Icahn Enterprises(US:IEP)2024-05-08 21:19PART I. FINANCIAL INFORMATION Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended March 31, 2024 (in millions) | Three Months Ended March 31, 2023 (in millions) | | :--- | :--- | :--- | | Total Revenues | $2,468 | $2,673 | | Total Expenses | $2,487 | $3,047 | | Net Loss | $(26) | $(358) | | Net Loss Attributable to Icahn Enterprises | $(38) | $(270) | | Basic and Diluted Loss per LP unit | $(0.09) | $(0.75) | Condensed Consolidated Balance Sheets Highlights (Unaudited) | Metric | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :--- | :--- | :--- | | Total Assets | $20,064 | $20,858 | | Total Liabilities | $14,439 | $14,785 | | Total Equity | $5,625 | $6,073 | | Equity Attributable to Icahn Enterprises | $2,781 | $3,208 | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Metric | Three Months Ended March 31, 2024 (in millions) | Three Months Ended March 31, 2023 (in millions) | | :--- | :--- | :--- | | Net Cash Used In Operating Activities | $(251) | $265 | | Net Cash Used In Investing Activities | $(75) | $(63) | | Net Cash Used In Financing Activities | $(587) | $1 | Financial Statements Q1 2024 unaudited consolidated financial statements show a net loss of $38 million, an improvement from $270 million in Q1 2023, with total assets at $20.1 billion and equity at $5.6 billion Note 1. Description of Business Icahn Enterprises is a diversified holding company operating in seven segments, with Carl C. Icahn and affiliates owning approximately 85% of outstanding units - The company operates through seven primary segments: Investment, Energy, Automotive, Food Packaging, Real Estate, Home Fashion, and Pharma22 - The Investment segment consists of private investment funds where the company invests its proprietary capital, with a fair value of approximately $3.2 billion as of March 31, 202423 - The Energy segment is conducted through a majority-owned subsidiary, CVR Energy, Inc., which is involved in petroleum refining and nitrogen fertilizer manufacturing24 - As of March 31, 2024, Carl C. Icahn and his affiliates held approximately 85% of the company's outstanding depositary units21 Note 3. Subsidiary Bankruptcy and Deconsolidation Auto Plus, an Automotive segment subsidiary, filed for Chapter 11 bankruptcy on January 31, 2023, leading to its deconsolidation and a $226 million non-cash charge in Q1 2023 - Auto Plus, an aftermarket parts distributor in the Automotive segment, filed for Chapter 11 bankruptcy on January 31, 202358 - The company deconsolidated Auto Plus effective January 31, 2023, as it no longer controlled the subsidiary, resulting in a non-cash charge of $226 million in Q1 202359 Note 5. Investments The Investment segment's portfolio, valued at $3.2 billion as of March 31, 2024, includes equities and debt, with $3.6 billion in short positions Investment Segment Holdings by Security Type (March 31, 2024) | Security Type | Long Positions (in millions) | Short Positions (in millions) | | :--- | :--- | :--- | | Equity Securities | $3,143 | $3,469 | | Debt Securities | $60 | $175 | | Total | $3,203 | $3,644 | - For the three months ended March 31, 2024, the Investment segment recorded unrealized losses of $339 million on securities still held, compared to unrealized losses of $208 million in the prior year period70 Note 7. Financial Instruments The Investment segment uses derivatives for capital appreciation and hedging, reporting a $163 million net gain in Q1 2024, while the Energy segment had an $18 million net loss from commodity derivatives Investment Segment Derivative Notional Exposure (March 31, 2024) | Primary Underlying Risk | Long Notional Exposure (in millions) | Short Notional Exposure (in millions) | | :--- | :--- | :--- | | Equity contracts | $2,033 | $2,292 | | Credit contracts | — | $392 | | Commodity contracts | — | $321 | - The Investment segment recognized a net gain of $163 million from derivative activities in Q1 2024, a significant turnaround from a $247 million loss in Q1 202393 - The Energy segment uses derivatives to manage price risk on crude oil and other inventories. It recognized a loss of $18 million on these instruments in Q1 2024, compared to a gain of $45 million in Q1 20239499 Note 12. Debt Total debt decreased to $6.6 billion as of March 31, 2024, from $7.2 billion at year-end 2023, primarily due to the Energy segment's $600 million debt redemption Total Debt Breakdown | Category | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :--- | :--- | :--- | | Holding Company | $4,847 | $4,847 | | Reporting Segments | $1,761 | $2,360 | | Total Debt | $6,608 | $7,207 | - In February 2024, the Energy segment's subsidiary, CVR Energy, redeemed all of its $600 million in 5.25% senior unsecured notes due 2025114 Note 13. Net Income (Loss) Per LP Unit Q1 2024 basic and diluted loss per LP unit was $0.09, an improvement from $0.75 in Q1 2023, with a $1.00 quarterly distribution declared Net Loss Per LP Unit | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net Loss Attributable to Limited Partners | $(37) million | $(265) million | | Basic/Diluted Weighted Average LP Units Outstanding | 429 million | 354 million | | Basic and Diluted Loss per LP unit | $(0.09) | $(0.75) | - A quarterly distribution of $1.00 per depositary unit was declared on February 26, 2024, with unitholders having the option to receive cash or additional units119 - During Q1 2024, the company sold approximately 2.8 million depositary units under its At-The-Market (ATM) offering, generating gross proceeds of about $50 million121 Note 14. Segment Reporting In Q1 2024, the Energy segment contributed $1.88 billion in revenue and $49 million net income, while the Investment segment and Holding Company reported net losses Net (Loss) Income Attributable to Icahn Enterprises by Segment (Q1 2024 vs Q1 2023) | Segment | Q1 2024 (in millions) | Q1 2023 (in millions) | | :--- | :--- | :--- | | Investment | $(23) | $(171) | | Energy | $49 | $132 | | Automotive | $(9) | $(13) | | Food Packaging | $2 | $6 | | Real Estate | $(2) | $— | | Home Fashion | $(1) | $(2) | | Pharma | $1 | $(4) | | Holding Company | $(55) | $(218) | | Total | $(38) | $(270) | Note 18. Commitments and Contingencies The company faces $294 million in RFS liabilities and is cooperating with ongoing investigations by the U.S. Attorney's office and SEC, also facing related class action lawsuits - The Energy segment is involved in ongoing legal disputes with the EPA over Renewable Fuel Standard (RFS) obligations. The RFS liability was recorded at $294 million as of March 31, 2024139146 - In May and June 2023, the company was contacted by the U.S. Attorney's office (SDNY) and the SEC, respectively, seeking information on corporate governance, capitalization, securities offerings, and other matters157 - The company is facing two putative securities class action lawsuits and a derivative complaint related to these inquiries. The company believes these matters will not have a material impact157159160 Note 20. Subsequent Events Post-quarter, the company sold $17 million in repurchased senior unsecured notes and declared a $1.00 quarterly distribution payable in June 2024 - On May 6, 2024, the Board of Directors declared a quarterly distribution of $1.00 per depositary unit, payable on or about June 25, 2024163 - In April 2024, the company sold $17 million aggregate principal of its 6.250% and 5.250% senior unsecured notes that had been previously repurchased and held in treasury162 Management's Discussion and Analysis of Financial Condition and Results of Operations Q1 2024 results were driven by the Investment Funds' (0.8)% negative return and lower Energy segment sales, with the Holding Company maintaining $1.7 billion cash against $4.8 billion debt Results of Operations Q1 2024 consolidated revenues were $2.47 billion, with net loss narrowing to $38 million, driven by the Investment segment's (0.8)% return and decreased Energy and Automotive sales Investment Funds Performance Attribution | Position Type | Q1 2024 Return | Q1 2023 Return | | :--- | :--- | :--- | | Long positions | 11.4% | 1.3% | | Short positions | (13.4)% | (6.2)% | | Other | 1.2% | 0.8% | | Total Return | (0.8)% | (4.1)% | - The Energy segment's net sales decreased by $423 million (19%) year-over-year, driven by lower refined product and nitrogen fertilizer prices190 - The Automotive segment's revenue decreased by $72 million (16%) year-over-year, primarily due to an $59 million drop in Aftermarket Parts sales following the deconsolidation of Auto Plus198200 - A pre-tax loss on the deconsolidation of the Auto Plus subsidiary of $226 million was recognized in Q1 2023, significantly impacting the prior year's results213 Liquidity and Capital Resources The Holding Company held $1.7 billion cash against $4.8 billion debt, with operating segments' debt decreasing to $1.8 billion due to a $600 million Energy segment redemption Holding Company Liquidity Summary (March 31, 2024) | Metric | Amount (in billions) | | :--- | :--- | | Cash and cash equivalents | $1.7 | | Total debt | $4.8 | | Investments in Investment Funds | $3.2 | - As of March 31, 2024, covenants governing the company's senior notes do not permit the incurrence of additional indebtedness, except for refinancing existing notes224 - The Investment Funds had a net short notional exposure of 27% as of March 31, 2024, with long exposure at 99% and short exposure at 126%232 - Consolidated cash flow from operations was a net use of $251 million in Q1 2024, compared to a net provision of $265 million in Q1 2023, primarily driven by investment transactions19242 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk stems from its Investment segment, where a 10% adverse change in fair value could impact securities owned by $320 million, shorts by $364 million, and derivatives by $667 million - The company's predominant market risk exposure is from its Investment segment's portfolio261 - A hypothetical 10% adverse change in the fair value of investments held by the Investment Funds as of March 31, 2024, would result in an estimated negative impact of $320 million on securities owned, $364 million on securities sold short, and $667 million on derivatives265 - The company's share of the net gain/loss from these investment activities is approximately 60%, mitigating the full impact of market value changes on its consolidated statement of operations265 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during Q1 2024 - The CEO and CFO concluded that as of March 31, 2024, the company's disclosure controls and procedures were effective266 - No material changes to the internal control over financial reporting were identified during the first quarter of 2024267 PART II. OTHER INFORMATION Legal Proceedings The company is subject to ordinary course litigation, with details on specific lawsuits and proceedings referenced in Note 18 of the financial statements - For information regarding lawsuits and proceedings, the report refers to Note 18, "Commitments and Contingencies"270 Risk Factors No material changes to the company's risk factors were reported during Q1 2024 compared to the 2023 Annual Report on Form 10-K - No material changes to risk factors were reported for the three months ended March 31, 2024271 Exhibits This section lists exhibits filed with the Form 10-Q, including employment agreements and CEO/CFO certifications required by Sarbanes-Oxley Act - Exhibits filed include CEO and CFO certifications pursuant to Sections 302(a) and 906 of the Sarbanes-Oxley Act273