulatory actions, especially in the Energy segment, can increase compliance costs and require operational changes[177] - Operating subsidiaries are exposed to risks of operational disruptions, property damage, and environmental/legal liabilities, potentially incurring significant uninsured costs[178] - Extensive environmental laws and regulations (e.g., Clean Air Act, CERCLA, RCRA, RFS, climate change laws, PFAS) could require substantial capital expenditures and lead to material liabilities[179][180][181][182] - The Energy segment's businesses are highly sensitive to cyclical and volatile commodity prices (crude oil, refined products, natural gas, nitrogen fertilizer), impacting margins and operating costs[183][184][185][186][188] - Compliance with the U.S. EPA Renewable Fuel Standard (RFS) poses significant costs and volatility due to RIN prices, potentially displacing refined products and lowering earnings[189][190] - Competition from larger entities may require significant capital investment, and investments may not achieve desired results, as exemplified by Auto Plus's Chapter 11 filing and $246 million non-cash charge[194] - International operations expose subsidiaries to risks from local economic/political conditions, currency fluctuations, and import/export restrictions[195][196] - Substantial indebtedness in subsidiaries could restrict business activities, require significant cash flow for debt service, and increase vulnerability to adverse economic conditions[199][200][204] - Significant labor disputes involving any business or its customers/suppliers could adversely affect financial performance[202] General Risk Factors All businesses are susceptible to general economic factors such as terrorism, health epidemics, inflation, volatile interest rates, cybersecurity threats, and reliance on key personnel - All businesses are subject to general risks including terrorism, health epidemics, financing availability, inflation, interest rate volatility, competition, and litigation[204][205][212] - The company's decentralized business model requires qualified management and personnel, and shortages could negatively impact operations[208] - Future pandemics could materially impact operations, financial performance, and supply chains, exacerbating existing risks[209][210][211][214] - Global economic conditions, including conflicts in Ukraine and the Middle East, contribute to inflationary pressures, increased commodity prices, and adverse impacts on demand and costs[215][216] - Cybersecurity threats, including sophisticated attacks and AI-driven techniques, pose risks of system disruption, data breaches, and adverse financial impacts[217] - Investor and market sentiment regarding ESG matters (climate change, fossil fuels) could adversely affect the business and cost of capital, particularly for the Energy segment[219] - Mr. Icahn and his affiliates, holding approximately 86% of depositary units, exert significant influence over the company, and potential sales of pledged units could impact liquidity and unit price[77][79][81] - The company faces the risk of inadvertently becoming an investment company under the Investment Company Act of 1940, which would subject it to extensive and restrictive regulations[89][90] - Tax risks include potential reclassification as a corporation for U.S. federal income tax purposes if less than 90% of gross income is 'qualifying' income, and unitholders may pay tax on income not yet distributed[94][99] - The company is a holding company, dependent on its subsidiaries' cash flows to service debt and make distributions, and these cash flows can be restricted by legal or debt covenants[131][132][133] - The Investment Funds' performance is subject to significant uncertainties, including market fluctuations, lack of control in minority investments, concentration risk (top five holdings were ~35% of AUM as of Dec 31, 2023), and the use of leverage[142][146][148][149][160] - Operating subsidiaries face risks from extensive environmental regulations (e.g., RFS, climate change laws), volatility of commodity prices (especially in Energy), intense competition, and operational disruptions[177][179][181][183][189][194] - General risks include global economic conditions, inflation, cybersecurity threats, and the need for qualified personnel[204][208][215][216][217] Item 1B. Unresolved Staff Comments There are no unresolved staff comments from the SEC - The company has no unresolved staff comments[223] Item 1C. Cybersecurity Icahn Enterprises maintains a comprehensive cybersecurity risk management program, based on NIST frameworks, with Board oversight and no material threats identified - The company has a holistic cybersecurity risk management program, following NIST frameworks, to protect systems and data[225] - The program includes incident response plans, risk assessments, technical safeguards, and mandatory annual employee training[225] - The Board of Directors and its Audit Committee oversee cybersecurity risks, receiving regular reports from management and the CIO[227] - No identified cybersecurity threats have materially affected or are reasonably likely to materially affect the company's operations or financial condition[226] Item 2. Properties Icahn Enterprises' operating segments own and lease various properties, including oil refineries, fertilizer plants, automotive stores, manufacturing facilities, and real estate investments - Holding Company and Investment segment lease office space in Sunny Isles Beach, Florida[229] - Energy segment (CVR Energy) owns and operates oil refineries in Kansas and Oklahoma, and fertilizer plants in Kansas and Illinois, along with storage facilities[229][231] - Automotive segment operates approximately 920 company-owned stores, 744 franchise locations, and 27 tire hub/distribution centers across the U.S., with about 80% of facilities leased[232] - Food Packaging (Viskase) has ten manufacturing facilities in North America, Europe, South America, and Asia[233] - Real Estate segment includes investment properties (land, retail, office, industrial), single-family home development, and resort/country club operations[68][69] Item 3. Legal Proceedings The company is routinely involved in litigation in the ordinary course of business, with specific details provided in Note 19 to the financial statements - The company is subject to litigation in the ordinary course of business[234] - Information regarding specific lawsuits and proceedings is detailed in Note 19, 'Commitments and Contingencies,' to the consolidated financial statements[234] Item 4. Mine Safety Disclosures This item is not applicable to the company PART II Item 5. Market for Registrant's Common Equity, Related Security Holder Matters and Issuer Purchases of Equity Securities Icahn Enterprises' depositary units are traded on the Nasdaq Global Select Market under the symbol "IEP," with 429,033,241 units outstanding as of February 28, 2024 - Icahn Enterprises' depositary units trade on the Nasdaq Global Select Market under the symbol "IEP"[4][237] - As of December 31, 2023, there were approximately 1,800 record holders of depositary units[237] - As of February 28, 2024, there were 429,033,241 depositary units outstanding[4] Item 6. Reserved This item is not applicable and has been reserved Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of Icahn Enterprises' financial condition and results, highlighting the diversified nature of its businesses, key developments, and critical accounting estimates Executive Overview Icahn Enterprises L.P. is a diversified holding company controlled by Carl C. Icahn and affiliates, with recent developments including the Auto Plus bankruptcy and strategic debt management - Icahn Enterprises is a diversified holding company with Investment, Energy, Automotive, Food Packaging, Real Estate, Home Fashion, and Pharma segments[240] - Carl C. Icahn and his affiliates owned approximately 86% of outstanding depositary units as of December 31, 2023[241] - The Auto Plus subsidiary (Automotive segment) filed for Chapter 11 bankruptcy on January 31, 2023, leading to its deconsolidation and a $246 million non-cash charge[242] - The company repurchased $92 million aggregate principal amount of senior unsecured notes for $84 million cash in late 2023[243] - In December 2023, $700 million in 9.750% senior unsecured notes due 2029 were issued, with proceeds used to satisfy and discharge the remaining 4.750% senior unsecured notes due 2024[244] Results of Operations Consolidated financial results for 2023 were significantly impacted by a $1,012 million net loss, primarily driven by negative Investment segment performance and the Auto Plus deconsolidation Consolidated Financial Results (in millions) | Metric | 2023 | 2022 | 2021 | | :----------------------------------------- | :-------- | :-------- | :-------- | | Revenues | $10,847 | $14,101 | $11,338 | | Net (loss) income from continuing operations | $(1,012) | $(25) | $(500) | | Net (loss) income attributable to Icahn Enterprises | $(684) | $(183) | $(518) | | Basic and Diluted loss per LP unit | $(1.75) | $(0.57) | $(2.32) | | Distributions declared per LP unit | $6.00 | $8.00 | $8.00 | - The Investment Funds' returns were (16.9)% in 2023, (2.4)% in 2022, and (0.3)% in 2021, with 2023 negative performance driven by net losses in both short and long positions[255][256] Energy Segment Net Sales and Gross Profit (in millions) | Metric | 2023 | 2022 | 2021 | | :----------- | :------ | :------- | :------ | | Net sales | $9,247 | $10,896 | $7,242 | | Gross profit | $1,228 | $1,085 | $173 | | Gross margin | 13% | 10% | 2% | - Automotive segment net sales and other revenues decreased by $664 million (28%) in 2023, primarily due to the deconsolidation of Auto Plus[271] - Food Packaging net sales increased by $15 million (3%) in 2023, with gross margin improving to 21% from 17%[274] - Real Estate net sales increased by $8 million (13%) in 2023, driven by single-family home sales and an investment property sale[277] - Home Fashion net sales decreased by $42 million (19%) in 2023 due to normalized hospitality demand and retail slowdowns, but gross margin improved to 21% from 14%[280] - Pharma net sales increased by $27 million (41%) in 2023 due to higher prescription growth, with gross margin improving to 40% from 27%[282] - The Holding Company recorded a $246 million loss on deconsolidation of Auto Plus and a $139 million credit loss on a related party note receivable in 2023[284][285] Liquidity and Capital Resources Icahn Enterprises' liquidity is driven by subsidiary cash flows, debt financings, and investment performance, with the Holding Company holding $1.6 billion in cash and $4.8 billion in total debt as of December 31, 2023 - Holding Company's cash flow depends on subsidiary loans, dividends, distributions, divestitures, equity offerings, debt financings, and returns from Investment Funds[291] Holding Company Financial Position (in millions) | Metric | December 31, 2023 | December 31, 2022 | | :----------------- | :---------------- | :---------------- | | Cash & Equivalents | $1,600 | $1,720 | | Total Debt | $4,847 | $5,309 | | Investments in Investment Funds | $3,200 | $4,200 | - In December 2023, the Holding Company issued $700 million in 9.750% senior unsecured notes due 2029 to satisfy outstanding 4.750% senior unsecured notes due 2024[296] - The company has an 'at-the-market' offering program, selling 3,395,353 depositary units for $175 million in 2023, with $149 million remaining availability[303] - A repurchase program for up to $500 million of senior notes and $500 million of depositary units was approved in May 2023; $92 million of senior notes were repurchased by year-end[309] - The Investment Funds had a net short notional exposure of 36% as of December 31, 2023 (89% long, 125% short)[314] - Mr. Icahn and his affiliates redeemed $2.0 billion from the Investment Funds in 2023[320] Segment Cash and Cash Equivalents (in millions) | Segment | December 31, 2023 | | :------------- | :---------------- | | Energy | $1,179 | | Automotive | $104 | | Food Packaging | $8 | | Real Estate | $22 | | Home Fashion | $5 | | Pharma | $26 | | Total | $1,344 | Segment Debt (in millions) | Segment | December 31, 2023 | | :------------- | :---------------- | | Energy | $2,185 | | Automotive | $33 | | Food Packaging | $133 | | Real Estate | $1 | | Home Fashion | $8 | | Total | $2,360 | - Consolidated cash provided by operating activities was $3,736 million in 2023, primarily driven by the Investment segment's net investment transactions[335] - Consolidated capital expenditures were $303 million in 2023, with an additional $57 million in turnaround expenditures for the Energy segment[357] Critical Accounting Estimates Critical accounting estimates involve income taxes, investment valuation, and long-lived assets/goodwill, requiring significant management judgment and assumptions - Critical accounting estimates include income taxes, valuation of investments, and long-lived assets and goodwill[360] - Income tax estimates involve deferred tax assets and liabilities, valuation allowances, and the ability to realize tax benefits, with a valuation allowance of approximately $860 million as of December 31, 2023[361][364][636] - Investment valuation is based on observable market prices when available; for less liquid assets, fair value is determined by management using judgment and assumptions[366] - Long-lived assets and goodwill are reviewed for impairment annually or when indicators exist, using discounted cash flow (DCF) analysis and market-based approaches, requiring significant judgment on future cash flows, discount rates, and growth rates[370][372][373] - The Automotive segment recognized a $7 million impairment charge on trademarks and brand names in Q4 2023 due to decreased projected revenue growth[371][581] Recently Issued Accounting Standards The company adopted ASU 2022-04 and ASU 2020-04 with no significant impact and is assessing future standards like ASU 2023-09, ASU 2023-07, and ASU 2022-03 - Adopted ASU 2022-04 (Supplier Finance Programs) and ASU 2020-04 (Reference Rate Reform) effective January 1, 2023, with no significant impact[514][515] - Assessing impact of ASU 2023-09 (Income Tax Disclosures) effective January 1, 2025[516][517] - Assessing impact of ASU 2023-07 (Segment Reporting) effective January 1, 2024[518] - Assessing impact of ASU 2022-03 (Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions) effective January 1, 2024[519] - Icahn Enterprises is a diversified holding company with subsidiaries in Investment, Energy, Automotive, Food Packaging, Real Estate, Home Fashion, and Pharma[240] - Carl C. Icahn and his affiliates owned approximately 86% of outstanding depositary units as of December 31, 2023[241] - The Automotive segment's Auto Plus subsidiary filed for Chapter 11 bankruptcy on January 31, 2023, leading to its deconsolidation and a non-cash charge of $246 million[242] - The company repurchased $92 million aggregate principal amount of senior unsecured notes for $84 million cash in late 2023 and issued $700 million in 9.750% senior unsecured notes due 2029 to satisfy outstanding 2024 notes[243][244] Consolidated Financial Results (in millions) | Metric | 2023 | 2022 | 2021 | | :----------------------------------------- | :-------- | :-------- | :-------- | | Revenues | $10,847 | $14,101 | $11,338 | | Net (loss) income from continuing operations | $(1,012) | $(25) | $(500) | | Net (loss) income attributable to Icahn Enterprises | $(684) | $(183) | $(518) | | Basic and Diluted loss per LP unit | $(1.75) | $(0.57) | $(2.32) | | Distributions declared per LP unit | $6.00 | $8.00 | $8.00 | - The Investment Funds' returns were (16.9)% in 2023, (2.4)% in 2022, and (0.3)% in 2021, with 2023 negative performance driven by net losses in both short and long positions[255][256] - Energy segment net sales decreased by $1.6 billion (15%) in 2023 due to lower refined product and nitrogen fertilizer prices, but gross profit improved by $143 million due to lower feedstock costs and a favorable RINs liability revaluation[264][265] - Automotive segment net sales and other revenues decreased by $664 million (28%) in 2023, primarily due to the deconsolidation of Auto Plus[271] - The Holding Company's cash and cash equivalents were approximately $1.6 billion, with total debt of $4.8 billion as of December 31, 2023[292] - Consolidated capital expenditures are estimated to be $226 million to $250 million for Energy, $73 million for Automotive, and $29 million for other segments in 2024[358] Item 7A. Quantitative and Qualitative Disclosures About Market Risk Icahn Enterprises is exposed to significant market risks from equity prices, commodity prices, interest rates, and foreign currency exchange rates, with hedging strategies employed to mitigate volatility - Significant market risks include equity prices, commodity prices, interest rates, and foreign currency exchange rates[377] - Equity price risk is predominant in the Investment segment; a 10% adverse change in fair value of investments (securities owned, sold not yet purchased, derivatives) would decrease fair values by approximately $290 million, $347 million, and $673 million, respectively, as of December 31, 2023[378][380] - Commodity price risk significantly impacts the Energy segment (petroleum and nitrogen fertilizer businesses), which uses hedging strategies to manage volatility in raw material and finished product prices[381][382][384] - Operating subsidiaries have $141 million in variable rate debt as of December 31, 2023; a 1.0% interest rate increase would raise annual interest expense by approximately $1 million[386] - Foreign currency exchange rate risk primarily affects the Food Packaging segment, which recorded a translation gain of $5 million in 2023 and losses in 2022[387][388] - Credit risk arises from investments and derivative instruments; the company monitors counterparty credit quality and diversifies cash investments[389][390][391] - The Energy segment is exposed to compliance program price risk related to the volatility of RINs prices under the Renewable Fuel Standard[392][394] Item 8. Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for Icahn Enterprises L.P. and its subsidiaries, with an unqualified opinion from Grant Thornton LLP, and detailed notes on business description, accounting policies, and key disclosures 1. Description of Business Icahn Enterprises L.P. is a diversified holding company with seven continuing operating segments, controlled by Carl C. Icahn and affiliates, with its Investment segment managing proprietary capital - Icahn Enterprises L.P. is a master limited partnership with seven continuing operating businesses: Investment, Energy, Automotive, Food Packaging, Real Estate, Home Fashion, and Pharma[413][415] - Carl C. Icahn and his affiliates owned approximately 86% of outstanding depositary units as of December 31, 2023, and control the general partner[414] - The Investment segment consists of private investment funds where the company invests proprietary capital, with fair value of investments at approximately $3.2 billion as of December 31, 2023[416] - The Energy segment, through CVR Energy, is engaged in petroleum refining and nitrogen fertilizer manufacturing; the company's ownership in CVR Energy decreased to approximately 66% in 2023[417] - The Automotive segment's Auto Plus subsidiary filed for Chapter 11 bankruptcy on January 31, 2023, leading to its deconsolidation[419] - The Metals segment was sold in December 2021[425] 2. Basis of Presentation and Summary of Significant Accounting Policies Financial statements are prepared under U.S. GAAP, consolidating subsidiaries and VIEs, with key policies covering fair value measurements, cash flow, investments, inventories, long-lived assets, and revenue recognition - Financial statements are prepared under U.S. GAAP, and the company aims to avoid being deemed an investment company under the Investment Company Act of 1940[426][427] - Consolidation includes wholly/majority-owned subsidiaries and Variable Interest Entities (VIEs) where the company is the primary beneficiary, such as Icahn Enterprises Holdings[429][431] - Cash and cash equivalents include highly liquid short-term investments, while restricted cash includes amounts pledged for margin requirements and the captive insurance program[443][444][446] - Investments are carried at fair value, with the Investment segment applying the fair value option to equity method investments[448][455] - Inventories are valued at the lower of cost (FIFO for Energy, Food Packaging, Home Fashion; LIFO for Automotive; weighted-average for Pharma) or net realizable value[458][460] - Long-lived assets and goodwill are reviewed for impairment, with depreciation/amortization computed on a straight-line basis[461][465][467] - Revenue from contracts with customers is recognized when performance obligations are satisfied, with specific policies for each operating segment[488][490][491][498][500][501][502] - Adopted ASU 2022-04 (Supplier Finance Programs) and ASU 2020-04 (Reference Rate Reform) effective January 1, 2023, with no significant impact. Assessing ASU 2023-09 (Income Tax Disclosures), ASU 2023-07 (Segment Reporting), and ASU 2022-03 (Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions) for future impact[514][515][516][517][518][519] 3. Subsidiary Bankruptcy and Deconsolidation IEH Auto Parts Holding LLC (Auto Plus) filed for Chapter 11 bankruptcy on January 31, 2023, leading to its deconsolidation and a $246 million non-cash charge - IEH Auto Parts Holding LLC (Auto Plus), an Automotive segment subsidiary, filed for Chapter 11 bankruptcy on January 31, 2023[520] - The company deconsolidated Auto Plus, recording a non-cash charge of $246 million in 2023[521] - The bankruptcy court approved asset sales, with AEP PLC acquiring $10 million in Aftermarket Parts inventory[520][529] 4. Related Party Transactions Icahn Enterprises engages in transactions with its general partner and affiliates, including investments, expense reimbursements, and lease/parts transactions, with Carl C. Icahn and his affiliates having significant influence - Carl C. Icahn and his affiliates (excluding the company and Brett Icahn) had approximately $2.1 billion invested in the Investment Funds as of December 31, 2023, and redeemed $2.0 billion during 2023[524] - The company is reimbursed $18 million in 2023 for Investment segment operating, administration, and investment activities expenses by the Investment Funds[525] - Post-deconsolidation, Auto Plus engaged in lease agreements and parts purchases/sales with entities in the Automotive and Real Estate segments[526][527] - A related party note receivable from Auto Plus resulted in a $127 million write-off in 2023, with an estimated $11 million remaining collectible[528] - Brett Icahn serves as a portfolio manager for designated assets within the Investment Funds, co-invests, and receives restricted depositary units, with net redemptions of $17 million in 2023[530] 5. Investments The Investment segment's portfolio, comprising equities and debt securities, is reported at fair value, with total investments at $2,898 million and securities sold, not yet purchased, at $3,473 million as of December 31, 2023 - Investment segment's investments and securities sold, not yet purchased, are reported at fair value[532] Investment Segment: Investments and Securities Sold, Not Yet Purchased (in millions) | Category | Dec 31, 2023 | Dec 31, 2022 | | :------------------------------------- | :----------- | :----------- | | Assets | | | | Investments | $2,898 | $6,719 | | Equity securities | $2,611 | $4,619 | | Debt securities | $287 | $2,100 | | Liabilities | | | | Securities sold, not yet purchased | $3,473 | $6,495 | | Equity securities | $3,288 | $6,326 | | Debt securities | $185 | $169 | - Unrealized losses on securities still held by the Investment segment were $(302) million in 2023, compared to $(1,544) million in 2022[534] - The Investment Funds sold their entire investment in Xerox Holding Corporation during Q3 2023, which previously represented approximately 22.0% of outstanding common stock[537] 6. Fair Value Measurements Assets and liabilities measured at fair value are classified into a three-level hierarchy, with total assets at $2,965 million and liabilities at $4,781 million as of December 31, 2023 - Assets and liabilities measured at fair value are classified into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[543][544][545] Assets and Liabilities Measured at Fair Value (in millions) | Category | Dec 31, 2023 Total | Dec 31, 2023 Level 1 | Dec 31, 2023 Level 2 | Dec 31, 2023 Level 3 | | :------------------------------------- | :----------------- | :------------------- | :------------------- | :------------------- | | Assets | $2,965 | $2,730 | $193 | $42 | | Investments | $2,901 | $2,730 | $129 | $42 | | Derivative assets, net | $64 | $0 | $64 | $0 | | Liabilities | $4,781 | $3,288 | $1,493 | $0 | | Securities sold, not yet purchased | $3,473 | $3,288 | $185 | $0 | | Derivative liabilities, net | $979 | $0 | $979 | $0 | | Other liabilities | $329 | $0 | $329 | $0 | - There were no changes in Level 3 investments measured at fair value on a recurring basis during 2023 and 2022[548] - Non-recurring fair value measurements included CVR Partners' equity interest in the 45Q Transaction ($46 million) and the Holding Company's note receivable from Auto Plus ($11 million) as of December 31, 2023[549][550] 7. Financial Instruments The Investment Funds utilize various financial instruments for capital appreciation and hedging, while the Energy segment uses commodity derivatives to manage price risk and fix margins - The Investment Funds trade various financial instruments (futures, options, swaps, short sales) for capital appreciation or economic hedges, leading to off-balance-sheet risks and credit concentrations[551] Investment Segment: Derivative Notional Exposure (in millions) | Primary Underlying Risk | Dec 31, 2023 Long Notional Exposure | Dec 31, 2023 Short Notional Exposure | | :---------------------- | :---------------------------------- | :----------------------------------- | | Equity contracts | $1,882 | $2,350 | | Credit contracts | $0 | $435 | | Commodity contracts | $0 | $409 | Investment Segment: Derivative Gain (Loss) Recognized in Income (in millions) | Category | 2023 | 2022 | 2021 | | :---------------- | :---------- | :---------- | :---------- | | Equity contracts | $(903) | $456 | $(1,100) | | Credit contracts | $(87) | $(586) | $88 | | Commodity contracts | $(26) | $(1) | $0 | | Total | $(1,016) | $(131) | $(1,012) | - The Energy segment uses commodity derivative transactions (futures, swaps) to manage price risk and fix margins on crude oil, refined products, and RINs[564] - As of December 31, 2023, CVR Energy had swap positions for 11 million barrels of refined products and open fixed-price commitments to sell a net 11 million RINs[565] - Gains and losses on Energy segment derivatives were $5 million in 2023, $(55) million in 2022, and $(44) million in 2021, recognized in cost of goods sold[568] 8. Related Party Notes Receivable, Net Related party notes receivable, net, totaled $11 million as of December 31, 2023, after a $139 million credit loss provision and $127 million write-offs primarily due to the Auto Plus bankruptcy Related Party Notes Receivable, Net (in millions) | Metric | December 31, 2023 | | :----------------------------------- | :---------------- | | Related party notes receivable, gross | $23 | | Less: Allowance for expected credit losses | $12 | | Related party notes receivable, net | $11 | Allowance for Expected Credit Losses (in millions) | Metric | December 31, 2023 | | :---------------------- | :---------------- | | Beginning Balance | $0 | | Credit loss provision | $139 | | Write-offs | $(127) | | Ending Balance | $12 | - Write-offs of $127 million for related party notes receivable occurred in 2023, primarily due to the Auto Plus bankruptcy[572] 9. Inventories, Net Total inventories, net, decreased by $484 million to $1,047 million as of December 31, 2023, primarily due to the deconsolidation of Auto Plus Inventories, Net (in millions) | Category | Dec 31, 2023 | Dec 31, 2022 | | :-------------- | :----------- | :----------- | | Raw materials | $367 | $335 | | Work in process | $95 | $105 | | Finished goods | $585 | $1,091 | | Total | $1,047 | $1,531 | - Inventories decreased by $484 million from December 31, 2022, primarily due to the deconsolidation of Auto Plus[573] 10. Property, Plant and Equipment, Net Property, plant and equipment, net, totaled $3,969 million as of December 31, 2023, with machinery, equipment and furniture being the largest component Property, Plant and Equipment, Net (in millions) | Category | Dec 31, 2023 | Dec 31, 2022 | | :--------------------------------- | :----------- | :----------- | | Land | $332 | $331 | | Buildings and improvements | $1,058 | $964 | | Machinery, equipment and furniture | $6,083 | $6,034 | | Assets leased to others | $334 | $321 | | Financing leases | $118 | $106 | | Construction in progress | $275 | $210 | | Less: Accumulated depreciation and amortization | $(4,231) | $(3,928) | | Total, net | $3,969 | $4,038 | - Depreciation and amortization expense for property, plant and equipment was $384 million for the year ended December 31, 2023[575] 11. Goodwill and Intangible Assets, Net Consolidated goodwill remained at $288 million as of December 31, 2023, primarily within the Automotive segment, while intangible assets, net, decreased to $466 million Goodwill by Segment (in millions) | Segment | Dec 31, 2023 Net Carrying Value | | :------------- | :------------------------------ | | Automotive | $250 | | Food Packaging | $6 | | Home Fashion | $19 | | Pharma | $13 | | Consolidated | $288 | - The annual goodwill impairment test for the Automotive segment in 2023 determined no impairment was required[579] Intangible Assets, Net (in millions) | Category | Dec 31, 2023 Net Carrying Value | | :---------------------------- | :------------------------------ | | Definite-lived intangible assets | $390 | | Indefinite-lived intangible assets | $76 | | Total, net | $466 | - Amortization expense for definite-lived intangible assets was $58 million in 2023[576] - The Automotive segment recognized a $7 million impairment charge on trademarks and brand names in Q4 2023 due to decreased projected revenue growth[581] 12. Leases The company has operating and finance leases primarily within its Automotive, Energy, and Food Packaging segments, with operating lease right-of-use assets of $526 million as of December 31, 2023 - The company has operating and finance leases primarily in its Automotive, Energy, and Food Packaging segments[582] Lease Assets and Liabilities (in millions) | Category | Dec 31, 2023 Right-of-Use Assets | Dec 31, 2023 Lease Liabilities | | :-------------- | :------------------------------- | :----------------------------- | | Operating Leases | $526 | $531 | | Financing Leases | $55 | $70 | - Total lease cost for 2023 was $177 million for operating leases, $8 million for amortization of finance lease ROU assets, and $5 million for interest expense on finance lease liabilities[585] - The Automotive segment accounted for $143 million of total lease cost in 2023[586] - As a lessor, the Automotive segment generated $56 million in operating lease revenues in 2023, and the Real Estate segment generated $17 million[587][588] 13. Debt Total consolidated debt was $7,207 million as of December 31, 2023, with the Holding Company and Energy segment undertaking significant debt issuances and redemptions Total Debt by Segment (in millions) | Segment | Dec 31, 2023 | Dec 31, 2022 | | :------------- | :----------- | :----------- | | Holding Company | $4,847 | $5,309 | | Energy | $2,185 | $1,591 | | Automotive | $33 | $21 | | Food Packaging | $133 | $162 | | Real Estate | $1 | $1 | | Home Fashion | $8 | $12 | | Total Debt | $7,207 | $7,096 | - In December 2023, the Holding Company issued $700 million in 9.750% senior unsecured notes due 2029 to satisfy and discharge the remaining 4.750% senior unsecured notes due 2024[593] - The Energy segment issued $600 million in 8.50% senior unsecured notes due 2029 in December 2023, used to redeem its 5.250% senior unsecured notes due 2025 in February 2024[601][602] - All subsidiaries were in compliance with debt covenants as of December 31, 2023[600][608] Consolidated Debt Maturities (in millions) | Year | Amount | | :--------- | :----- | | 2024 | $637 | | 2025 | $763 | | 2026 | $1,338 | | 2027 | $1,450 | | 2028 | $950 | | Thereafter | $2,010 | | Total | $7,148 | 14. Net Income (Loss) Per LP Unit For 2023, the net loss attributable to Icahn Enterprises from continuing operations allocated to limited partners was $(670) million, resulting in a basic and diluted loss per LP unit of $(1.75) Net Income (Loss) Per LP Unit (in millions, except per unit amounts) | Metric | 2023 | 2022 | 2021 | | :------------------------------------------------------------------ | :-------- | :-------- | :-------- | | Net loss attributable to Icahn Enterprises from continuing operations allocable to limited partners | $(670) | $(179) | $(604) | | Basic and diluted loss per LP unit | $(1.75) | $(0.57) | $(2.32) | | Basic and diluted weighted average LP units outstanding | 382 | 316 | 260 | - In 2023, 72,060,733 depositary units were distributed to unitholders, with 67,882,278 units distributed to Mr. Icahn and his affiliates[617] - The company sold 3,395,353 depositary units for $175 million through its 'at-the-market' offering program in 2023[619] - A repurchase program for up to $500 million of senior notes and $500 million of depositary units was approved in May 2023; no depositary units were repurchased by year-end[620] 15. Segment and Geographic Reporting Icahn Enterprises' segments reported varied financial performance in 2023, with the Investment segment incurring a $(1,353) million net loss and Energy a $831 million net income, while most net sales originated from the United States Condensed Statements of Operations by Segment (in millions) - 2023 | Segment | Revenues | Net (Loss) Income | | :------------- | :-------- | :---------------- | | Investment | $(1,165) | $(1,353) | | Energy | $9,297 | $831 | | Automotive | $1,754 | $(6) | | Food Packaging | $435 | $13 | | Real Estate | $143 | $16 | | Home Fashion | $175 | $(6) | | Pharma | $98 | $(3) | | Holding Company | $110 | $(504) | | Consolidated | $10,847 | $(1,012) | Geographic Net Sales and Other Revenues (in millions) | Region | 2023 Net Sales | 2023 Other Revenues | | :------------ | :------------- | :------------------ | | United States | $10,687 | $742 | | International | $390 | $28 | | Total | $11,077 | $770 | Energy Segment Disaggregated Revenue (in millions) | Product | 2023 | 2022 | 2021 | | :------------------------- | :-------- | :-------- | :-------- | | Petroleum products | $8,566 | $10,060 | $6,709 | | Nitrogen fertilizer products | $681 | $836 | $533 | | Total | $9,247 | $10,896 | $7,242 | Automotive Segment Disaggregated Revenue (in millions) | Revenue Source | 2023 | 2022 | 2021 | | :------------------------- | :-------- | :-------- | :-------- | | Automotive Services | $1,548 | $1,552 | $1,377 | | Aftermarket Parts sales | $137 | $797 | $1,007 | | Total revenue from customers | $1,685 | $2,349 | $2,384 | | Lease revenue outside scope ASC 606 | $56 | $45 | $10 | | Total Automotive net sales and other revenues from operations | $1,741 | $2,394 | $2,394 | 16. Income Taxes The company's income tax expense for continuing operations was $(90) million in 2023, with deferred tax assets of $794 million and a valuation allowance of $860 million primarily related to NOL carryforwards Income Tax Benefit (Expense) Attributable to Continuing Operations (in millions) | Category | 2023 | 2022 | 2021 | | :------------ | :-------- | :-------- | :-------- | | Current | $(138) | $(182) | $(90) | | Deferred | $48 | $148 | $168 | | Total | $(90) | $(34) | $78 | Reconciliation of Income Tax Benefit (Expense) at U.S. Statutory Rate (in millions) | Item | 2023 | 2022 | 2021 | | :--------------------------------- | :-------- | :-------- | :-------- | | Income tax benefit at U.S. statutory rate | $193 | $(2) | $121 | | Valuation allowance | $(1) | $100 | $13 | | Non-controlling interest | $23 | $38 | $10 | | Income not subject to taxation | $(239) | $(88) | $(64) | | Deconsolidation | $23 | $0 | $0 | | Tax gain not on books | $(83) | $0 | $0 | | State taxes | $(26) | $(49) | $0 | | Other adjustments | $(3) | $(10) | $9 | | Income tax benefit (expense) | $(90) | $(34) | $78 | Deferred Tax Assets (Liabilities) (in millions) | Category | Dec 31, 2023 | Dec 31, 2022 | | :------------------------ | :----------- | :----------- | | Total deferred tax assets | $1,654 | $1,543 | | Less: Valuation allowance | $(860) | $(866) | | Net deferred tax assets | $794 | $677 | | Total deferred tax liabilities | $(1,009) | $(907) | | Net deferred tax assets (liabilities) | $(215) | $(230) | - AEPC, a corporate subsidiary, had U.S. federal net operating loss carryforwards of approximately $3.2 billion as of December 31, 2023[637] - Unrecognized tax benefits were $10 million as of December 31, 2023, with a potential decrease of $2 million in the next 12 months due to statute expirations[640][641] 17. Changes in Accumulated Other Comprehensive Loss Accumulated other comprehensive loss decreased from $(70) million to $(55) million at December 31, 2023, primarily due to a $12 million positive translation adjustment Changes in Accumulated Other Comprehensive Loss (in millions) | Category | Dec 31, 2022 Balance | Other Comprehensive Income, Net of Tax | Dec 31, 2023 Balance | | :------------------------------------- | :------------------- | :------------------------------------- | :------------------- | | Translation Adjustments, Net of Tax | $(45) | $12 | $(33) | | Post-Retirement Benefits and Other, Net of Tax | $(25) | $3 | $(22) | | Total | $(70) | $15 | $(55) | 18. Other Loss, Net Other loss, net, was $(69) million in 2023, a significant improvement from $(177) million in 2022, primarily due to a $13 million gain on extinguishment of debt and the absence of a $76 million legal settlement loss Other Loss, Net (in millions) | Item | 2023 | 2022 | 2021 | | :------------------------------------- | :-------- | :-------- | :-------- | | Dividend expense | $(87) | $(95) | $(75) | | Equity earnings from non-consolidated affiliates | $12 | $10 | $8 | | Foreign currency transaction loss | $1 | $(3) | $(14) | | Legal settlement loss | $0 | $(76) | $0 | | Gain (loss) on extinguishment of debt, net | $13 | $(2) | $(5) | | Other | $(8) | $(11) | $2 | | Total | $(69) | $(177) | $(84) | 19. Commitments and Contingencies The company faces environmental liabilities, RFS compliance costs, ongoing legal proceedings, and pension obligations, with significant unconditional purchase obligations for its Energy and Pharma segments - Consolidated environmental liabilities were $19 million as of December 31, 2023, primarily in the Energy segment[646] - The Energy segment recognized a $114 million benefit in 2023 (vs. $435 million expense in 2022) for compliance with the Renewable Fuel Standard (RFS), with an RFS position of $329 million as of December 31, 2023[648] - CVR Partners is obligated to meet minimum carbon dioxide supply quantities under a 45Q Transaction, with potential fees up to $15 million annually[651] - Ongoing legal matters include a call option coverage case for the Energy segment and securities class action lawsuits and government inquiries (SEC, U.S. Attorney's office) related to corporate governance and disclosures, initiated in May 2023[653][660] - Pension plans for Viskase and ACF (entities within Mr. Icahn's controlled group) were underfunded by an aggregate of approximately $34 million as of December 31, 2023, for which the company could be liable[657] Unconditional Purchase Obligations (in millions) | Year | Energy | Pharma | | :--------- | :----- | :----- | | 2024 | $73 | $15 | | 2025 | $73 | $11 | | 2026 | $67 | $11 | | 2027 | $66 | $12 | | 2028 | $66 | $12 | | Thereafter | $147 | $12 | | Total | $492 | $73 | 20. Pension and Other Post-Retirement Benefit Plans Pension and other post-retirement benefit plan costs and obligations are primarily within the Food Packaging segment (Viskase), with a funded status deficit of $(27) million as of December 31, 2023 - Pension and other post-retirement benefit plan costs and obligations are primarily within the Food Packaging segment (Viskase)[665] Viskase Pension Benefits: Funded Status (in millions) | Metric | Dec 31, 2023 | Dec 31, 2022 | | :---------------------- | :----------- | :----------- | | Benefit obligation | $116 | $115 | | Fair value of plan assets | $89 | $84 | | Funded status | $(27) | $(31) | - Net periodic benefit cost for Viskase's pension plans was $1 million in 2023[667] Viskase Defined Benefit Plan Assets by Fair Value Hierarchy (in millions) | Category | Dec 31, 2023 Level 1 | Dec 31, 2023 Level 2 | Dec 31, 2023 Total | | :---------------------- | :------------------- | :------------------- | :----------------- | | Cash and cash equivalents | $1 | $39 | $40 | | Government debt securities | $3 | $0 | $3 | | Common stock | $46 | $0 | $46 | | Total | $50 | $39 | $89 | 21. Supplemental Cash Flow Information Supplemental cash flow information for 2023 includes cash payments for interest of $(426) million and income taxes of $(105) million, along with non-cash partnership contributions Supplemental Cash Flow Information (in millions) | Item | 2023 | 2022 | 2021 | | :---------------------------------------------------------------- | :-------- | :-------- | :-------- | | Cash payments for interest, net of amounts capitalized | $(426) | $(438) | $(485) | | Cash (payments) receipts for income taxes, net | $(105) | $(180) | $(72) | | Non-cash dividends to non-controlling interests in subsidiary | $0 | $0 | $(74) | | Partnership contributions receivable | $6 | $0 | $0 | | Non-cash Investment segment contributions from non-controlling interests | $(2) | $0 | $2 | 22. Subsequent Events On February 26, 2024, a quarterly distribution of $1.00 per depositary unit was declared, payable around April 18, 2024, with unitholders having an election option - On February 26, 2024, a quarterly distribution of $1.00 per depositary unit was declared, payable around April 18, 2024[671] - Unitholders have the option to elect cash or additional depositary units, with a default to units if no timely election is made[671] - Grant Thornton LLP issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2023[396][397][684][685] Consolidated Balance Sheets (in millions) | ASSETS | Dec 31, 2023 | Dec 31, 2022 | | :----------------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $2,951 | $2,337 | | Cash held at consolidated affiliated partnerships and restricted cash | $2,995 | $2,549 | | Investments | $3,012 | $6,809 | | Due from brokers | $4,367 | $7,051 | | Accounts receivable, net | $485 | $606 | | Related party notes receivable, net | $11 | $0 | | Inventories | $1,047 | $1,531 | | Property, plant and equipment, net | $3,969 | $4,038 | | Deferred tax asset | $184 | $127 | | Derivative assets, net | $64 | $805 | | Goodwill | $288 | $288 | | Intangible assets, net | $466 | $533 | | Other assets | $1,019 | $1,240 | | Total Assets | $20,858 | $27,914 | | LIABILITIES AND EQUITY | | | | Accounts payable | $830 | $870 | | Accrued expenses and other liabilities | $1,785 | $1,981 | | Deferred tax liabilities | $399 | $338 | | Derivative liabilities, net | $979 | $691 | | Securities sold, not yet purchased, at fair value | $3,473 | $6,495 | | Due to brokers | $301 | $882 | | Debt | $7,207 | $7,096 | | Total liabilities | $14,785 | $18,356 | | Total equity | $6,073 | $9,558 | | Total Liabilities and Equity | $20,858 | $27,914 | Consolidated Statements of Operations (in millions, except per unit amounts) | Revenues: | 2023 | 2022 | 2021 | | :----------------------------------------- | :-------- | :-------- | :-------- | | Net sales | $11,077 | $13,378 | $10,304 | | Other revenues from operations | $770 | $748 | $647 | | Net (loss) gain from investment activities | $(1,575) | $(168) | $193 | | Interest and dividend income | $636 | $328 | $137 | | Gain (loss) on disposition of assets, net | $8 | $(8) | $141 | | Other loss, net | $(69) | $(177) | $(84) | | Total Revenues | $10,847 | $14,101 | $11,338 | | Expenses: | | | | | Cost of goods sold | $9,327 | $11,689 | $9,485 | | Other expenses from operations | $643 | $583 | $522 | | Selling, general and administrative | $852 | $1,250 | $1,238 | | Restructuring, net | $1 | $2 | $5 | | Impairment | $7 | $0 | $0 | | Credit loss on related party note receivable | $139 | $0 | $0 | | Loss on deconsolidation of subsidiary | $246 | $0 | $0 | | Interest expense | $554 | $568 | $666 | | Total Expenses | $11,769 | $14,092 | $11,916 | | (Loss) income before income tax benefit (expense) | $(922) | $9 | $(578) | | Income tax (expense) benefit | $(90) | $(34) | $78 | | Net