Wdesk | Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2017

(Commission File Number)
(Exact Name of Registrant as Specified in Its Charter)
(Address of Principal Executive Offices) (Zip Code)
(Telephone Number)
(State or Other Jurisdiction of Incorporation or Organization)
(IRS Employer Identification No.)
1-9516
ICAHN ENTERPRISES L.P.
Delaware
13-3398766
 
767 Fifth Avenue, Suite 4700
New York, NY 10153
(212) 702-4300
 
 
 
 
 
 
333-118021-01
ICAHN ENTERPRISES HOLDINGS L.P.
Delaware
13-3398767
 
767 Fifth Avenue, Suite 4700
New York, NY 10153
(212) 702-4300
 
 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Icahn Enterprises L.P. Yes x No o             Icahn Enterprises Holdings L.P. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     
Icahn Enterprises L.P. Yes x No o             Icahn Enterprises Holdings L.P. Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check One):
Icahn Enterprises L.P.
 
Icahn Enterprises Holdings L.P.
Large Accelerated Filer x
Accelerated Filer o
 
Large Accelerated Filer o
Accelerated Filer o
Non-accelerated Filer o
Smaller Reporting Company o
 
Non-accelerated Filer x
Smaller Reporting Company o
Emerging Growth Company o
 
Emerging Growth Company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Icahn Enterprises L.P. Yes o No x          Icahn Enterprises Holdings L.P. Yes o No x

As of August 8, 2017, there were 164,807,945 of Icahn Enterprises' depositary units outstanding.



ICAHN ENTERPRISES L.P.
ICAHN ENTERPRISES HOLDINGS L.P.
TABLE OF CONTENTS

 
 
Page
No.
 
PART I. FINANCIAL INFORMATION
 
 
 
 
 
PART II. OTHER INFORMATION
 





i


EXPLANATORY NOTE

This Quarterly Report on Form 10-Q (this "Report") is a joint report being filed by Icahn Enterprises L.P. and Icahn Enterprises Holdings L.P. Each registrant hereto is filing on its own behalf all of the information contained in this Report that relates to such registrant. Each registrant hereto is not filing any information that does not relate to such registrant, and therefore makes no representation as to any such information.



ii


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

ICAHN ENTERPRISES L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except unit amounts)
 
June 30, 2017
 
December 31, 2016
ASSETS
(Unaudited)
 
 
Cash and cash equivalents
$
2,389

 
$
1,833

Cash held at consolidated affiliated partnerships and restricted cash
1,019

 
804

Investments
9,302

 
9,881

Due from brokers
1,391

 
1,482

Accounts receivable, net
1,757

 
1,609

Inventories, net
3,142

 
2,983

Property, plant and equipment, net
9,610

 
10,122

Goodwill
1,168

 
1,136

Intangible assets, net
1,063

 
1,080

Assets held for sale
549

 
1,366

Other assets
1,167

 
1,039

Total Assets
$
32,557

 
$
33,335

LIABILITIES AND EQUITY
 
 
 
Accounts payable
$
2,017

 
$
1,765

Accrued expenses and other liabilities
3,440

 
2,998

Deferred tax liability
1,658

 
1,613

Securities sold, not yet purchased, at fair value
1,729

 
1,139

Due to brokers
676

 
3,725

Post-retirement benefit liability
1,210

 
1,180

Liabilities held for sale
12

 
1,779

Debt
11,285

 
11,119

Total liabilities
22,027

 
25,318

 
 
 
 
Commitments and contingencies (Note 16)

 

 
 
 
 
Equity:
 
 
 
Limited partners: Depositary units: 164,807,945 units issued and outstanding at June 30, 2017 and 144,741,149 units issued and outstanding at December 31, 2016
4,484

 
2,448

General partner
(253
)
 
(294
)
Equity attributable to Icahn Enterprises
4,231

 
2,154

Equity attributable to non-controlling interests
6,299

 
5,863

Total equity
10,530

 
8,017

Total Liabilities and Equity
$
32,557

 
$
33,335



See notes to condensed consolidated financial statements.


1


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per unit amounts)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
Revenues:
(Unaudited)
Net sales
$
4,282

 
$
4,094

 
$
8,601

 
$
7,642

Other revenues from operations
487

 
523

 
962

 
969

Net income (loss) from investment activities
314

 
(308
)
 
184

 
(1,244
)
Interest and dividend income
33

 
28

 
62

 
70

Gain on disposition of assets, net
1,525

 
1

 
1,520

 
11

Other income, net
13

 
12

 
2

 
29

 
6,654

 
4,350

 
11,331

 
7,477

Expenses:
 
 
 
 
 
 
 
Cost of goods sold
3,723

 
3,448

 
7,415

 
6,571

Other expenses from operations
278

 
314

 
532

 
560

Selling, general and administrative
623

 
615

 
1,250

 
1,133

Restructuring, net
2

 
6

 
9

 
21

Impairment
69

 

 
77

 
577

Interest expense
218

 
202

 
441

 
443

 
4,913

 
4,585

 
9,724

 
9,305

Income (loss) before income tax expense
1,741

 
(235
)
 
1,607

 
(1,828
)
Income tax expense
(16
)
 
(50
)
 
(42
)
 
(66
)
Net income (loss)
1,725

 
(285
)
 
1,565

 
(1,894
)
Less: net income (loss) attributable to non-controlling interests
172

 
(216
)
 
30

 
(988
)
Net income (loss) attributable to Icahn Enterprises
$
1,553

 
$
(69
)
 
$
1,535

 
$
(906
)
 
 
 
 
 
 
 
 
Net income (loss) attributable to Icahn Enterprises allocable to:
 
 
 
 
 
 
 
Limited partners
$
1,522

 
$
(68
)
 
$
1,504

 
$
(888
)
General partner
31

 
(1
)
 
31

 
(18
)
 
$
1,553

 
$
(69
)
 
$
1,535

 
$
(906
)
 
 
 
 
 
 
 
 
Basic and diluted income (loss) per LP unit
$
9.51

 
$
(0.50
)
 
$
9.77

 
$
(6.68
)
Basic and diluted weighted average LP units outstanding
160

 
135

 
154

 
133

Cash distributions declared per LP unit
$
1.50

 
$
1.50

 
$
3.00

 
$
3.00







See notes to condensed consolidated financial statements.


2


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
 
(Unaudited)
Net income (loss)
$
1,725

 
$
(285
)
 
$
1,565

 
$
(1,894
)
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Post-employment benefits
5

 
4

 
10

 
10

Hedge instruments
3

 
1

 
3

 
1

Translation adjustments and other
13

 
(60
)
 
108

 
(13
)
Other comprehensive income (loss), net of tax
21

 
(55
)
 
121

 
(2
)
Comprehensive income (loss)
1,746

 
(340
)
 
1,686

 
(1,896
)
Less: Comprehensive income (loss) attributable to non-controlling interests
175

 
(224
)
 
39

 
(984
)
Comprehensive income (loss) attributable to Icahn Enterprises
$
1,571

 
$
(116
)
 
$
1,647

 
$
(912
)
 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to Icahn Enterprises allocable to:
 
 
 
 
 
 
 
Limited partners
$
1,540

 
$
(114
)
 
$
1,614

 
$
(894
)
General partner
31

 
(2
)
 
33

 
(18
)
 
$
1,571

 
$
(116
)
 
$
1,647

 
$
(912
)

Accumulated other comprehensive loss was $1,463 million and $1,584 million at June 30, 2017 and December 31, 2016, respectively.






















See notes to condensed consolidated financial statements.


3


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(In millions, Unaudited)
 
Equity Attributable to Icahn Enterprises
 
 
 
 
 
General Partner's (Deficit) Equity
 
Limited Partners' Equity
 
Total Partners' Equity
 
Non-controlling Interests
 
Total Equity
Balance, December 31, 2016
$
(294
)
 
$
2,448

 
$
2,154

 
$
5,863

 
$
8,017

Net income
31

 
1,504

 
1,535

 
30

 
1,565

Other comprehensive income
2

 
110

 
112

 
9

 
121

Partnership distributions
(1
)
 
(39
)
 
(40
)
 

 
(40
)
Partnership contributions
12

 
600

 
612

 

 
612

Investment segment contributions

 

 

 
600

 
600

Dividends and distributions to non-controlling interests in subsidiaries

 

 

 
(24
)
 
(24
)
Cumulative effect adjustment from adoption of accounting principle
(1
)
 
(46
)
 
(47
)
 

 
(47
)
Changes in subsidiary equity and other
(2
)
 
(93
)
 
(95
)
 
(179
)
 
(274
)
Balance, June 30, 2017
$
(253
)
 
$
4,484

 
$
4,231

 
$
6,299

 
$
10,530


 
Equity Attributable to Icahn Enterprises
 
 
 
 
 
General Partner's (Deficit) Equity
 
Limited Partners' Equity
 
Total Partners' Equity
 
Non-controlling Interests
 
Total Equity
Balance, December 31, 2015
$
(257
)
 
$
4,244

 
$
3,987

 
$
6,046

 
$
10,033

Net loss
(18
)
 
(888
)
 
(906
)
 
(988
)
 
(1,894
)
Other comprehensive (loss) income

 
(6
)
 
(6
)
 
4

 
(2
)
Partnership distributions
(1
)
 
(53
)
 
(54
)
 

 
(54
)
Partnership contributions
1

 

 
1

 

 
1

Investment segment contributions

 

 

 
490

 
490

Dividends and distributions to non-controlling interests in subsidiaries

 

 

 
(51
)
 
(51
)
LP Unit issuance

 
35

 
35

 

 
35

Changes in subsidiary equity and other
(11
)
 
(520
)
 
(531
)
 
571

 
40

Balance, June 30, 2016
$
(286
)
 
$
2,812

 
$
2,526

 
$
6,072

 
$
8,598









See notes to condensed consolidated financial statements.


4


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
 
Six Months Ended
June 30,
 
2017
 
2016
 
(Unaudited)
Cash flows from operating activities:
 
 
 
Net income (loss)
$
1,565

 
$
(1,894
)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
 
 
 
Net (gain) loss from securities transactions
(1,064
)
 
627

Purchases of securities
(613
)
 
(1,211
)
Proceeds from sales of securities
1,841

 
5,880

Purchases to cover securities sold, not yet purchased
(220
)
 
(42
)
Proceeds from securities sold, not yet purchased
1,222

 
475

Changes in receivables and payables relating to securities transactions
(2,904
)
 
(5,046
)
Gain on disposition of assets, net
(1,520
)
 
(11
)
Depreciation and amortization
504

 
489

Impairment
77

 
577

Equity earnings from non-consolidated affiliates
(36
)
 
(36
)
Deferred taxes
(9
)
 
4

Other, net
62

 
74

Changes in cash held at consolidated affiliated partnerships and restricted cash
(217
)
 
589

Changes in other operating assets and liabilities
160

 
517

Net cash (used in) provided by operating activities
(1,152
)
 
992

Cash flows from investing activities:
 
 
 
Capital expenditures
(470
)
 
(421
)
Acquisition of businesses, net of cash acquired
(303
)
 
(1,042
)
Proceeds from disposition of assets
1,282

 
11

Other, net
6

 
(30
)
Net cash provided by (used in) investing activities
515

 
(1,482
)
Cash flows from financing activities:
 
 
 
Investment segment contributions from non-controlling interests
600

 
490

Partnership contributions
612

 
1

Partnership distributions
(40
)
 
(54
)
Dividends and distributions to non-controlling interests in subsidiaries
(24
)
 
(51
)
Proceeds from Holding Company senior unsecured notes
1,190

 

Repayments of Holding Company senior unsecured notes
(1,175
)
 

Proceeds from subsidiary borrowings
1,941

 
1,368

Repayments of subsidiary borrowings
(2,037
)
 
(1,399
)
Other, net
6

 
(17
)
Net cash provided by financing activities
1,073

 
338

Effect of exchange rate changes on cash and cash equivalents
7

 
(18
)
Add back decrease in cash of assets held for sale
113

 
12

Net increase (decrease) in cash and cash equivalents
556

 
(158
)
Cash and cash equivalents, beginning of period
1,833

 
2,078

Cash and cash equivalents, end of period
$
2,389

 
$
1,920


See notes to condensed consolidated financial statements.


5



ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
 
June 30, 2017
 
December 31, 2016
ASSETS
(Unaudited)
 
 
Cash and cash equivalents
$
2,389

 
$
1,833

Cash held at consolidated affiliated partnerships and restricted cash
1,019

 
804

Investments
9,302

 
9,881

Due from brokers
1,391

 
1,482

Accounts receivable, net
1,757

 
1,609

Inventories, net
3,142

 
2,983

Property, plant and equipment, net
9,610

 
10,122

Goodwill
1,168

 
1,136

Intangible assets, net
1,063

 
1,080

Assets held for sale
549

 
1,366

Other assets
1,197

 
1,067

Total Assets
$
32,587

 
$
33,363

LIABILITIES AND EQUITY
 
 
 
Accounts payable
$
2,017

 
$
1,765

Accrued expenses and other liabilities
3,440

 
2,998

Deferred tax liability
1,658

 
1,613

Securities sold, not yet purchased, at fair value
1,729

 
1,139

Due to brokers
676

 
3,725

Post-retirement benefit liability
1,210

 
1,180

Liabilities held for sale
12

 
1,779

Debt
11,289

 
11,122

Total liabilities
22,031

 
25,321

 
 
 
 
Commitments and contingencies (Note 16)

 

 
 
 
 
Equity:
 
 
 
Limited partner
4,553

 
2,496

General partner
(296
)
 
(317
)
Equity attributable to Icahn Enterprises Holdings
4,257

 
2,179

Equity attributable to non-controlling interests
6,299

 
5,863

Total equity
10,556

 
8,042

Total Liabilities and Equity
$
32,587

 
$
33,363






See notes to condensed consolidated financial statements.


6


ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
Revenues:
(Unaudited)
Net sales
$
4,282

 
$
4,094

 
$
8,601

 
$
7,642

Other revenues from operations
487

 
523

 
962

 
969

Net income (loss) from investment activities
314

 
(308
)
 
184

 
(1,244
)
Interest and dividend income
33

 
28

 
62

 
70

Gain on disposition of assets, net
1,525

 
1

 
1,520

 
11

Other income, net
13

 
12

 
2

 
29

 
6,654

 
4,350

 
11,331

 
7,477

Expenses:
 
 
 
 
 
 
 
Cost of goods sold
3,723

 
3,448

 
7,415

 
6,571

Other expenses from operations
278

 
314

 
532

 
560

Selling, general and administrative
623

 
615

 
1,250

 
1,133

Restructuring, net
2

 
6

 
9

 
21

Impairment
69

 

 
77

 
577

Interest expense
217

 
201

 
440

 
442

 
4,912

 
4,584

 
9,723

 
9,304

Income (loss) before income tax expense
1,742

 
(234
)
 
1,608

 
(1,827
)
Income tax expense
(16
)
 
(50
)
 
(42
)
 
(66
)
Net income (loss)
1,726

 
(284
)
 
1,566

 
(1,893
)
Less: net income (loss) attributable to non-controlling interests
172

 
(216
)
 
30

 
(988
)
Net income (loss) attributable to Icahn Enterprises Holdings
$
1,554

 
$
(68
)
 
$
1,536

 
$
(905
)
 
 
 
 
 
 
 
 
Net income (loss) attributable to Icahn Enterprises Holdings allocable to:
 
 
 
 
 
 
 
Limited partner
$
1,539

 
$
(67
)
 
$
1,521

 
$
(896
)
General partner
15

 
(1
)
 
15

 
(9
)
 
$
1,554

 
$
(68
)
 
$
1,536

 
$
(905
)









See notes to condensed consolidated financial statements.


7


ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
 
(Unaudited)
Net income (loss)
$
1,726

 
$
(284
)
 
$
1,566

 
$
(1,893
)
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Post-employment benefits
5

 
4

 
10

 
10

Hedge instruments
3

 
1

 
3

 
1

Translation adjustments and other
13

 
(60
)
 
108

 
(13
)
Other comprehensive income (loss), net of tax
21

 
(55
)
 
121

 
(2
)
Comprehensive income (loss)
1,747

 
(339
)
 
1,687

 
(1,895
)
Less: Comprehensive income (loss) attributable to non-controlling interests
175

 
(224
)
 
39

 
(984
)
Comprehensive income (loss) attributable to Icahn Enterprises Holdings
$
1,572

 
$
(115
)
 
$
1,648

 
$
(911
)
 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to Icahn Enterprises Holdings allocable to:
 
 
 
 
 
 
 
Limited partner
$
1,557

 
$
(114
)
 
$
1,632

 
$
(902
)
General partner
15

 
(1
)
 
16

 
(9
)
 
$
1,572

 
$
(115
)
 
$
1,648

 
$
(911
)

Accumulated other comprehensive loss was $1,463 million and $1,584 million at June 30, 2017 and December 31, 2016, respectively.

























See notes to condensed consolidated financial statements.


8


ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(In millions, Unaudited)
 
Equity Attributable to Icahn Enterprises Holdings
 
 
 
 
 
General Partner's Equity (Deficit)
 
Limited
Partner's Equity
 
Total Partners' Equity
 
Non-controlling Interests
 
Total Equity
Balance, December 31, 2016
$
(317
)
 
$
2,496

 
$
2,179

 
$
5,863

 
$
8,042

Net income
15

 
1,521

 
1,536

 
30

 
1,566

Other comprehensive income
1

 
111

 
112

 
9

 
121

Partnership distributions

 
(40
)
 
(40
)
 

 
(40
)
Partnership contribution
6

 
606

 
612

 

 
612

Investment segment contributions

 

 

 
600

 
600

Dividends and distributions to non-controlling interests in subsidiaries

 

 

 
(24
)
 
(24
)
Cumulative effect adjustment from adoption of accounting principle

 
(47
)
 
(47
)
 

 
(47
)
Changes in subsidiary equity and other
(1
)
 
(94
)
 
(95
)
 
(179
)
 
(274
)
Balance, June 30, 2017
$
(296
)
 
$
4,553

 
$
4,257

 
$
6,299

 
$
10,556


 
Equity Attributable to Icahn Enterprises Holdings
 
 
 
 
 
General Partner's Equity (Deficit)
 
Limited
Partner's Equity
 
Total Partners' Equity
 
Non-controlling Interests
 
Total Equity
Balance, December 31, 2015
$
(299
)
 
$
4,310

 
$
4,011

 
$
6,046

 
$
10,057

Net loss
(9
)
 
(896
)
 
(905
)
 
(988
)
 
(1,893
)
Other comprehensive (loss) income

 
(6
)
 
(6
)
 
4

 
(2
)
Partnership distributions
(1
)
 
(53
)
 
(54
)
 

 
(54
)
Partnership contributions
1

 

 
1

 

 
1

Investment segment contributions

 

 

 
490

 
490

Dividends and distributions to non-controlling interests in subsidiaries

 

 

 
(51
)
 
(51
)
LP Unit issuance

 
35

 
35

 

 
35

Changes in subsidiary equity and other
(5
)
 
(526
)
 
(531
)
 
571

 
40

Balance, June 30, 2016
$
(313
)
 
$
2,864

 
$
2,551

 
$
6,072

 
$
8,623









See notes to condensed consolidated financial statements.


9


ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
 
Six Months Ended
June 30,
 
2017
 
2016
 
(Unaudited)
Cash flows from operating activities:
 
 
 
Net income (loss)
$
1,566

 
$
(1,893
)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
 
 
 
Net (gain) loss from securities transactions
(1,064
)
 
627

Purchases of securities
(613
)
 
(1,211
)
Proceeds from sales of securities
1,841

 
5,880

Purchases to cover securities sold, not yet purchased
(220
)
 
(42
)
Proceeds from securities sold, not yet purchased
1,222

 
475

Changes in receivables and payables relating to securities transactions
(2,904
)
 
(5,046
)
Gain on disposition of assets, net
(1,520
)
 
(11
)
Depreciation and amortization
503

 
488

Impairment
77

 
577

Equity earnings from non-consolidated affiliates
(36
)
 
(36
)
Deferred taxes
(9
)
 
4

Other, net
62

 
74

Changes in cash held at consolidated affiliated partnerships and restricted cash
(217
)
 
589

Changes in other operating assets and liabilities
160

 
517

Net cash (used in) provided by operating activities
(1,152
)
 
992

Cash flows from investing activities:
 
 
 
Capital expenditures
(470
)
 
(421
)
Acquisition of businesses, net of cash acquired
(303
)
 
(1,042
)
Proceeds from disposition of assets
1,282

 
11

Other, net
6

 
(30
)
Net cash provided by (used in) investing activities
515

 
(1,482
)
Cash flows from financing activities:
 
 
 
Investment segment contributions from non-controlling interests
600

 
490

Partnership contributions
612

 
1

Partnership distributions
(40
)
 
(54
)
Dividends and distributions to non-controlling interests in subsidiaries
(24
)
 
(51
)
Proceeds from Holding Company senior unsecured notes
1,190

 

Repayments of Holding Company senior unsecured notes
(1,175
)
 

Proceeds from subsidiary borrowings
1,941

 
1,368

Repayments of subsidiary borrowings
(2,037
)
 
(1,399
)
Other, net
6

 
(17
)
Net cash provided by financing activities
1,073

 
338

Effect of exchange rate changes on cash and cash equivalents
7

 
(18
)
Add back decrease in cash of assets held for sale
113

 
12

Net increase (decrease) in cash and cash equivalents
556

 
(158
)
Cash and cash equivalents, beginning of period
1,833

 
2,078

Cash and cash equivalents, end of period
$
2,389

 
$
1,920


See notes to condensed consolidated financial statements.


10


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)


1.
Description of Business.
Overview
Icahn Enterprises L.P. ("Icahn Enterprises") owns a 99% limited partner interest in Icahn Enterprises Holdings L.P. ("Icahn Enterprises Holdings"). Icahn Enterprises G.P. Inc. ("Icahn Enterprises GP"), which is owned and controlled by Mr. Carl C. Icahn, owns a 1% general partner interest in each of Icahn Enterprises and Icahn Enterprises Holdings as of June 30, 2017. Icahn Enterprises Holdings and its subsidiaries own substantially all of the assets and liabilities of Icahn Enterprises and conduct substantially all of its operations. Therefore, the financial results of Icahn Enterprises and Icahn Enterprises Holdings are substantially the same, with differences relating primarily to allocations of the general partner interest, which is reflected as an aggregate 1.99% general partner interest in the financial statements of Icahn Enterprises, as well as due to the carrying amount of deferred financing costs related to our senior unsecured notes. In addition to the above, Mr. Icahn and his affiliates owned approximately 90.6% of Icahn Enterprises' outstanding depositary units as of June 30, 2017.
References to "we," "our" or "us" herein include both Icahn Enterprises and Icahn Enterprises Holdings and their subsidiaries, unless the context otherwise requires.
Description of Operating Businesses
We are a diversified holding company owning subsidiaries currently engaged in the following continuing operating businesses: Investment, Automotive, Energy, Railcar, Gaming, Metals, Mining, Food Packaging, Real Estate and Home Fashion. We also report the results of our Holding Company, which includes the results of certain subsidiaries of Icahn Enterprises and Icahn Enterprises Holdings (unless otherwise noted), and investment activity and expenses associated with our Holding Company. See Note 12, "Segment Reporting," for a reconciliation of each of our reporting segment's results of operations to our consolidated results. Certain additional information with respect to our segments are discussed below.
Investment
Our Investment segment is comprised of various private investment funds ("Investment Funds") in which we have general partner interests and through which we invest our proprietary capital. We and certain of Mr. Icahn's wholly owned affiliates are the only investors in the Investment Funds. As general partner, we provide investment advisory and certain administrative and back office services to the Investment Funds but do not provide such services to any other entities, individuals or accounts. Interests in the Investment Funds are not offered to outside investors. We had interests in the Investment Funds with a fair value of approximately $2.7 billion and $1.7 billion as of June 30, 2017 and December 31, 2016, respectively.
Automotive
We conduct our Automotive segment through our wholly owned subsidiaries Federal-Mogul LLC ("Federal-Mogul") and Icahn Automotive Group LLC ("Icahn Automotive"), which is the parent company of IEH Auto Parts Holding LLC and The Pep Boys - Manny, Moe & Jack ("Pep Boys"). During January 2017, we increased our ownership in Federal-Mogul from 82.0% to 100% through a tender offer for the remaining shares of Federal-Mogul common stock not already owned by us and a subsequent short form merger for an aggregate purchase price of $305 million.
Federal-Mogul is engaged in the manufacture and distribution of automotive parts. Icahn Automotive is engaged in the distribution of automotive parts in the aftermarket as well as providing automotive services to its customers.
Energy
We conduct our Energy segment through our majority ownership in CVR Energy, Inc. ("CVR Energy"). CVR Energy is a diversified holding company primarily engaged in the petroleum refining and nitrogen fertilizer manufacturing industries through its holdings in CVR Refining L.P. ("CVR Refining") and CVR Partners L.P. ("CVR Partners"), respectively. CVR Refining is an independent petroleum refiner and marketer of high value transportation fuels. CVR Partners produces and markets nitrogen fertilizers in the form of urea ammonium nitrate and ammonia. As of June 30, 2017, CVR Energy owned 100% of each of the general partners of CVR Refining and CVR Partners and approximately 66% and 34% of the common units of CVR Refining and CVR Partners, respectively.
As of June 30, 2017, we owned approximately 82.0% of the total outstanding common stock of CVR Energy. In addition, as of June 30, 2017, we directly owned approximately 3.9% of the total outstanding common units of CVR Refining.


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ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

Railcar
We conduct our Railcar segment through our majority ownership interest in American Railcar Industries, Inc. ("ARI") and, prior to June 1, 2017, our wholly owned subsidiary American Railcar Leasing, LLC ("ARL"). As of June 30, 2017, we owned approximately 62.2% of the total outstanding common stock of ARI. As discussed below, we sold ARL, along with a majority of its railcar lease fleet, on June 1, 2017. As of June 30, 2017, through a wholly owned subsidiary of ours, we continue to own approximately 4,600 remaining railcars previously owned by ARL.
ARI is a North American designer and manufacturer of hopper and tank railcars. ARI provides its railcar customers with integrated solutions through a comprehensive set of high-quality products and related services through its manufacturing, leasing and railcar services operations. ARI's manufacturing consists of railcar manufacturing and railcar and industrial component manufacturing. ARI's railcar leasing business consists of railcars built by ARI leased to third parties under operating leases. ARI's railcar services consist of railcar repair, engineering and field services.
On December 19, 2016, Icahn Enterprises entered into a definitive agreement to sell ARL to SMBC Rail Services, LLC ("SMBC Rail"), a wholly owned subsidiary of Sumitomo Mitsui Banking Corporation, for cash based on (i) a value of approximately $2.8 billion (subject to certain adjustments) and (ii) a fleet of approximately 29,000 railcars (the "ARL Initial Sale"). The ARL Initial sale closed on June 1, 2017. After repaying, or assigning to SMBC Rail, applicable indebtedness of ARL, we received cash consideration of approximately $1.3 billion in connection with the ARL Initial Sale, resulting in a pretax gain on disposition of assets for our Railcar segment of approximately $1.5 billion. For a period of three years after the closing of the ARL Initial Sale, and upon satisfaction of certain conditions, we have an option to sell, and SMBC Rail has an option to buy, approximately 4,600 remaining railcars currently owned by a wholly owned subsidiary of ours for an additional purchase price estimated to be approximately $559 million.
Gaming
We conduct our Gaming segment through our majority ownership in Tropicana Entertainment Inc. ("Tropicana") and our wholly owned subsidiary Trump Entertainment Resorts Inc. ("TER"), which we acquired out of bankruptcy in 2016. As of June 30, 2017, we owned approximately 72.5% of the total outstanding common stock of Tropicana. Tropicana is an owner and operator of regional casino and entertainment properties located in the United States and one hotel, timeshare and casino resort located on the island of Aruba. TER owned the Trump Taj Mahal Casino Resort, which closed and ceased its casino and hotel operations in October 2016, and was subsequently sold on March 31, 2017. TER also owns Trump Plaza Hotel and Casino, which ceased operations in September 2014, prior to our obtaining a controlling interest in TER.
On June 23, 2017, Icahn Enterprises Holdings and Tropicana commenced a tender offer to purchase severally, and not jointly, up to 5,580,000 shares of Tropicana common stock in the aggregate, at a price of not greater than $45.00 nor less than $38.00 per share, by means of a "modified" Dutch auction, on the terms and subject to the conditions set forth in the Offer to Purchase dated June 23, 2017 and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Tender Offer"). The Tender Offer is being made severally, and not jointly, by Icahn Enterprises Holdings and Tropicana and upon the terms and subject to the conditions of the Tender Offer, first, Tropicana will severally, and not jointly, purchase 800,000 of the shares properly tendered, and second, Icahn Enterprises will severally, and not jointly, purchase any remaining shares properly tendered, up to a maximum of 4,780,000 shares. The Tender Offer was extended on August 3, 2017 and expires on August 9, 2017, unless the Tender Offer is further extended.
Metals
We conduct our Metals segment through our indirect wholly owned subsidiary, PSC Metals, Inc. (“PSC Metals”). PSC Metals is principally engaged in the business of collecting, processing and selling ferrous and non-ferrous metals, as well as the processing and distribution of steel pipe and plate products. PSC Metals collects industrial and obsolete scrap metal, processes it into reusable forms, and supplies the recycled metals to its customers.
Mining
We conduct our Mining segment through our majority ownership in Ferrous Resources Ltd. ("Ferrous Resources"). As of June 30, 2017, we owned approximately 77.2% of the total outstanding common stock of Ferrous Resources. Ferrous Resources acquired certain rights to iron ore mineral resources in Brazil and develops mining operations and related infrastructure to produce and sell iron ore products to the global steel industry.


12


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

Food Packaging
We conduct our Food Packaging segment through our majority ownership in Viskase Companies, Inc. ("Viskase"). As of June 30, 2017, we owned approximately 74.6% of the total outstanding common stock of Viskase. Viskase is a producer of cellulosic, fibrous and plastic casings used to prepare and package processed meat products.
Real Estate
Our Real Estate operations consist of rental real estate, property development and associated club activities. Our rental real estate operations consist primarily of office and industrial properties leased to single corporate tenants. Our property development operations are run primarily through a real estate investment, management and development subsidiary that focuses primarily on the construction and sale of single-family and multi-family homes, lots in subdivisions and planned communities and raw land for residential development. Our property development locations also operate golf and club operations as well.
Home Fashion
We conduct our Home Fashion segment through our indirect wholly owned subsidiary, WestPoint Home LLC (“WPH”). WPH's business consists of manufacturing, sourcing, marketing, distributing and selling home fashion consumer products.

2.
Basis of Presentation and Summary of Significant Accounting Policies.
We conduct and plan to continue to conduct our activities in such a manner as not to be deemed an investment company under the Investment Company Act of 1940, as amended (the “'40 Act”). Therefore, no more than 40% of our total assets can be invested in investment securities, as such term is defined in the '40 Act. In addition, we do not invest or intend to invest in securities as our primary business. We intend to structure our investments to continue to be taxed as a partnership rather than as a corporation under the applicable publicly traded partnership rules of the Internal Revenue Code, as amended.
The accompanying condensed consolidated financial statements and related notes should be read in conjunction with our consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the year ended December 31, 2016. The condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) related to interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. The financial information contained herein is unaudited; however, management believes all adjustments have been made that are necessary to present fairly the results for the interim periods. All such adjustments are of a normal and recurring nature.
Principles of Consolidation
As of June 30, 2017, our condensed consolidated financial statements include the accounts of (i) Icahn Enterprises and Icahn Enterprises Holdings and (ii) the wholly and majority owned subsidiaries of Icahn Enterprises and Icahn Enterprises Holdings, in addition to variable interest entities ("VIEs") in which we are the primary beneficiary. In evaluating whether we have a controlling financial interest in entities that we consolidate, we consider the following: (1) for voting interest entities, including limited partnerships and similar entities that are not VIEs, we consolidate these entities in which we own a majority of the voting interests; and (2) for VIEs, we consolidate these entities in which we are the primary beneficiary. See below for a discussion of our VIEs. Kick-out rights, which are the rights underlying the limited partners' ability to dissolve the limited partnership or otherwise remove the general partners, held through voting interests of partnerships and similar entities that are not VIEs are considered the equivalent of the equity interests of corporations that are not VIEs.
Except for our Investment segment, for those investments in which we own 50% or less but greater than 20%, we generally account for such investments using the equity method, while investments in affiliates of 20% or less are accounted for under the cost method.
Variable Interest Entities
Icahn Enterprises Holdings
We determined that Icahn Enterprises Holdings is a VIE because it lacks both substantive kick-out and participating rights. Icahn Enterprises is the primary beneficiary of Icahn Enterprises Holdings principally based on its 99% limited partner interest in Icahn Enterprises Holdings and therefore continues to consolidate Icahn Enterprises Holdings. The condensed consolidated financial statements of Icahn Enterprises Holdings are included in this Report. The balances with respect to Icahn Enterprises Holdings' consolidated VIEs are discussed below, comprising the Investment Funds, CVR Refining and CVR Partners.


13


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

Investment
We determined that each of the Investment Funds are considered VIEs because these limited partnerships lack both substantive kick-out and participating rights. Because we have a general partner interest in each of the Investment Funds and have significant limited partner interests in each of the Investment Funds, coupled with our significant exposure to losses and benefits in each of the Investment Funds, we are the primary beneficiary of each of the Investment Funds and therefore continue to consolidate each of the Investment Funds.
Energy
CVR Refining and CVR Partners are each considered VIEs because each of these limited partnerships lack both substantive kick-out and participating rights. In addition, CVR Energy also concluded that based upon its general partner's roles and rights in CVR Refining and CVR Partners as afforded by their respective partnership agreements, coupled with its exposure to losses and benefits in each of CVR Refining and CVR Partners through its significant limited partner interests, intercompany credit facilities and services agreements, CVR Energy determined that it is the primary beneficiary of both CVR Refining and CVR Partners. Based upon this evaluation, CVR Energy continues to consolidate both CVR Refining and CVR Partners.
The following table includes balances of assets and liabilities of VIE's included in Icahn Enterprises Holdings' condensed consolidated balance sheets.
 
June 30, 2017
 
December 31, 2016
 
(in millions)
Cash and cash equivalents
$
567

 
$
370

Cash held at consolidated affiliated partnerships and restricted cash
968

 
752

Investments
8,627

 
9,219

Due from brokers
1,391

 
1,482

Property, plant and equipment, net
3,259

 
3,331

Inventories
318

 
349

Intangible assets, net
308

 
318

Other assets
78

 
110

Accounts payable, accrued expenses and other liabilities
2,124

 
1,769

Securities sold, not yet purchased, at fair value
1,730

 
1,139

Due to brokers
676

 
3,725

Debt
1,166

 
1,165

Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, cash held at consolidated affiliated partnerships and restricted cash, accounts receivable, due from brokers, accounts payable, accrued expenses and other liabilities and due to brokers are deemed to be reasonable estimates of their fair values because of their short-term nature. See Note 4, “Investments and Related Matters,” and Note 5, “Fair Value Measurements,” for a detailed discussion of our investments and other non-financial assets and/or liabilities.
The fair value of our long-term debt is based on the quoted market prices for the same or similar issues or on the current rates offered to us for debt of the same remaining maturities. The carrying value and estimated fair value of our long-term debt as of June 30, 2017 was approximately $11.3 billion and $11.5 billion, respectively. The carrying value and estimated fair value of our long-term debt as of December 31, 2016 was approximately $11.1 billion and $11.2 billion, respectively.
Restricted Cash
Our restricted cash balance was $961 million and $686 million as of June 30, 2017 and December 31, 2016, respectively.
Accounts Receivable, net
Transfers of receivables relate primarily to our Automotive segment. Federal-Mogul's subsidiaries in Brazil, France, Germany, Italy, Canada and the United States are party to accounts receivable factoring and securitization facilities. Gross


14


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

accounts receivable transferred under these facilities were $601 million and $487 million as of June 30, 2017 and December 31, 2016, respectively. Of those gross amounts, $595 million and $485 million, respectively, qualify as sales in accordance with U.S. GAAP. The remaining transferred receivables were pledged as collateral and accounted for as secured borrowings and recorded in the condensed consolidated balance sheets within accounts receivable, net and debt. Under the terms of these facilities, Federal-Mogul is not obligated to draw cash immediately upon the transfer of accounts receivable. As of June 30, 2017 and December 31, 2016, Federal-Mogul did not have any undrawn cash related to such transferred receivables.
Proceeds from the transfers of accounts receivable qualifying as sales were $442 million and $429 million for the three months ended June 30, 2017 and 2016, respectively, and $916 million and $842 million for the six months ended June 30, 2017 and 2016, respectively. Expenses associated with transfers of receivables were $4 million and $4 million for the three months ended June 30, 2017 and 2016, respectively, and $8 million and $7 million for the six months ended June 30, 2017 and 2016, respectively. Such expenses were recorded in the condensed consolidated statements of operations within other income (loss), net. Where Federal-Mogul receives a fee to service and monitor these transferred receivables, such fees are sufficient to offset the costs and as such, a servicing asset or liability is not incurred as a result of such activities.
Held For Sale
As of December 31, 2016, assets and liabilities held for sale primarily consisted of property plant and equipment and debt, respectively, and related primarily to our pending ARL Initial Sale as of December 31, 2016. On June 1, 2017, we closed on the ARL Initial Sale and disposed of such assets and liabilities previously classified as held for sale.
During 2017, we identified additional assets and liabilities that meet the criteria to be classified as held for sale. As of June 30, 2017, assets held for sale primarily consisted of property plant and equipment within our Railcar and Real Estate segments, including the remaining railcars previously owned by ARL that we continued to own subsequent to the ARL Initial Sale.
Reclassifications
Certain reclassifications from the prior year presentation have been made to conform to the current year presentation.
Adoption of New Accounting Standards
In July 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-11, Simplifying the Measurement of Inventory, which amends FASB Accounting Standards Codification ("ASC") Topic 330, Inventory. This ASU requires entities to measure inventory at the lower of cost or net realizable value and eliminates the option that currently exists for measuring inventory at market value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This ASU is effective beginning with our interim period beginning January 1, 2017. The adoption of this guidance was applied prospectively and had minimal impact on our consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-07, Simplifying the Transition to the Equity Method of Accounting, which amends FASB ASC Topic 323, Investments - Equity Method and Joint Ventures. This ASU eliminates the retroactive adjustment of an investment that qualifies for the equity method as a result of an increase in the level of ownership or degree of influence as if the equity method had been in effect during all previous periods that the investment had been held. This ASU is effective beginning with our interim period beginning January 1, 2017. The adoption of this guidance had minimal impact on our consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends FASB ASC Topic 718, Compensation - Stock Compensation. This ASU simplifies several aspects of the accounting for share-based payment transactions, including income the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU is effective beginning with our interim period beginning January 1, 2017. During the first quarter of 2017, the board of directors of the general partner of Icahn Enterprises unanimously approved and adopted the Icahn Enterprises L.P. 2017 Long Term Incentive Plan (the "2017 Incentive Plan"), which became effective during the first quarter of 2017 subject to the approval by holders of a majority of Icahn Enterprises depositary units. The 2017 Incentive Plan permits us to issue depositary units and grant options, restricted units or other unit-based awards to all of our, and our affiliates', employees, consultants, members and partners, as well as the three non-employee directors of our general partner. One million of Icahn Enterprises' depositary units are initially available under the 2017 Incentive Plan. Prior to the adoption of the 2017 Incentive Plan, accounting for unit-based payments did not apply to us. Therefore, the adoption of this guidance in 2017 was the result of the adoption of the 2017 Incentive Plan and which had a minimal impact on our consolidated financial statements.


15


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

In October 2016, the FASB issued ASU No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, which amends FASB ASC Topic 740, Income Taxes. This ASU requires the recognition of income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Current U.S. GAAP prohibits the recognition of current and deferred incomes taxes for an intra-entity asset transfer until the asset has been sold to an outside party. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We have elected to early adopt this guidance in the first quarter of 2017. The impact of early adopting this guidance on our consolidated financial statements is a cumulative effect adjustment to decrease our equity attributable to Icahn Enterprises and Icahn Enterprises Holdings as of January 1, 2017 by $47 million to reverse previously deferred charges and recognize them in equity.
In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business, which amends FASB ASC Topic 805, Business Combinations. This ASU provides guidance on what constitutes a business for purposes of applying FASB ASC Topic 805. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We have elected to early adopt this guidance in the first quarter of 2017. We did not have any material transactions affected by this guidance and therefore, the adoption of this guidance did not have a material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, which amends FASB ASC Topic 350, Intangibles - Goodwill and Other. This ASU simplifies the subsequent measurement of goodwill by eliminating "Step 2" from the goodwill impairment test which, prior to adoption of this ASU, requires comparing the implied fair value of goodwill with its carrying value. By eliminating "Step 2" from the goodwill impairment test, the quantitative analysis of goodwill will result in an impairment loss for the amount that the carrying value of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to the tested reporting unit. While this ASU reduces the complexity and cost of our goodwill impairment tests, it may result in significant differences in the recognition of goodwill impairment. For example, should our reporting units fail "Step 1" of the impairment tests but pass the current "Step 2" impairment tests, we may have more impairments of goodwill under the new guidance. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted beginning for interim and annual goodwill impairment tests performed on testing dates after January 1, 2017. We have elected to early adopt this guidance for our interim and annual goodwill impairment tests to be performed on testing dates beginning in 2017. This ASU principally affects our Automotive segment as substantially all of our goodwill balance pertains to our Automotive segment as of June 30, 2017. We did not perform any interim goodwill impairment analysis in 2017 and therefore, the adoption of this guidance had no impact on our consolidated financial statements.
Recently Issued Accounting Standards
In May 2014, the FASB issued ASU No. 2014-09, creating a new topic, FASB ASC Topic 606, Revenue from Contracts with Customers, superseding revenue recognition requirements in FASB ASC Topic 605, Revenue Recognition. This ASU requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In addition, an entity is required to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. This ASU was amended by ASU No. 2015-14, issued in August 2015, which deferred the original effective date by one year; the effective date of this ASU is for fiscal years, and interim reporting periods within those years, beginning after December 15, 2017, using one of two retrospective application methods. In addition, the FASB issued other amendments during 2016 to FASB ASC Topic 606 that include implementation guidance to principal versus agent considerations, guidance to identifying performance obligations and licensing guidance and other narrow scope improvements. We have developed an implementation plan to adopt this new ASU. As part of this plan, we are continuing to assess the impact of this new standard on our business processes, business and accounting systems, and consolidated financial statements and related disclosures. We expect to complete our assessment within the next several months after which we will initiate the design and implementation phases of the plan, including implementing any changes to existing business processes and systems to accommodate these new standards, during 2017. We will adopt these new standards on January 1, 2018 using the modified retrospective application method. To date, we have not identified any material differences in our existing revenue recognition methods that would require modification under the new standards.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall, which amends FASB ASC Topic 825, Financial Instruments. This ASU requires that equity investments (except those accounted for under the equity method of accounting or those that result in the consolidation of the investee) to be measured at fair value with changes recognized in earnings. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment. In addition, there were other amendments to certain disclosure and presentation matters pertaining to


16


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

financial instruments, including the requirement of an entity to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The amendments in this ASU should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values should be applied prospectively to equity investments that exist as of the date of adoption. Early application is permitted for certain matters only. We are currently evaluating the impact of this guidance on our consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes FASB ASC Topic 840, Leases. This ASU requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. In addition, among other changes to the accounting for leases, this ASU retains the distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous guidance. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The amendments in this ASU should be applied using a modified retrospective approach. Early application is permitted. We anticipate our assessment and implementation plan to be ongoing during the remainder of 2017 and into 2018 and are currently unable to reasonably estimate the impact of this guidance on our consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which amends FASB ASC Topic 326, Financial Instruments - Credit Losses. This ASU requires financial assets measured at amortized cost to be presented at the net amount to be collected and broadens the information, including forecasted information incorporating more timely information, that an entity must consider in developing its expected credit loss estimate for assets measured. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early application is permitted for fiscal years beginning after December 15, 2018. We are currently evaluating the impact of this guidance on our consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, which amends FASB ASC Topic 230, Statement of Cash Flows. This ASU seeks to reduce the diversity currently in practice by providing guidance on the presentation of eight specific cash flow issues in the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We are currently evaluating the impact of this guidance on our consolidated statements of cash flows.
In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash, which amends FASB ASC Topic 230, Statement of Cash Flows. This ASU requires that the statement of cash flows explain the change during the period total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements.
In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which amends FASB ASC Topic 715, Compensation - Retirement Benefits. This ASU requires entities to present the service cost component of net periodic benefit cost in the same line item or items in the financial statements as other compensation costs arising from services rendered by the pertinent employees during the period. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements.
In May 2017, the FASB issued ASU No. 2017-09, Scope of Modification Accounting, which amends FASB ASC Topic 718, Compensation - Stock Compensation. This ASU provides updated guidance about which changes to the terms and conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements.

3.
Related Party Transactions.
Our amended and restated agreement of limited partnership expressly permits us to enter into transactions with our general partner or any of its affiliates, including, without limitation, buying or selling properties from or to our general partner and any of its affiliates and borrowing and lending money from or to our general partner and any of its affiliates, subject to limitations contained in our partnership agreement and the Delaware Revised Uniform Limited Partnership Act. The indentures governing our indebtedness contain certain covenants applicable to transactions with affiliates.


17


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

Investment
During the six months ended June 30, 2017 and 2016, affiliates of Mr. Icahn invested $600 million and $490 million, respectively, in the Investment Funds. As of June 30, 2017 and December 31, 2016, the total fair market value of investments in the Investment Funds made by Mr. Icahn and his affiliates (excluding Icahn Enterprises and Icahn Enterprises Holdings) was approximately $4.3 billion and $3.7 billion, respectively, representing approximately 61% and 69% of the Investment Funds' assets under management as of each respective date.
We pay for expenses pertaining to the operation, administration and investment activities of our Investment segment for the benefit of the Investment Funds (including salaries, benefits and rent). Effective April 1, 2011, based on an expense-sharing arrangement, certain expenses borne by us are reimbursed by the Investment Funds. For the three months ended June 30, 2017 and 2016, $3 million and $19 million, respectively, was allocated to the Investment Funds based on this expense-sharing arrangement and for the six months ended June 30, 2017 and 2016, such allocation was $5 million and $7 million, respectively.
Automotive
As discussed in Note 4, "Investments and Related Matters," the Investment Funds have an investment in the common stock of Hertz Global Holdings, Inc. ("Hertz") measured at fair value that would have otherwise been subject to the equity method of accounting beginning in the fourth quarter of 2016. Pep Boys provides services to Hertz in the ordinary course of business. For the three and six months ended June 30, 2017, revenue from Hertz was $3 million and $5 million, respectively.
Railcar
ARL
On February 29, 2016, Icahn Enterprises entered into a contribution agreement with an affiliate of Mr. Icahn to acquire the remaining 25% economic interest in ARL not already owned by us. Pursuant to this contribution agreement, we contributed 685,367 newly issued depositary units of Icahn Enterprises to the affiliate in exchange for the remaining 25% economic interest in ARL. As a result of the transaction, we owned a 100% economic interest in ARL. This transaction was authorized by the independent committee of the board of directors of the general partner of Icahn Enterprises. The independent committee was advised by independent counsel and retained an independent financial advisor which rendered a fairness opinion.
Transactions with ACF
Our Railcar segment has certain transactions with ACF Industries LLC ("ACF"), an affiliate of Mr. Icahn, under various agreements, as well as on a purchase order basis. ACF is a manufacturer and fabricator of specialty railcar parts and miscellaneous steel products. Agreements and transactions with ACF include the following:
Railcar component purchases from ACF
Railcar parts purchases from and sales to ACF
Railcar purchasing and engineering services agreement with ACF
Lease of certain intellectual property to ACF
Railcar repair services and support for ACF
Railcar purchases from ACF (prior to June 1, 2017)
For each of the three and six months ended June 30, 2017 and 2016, revenues and purchases from ACF were not material.
Insight Portfolio Group LLC
Insight Portfolio Group LLC ("Insight Portfolio Group") is an entity formed and controlled by Mr. Icahn in order to maximize the potential buying power of a group of entities with which Mr. Icahn has a relationship in negotiating with a wide range of suppliers of goods, services and tangible and intangible property at negotiated rates. Icahn Enterprises Holdings has a minority equity interest in Insight Portfolio Group and agreed to pay a portion of Insight Portfolio Group's operating expenses. In addition to the minority equity interest held by Icahn Enterprises Holdings, certain subsidiaries of ours, including Federal-Mogul, CVR Energy, PSC Metals, ARI, ARL (prior to June 1, 2017), Tropicana, Viskase and WPH also acquired minority equity interests in Insight Portfolio Group and agreed to pay a portion of Insight Portfolio Group's operating expenses. A number of other entities with which Mr. Icahn has a relationship also acquired equity interests in Insight Portfolio Group and also agreed to pay certain of Insight Portfolio Group's operating expenses. For each of the three and six months ended June 30,


18


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

2017 and 2016, we and certain of our subsidiaries paid certain of the Insight Portfolio Group's operating expenses of $1 million.

4.
Investments and Related Matters.
Investment
Investments and securities sold, not yet purchased consist of equities, bonds, bank debt and other corporate obligations, all of which are reported at fair value in our condensed consolidated balance sheets. These investments are considered trading securities. In addition, our Investment segment has certain derivative transactions which are discussed in Note 6, “Financial Instruments." The carrying value and detail by security type, including business sector for equity securities, with respect to investments and securities sold, not yet purchased held by our Investment segment consist of the following:
 
June 30, 2017
 
December 31, 2016
Assets
(in millions)
Investments:
 
 
 
   Equity securities:
 
 
 
      Basic materials
$
880

 
$
963

      Consumer, non-cyclical
2,203

 
2,677

      Energy
1,449

 
1,278

      Financial
2,151

 
2,385

      Technology
822

 
911

      Other
706

 
809

 
8,211

 
9,023

 
 
 
 
   Corporate debt securities
409

 
190

 
$
8,620

 
$
9,213

Liabilities
 
 
 
Securities sold, not yet purchased, at fair value:
 
 
 
   Equity securities:
 
 
 
      Consumer, non-cyclical
$
161

 
$

      Consumer, cyclical
1,306

 
968

      Energy
101

 
19

      Industrial
108

 
100

 
1,676

 
1,087

 
 
 
 
   Corporate debt securities
53

 
52

 
$
1,729

 
$
1,139

The portion of trading gains (losses) that relates to trading securities still held by our Investment segment was $388 million and $(74) million for the three months ended June 30, 2017 and 2016, respectively, and $622 million and $(189) million for the six months ended June 30, 2017 and 2016, respectively.
As of June 30, 2017, the Investment Funds owned approximately 28.0% of the outstanding common stock of Hertz. Beginning in the fourth quarter of 2016, this investment would have become subject to the equity method of accounting however, our Investment segment elected to continue to apply the fair value option to this investment. Our Investment segment recorded net losses of $142 million and $236 million for the three and six months ended June 30, 2017, respectively, with respect to its investment in Hertz. As of June 30, 2017 and December 31, 2016, the aggregate fair value of our Investment segment's investment in Hertz was $269 million and $505 million, respectively.


19


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

The Investment Funds also owned approximately 19.6% of the outstanding common stock of Herbalife Ltd. ("Herbalife") as of June 30, 2017. Beginning in the third quarter of 2016, this investment would have become subject to the equity method of accounting, after considering additional ownership in Herbalife by an affiliate of Mr. Icahn as well as the collective representation on the board of directors of Herbalife, however, our Investment segment elected to continue to apply the fair value option to this investment. Our Investment segment recorded net gains of $241 million and $423 million for the three and six months ended June 30, 2017, respectively, with respect to its investment in Herbalife. As of June 30, 2017 and December 31, 2016, the aggregate fair value of our Investment segment's investment in Herbalife was approximately $1.3 billion and $867 million, respectively.
Other Segments
With the exception of certain equity method investments at our operating subsidiaries disclosed in the table below, our investments are measured at fair value in our condensed consolidated balance sheets. The carrying value of investments held by our other segments and our Holding Company consist of the following:
 
June 30, 2017
 
December 31, 2016
 
(in millions)
Equity method investments
$
312

 
$
302

Other investments (measured at fair value)
370

 
366

 
$
682

 
$
668


5.
Fair Value Measurements.
U.S. GAAP requires enhanced disclosures about investments and non-recurring non-financial assets and liabilities that are measured and reported at fair value and has established a hierarchal disclosure framework that prioritizes and ranks the level of market price observability used in measuring investments or non-financial assets and liabilities at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Investments and non-financial assets and/or liabilities measured and reported at fair value are classified and disclosed in one of the following categories:
Level 1 - Quoted prices are available in active markets for identical investments and non-financial assets and/or liabilities as of the reporting date.
Level 2 - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies where all significant inputs are observable.
Level 3 - Pricing inputs are unobservable for the investment and non-financial asset and/or liability and include situations where there is little, if any, market activity for the investment or non-financial asset and/or liability. The inputs into the determination of fair value require significant management judgment or estimation. Fair value is determined using comparable market transactions and other valuation methodologies, adjusted as appropriate for liquidity, credit, market and/or other risk factors.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, investments', non-financial assets' and/or liabilities' level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the investment. Significant transfers, if any, between the levels within the fair value hierarchy are recognized at the beginning of the reporting period when changes in circumstances require such transfers.


20


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

Assets Measured at Fair Value on a Recurring Basis
The following table summarizes the valuation of our assets and liabilities by the above fair value hierarchy levels measured on a recurring basis as of June 30, 2017 and December 31, 2016:
 
June 30, 2017
 
December 31, 2016
  
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
(in millions)
Investments (Note 4)
$
8,214

 
$
523

 
$
229

 
$
8,966

 
$
9,033

 
$
306

 
$
212

 
$
9,551

Derivative contracts, at fair value (Note 6)(1)

 
1

 

 
1

 

 
23

 

 
23

 
$
8,214

 
$
524

 
$
229

 
$
8,967

 
$
9,033

 
$
329

 
$
212

 
$
9,574

Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Securities sold, not yet purchased (Note 4)
$
1,676

 
$
53

 
$

 
$
1,729

 
$
1,087

 
$
52

 
$

 
$
1,139

Other liabilities

 
274

 

 
274

 

 
187

 

 
187

Derivative contracts, at fair value (Note 6)(2)

 
1,366

 

 
1,366

 

 
1,139

 

 
1,139

 
$
1,676

 
$
1,693

 
$

 
$
3,369

 
$
1,087

 
$
1,378

 
$

 
$
2,465

(1) 
Amounts are classified within other assets in our condensed consolidated balance sheets.
(2) 
Amounts are classified within accrued expenses and other liabilities in our condensed consolidated balance sheets.

Assets Measured at Fair Value on a Recurring Basis for Which We Use Level 3 Inputs to Determine Fair Value
The changes in investments measured at fair value on a recurring basis for which we use Level 3 inputs to determine fair value are as follows:
 
Six Months Ended
June 30,
 
2017
 
2016
 
(in millions)
Balance at January 1
$
212

 
$
283

Net realized and unrealized gains(1)
17

 
10

Purchases
5

 
50

Transfers out
(6
)
 
(129
)
Transfers in
1

 
9

Balance at June 30
$
229

 
$
223

(1) Includes net unrealized gains (losses) of $17 million and $(6) million for the six months ended June 30, 2017 and 2016, respectively, relating to investments still held at June 30 of each respective period and which are included in net gain (loss) from investment activities in the condensed consolidated statements of operations.
Transfers out of Level 3 during the six months ended June 30, 2016 primarily relates to our previously held corporate debt investment in TER of $126 million. The investment was transferred out of Level 3 following TER's emergence from bankruptcy on February 26, 2016 and subsequently becoming a wholly owned consolidated subsidiary of ours upon the extinguishment of their debt and its conversion to equity in TER. Purchases during the six months ended June 30, 2016 relates to an increase in a certain investment classified as trading securities which is considered a Level 3 investment due to unobservable market data and is measured at fair value on a recurring basis. We determined the fair value of this investment using the Black-Scholes option pricing model and other valuation techniques. As of June 30, 2017 and December 31, 2016, the fair value of this investment was $224 million and $207 million, respectively.


21


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

Assets Measured at Fair Value on a Non-Recurring Basis for Which We Use Level 3 Inputs to Determine Fair Value
Certain assets measured at fair value using level 3 inputs on a nonrecurring basis have been impaired. During the six months ended June 30, 2017 and 2016, we recorded impairment charges of $3 million and $3 million, respectively, relating to property, plant and equipment. We determined the fair value of property, plant and equipment by applying probability weighted, expected present value techniques to the estimated future cash flows using assumptions a market participant would utilize. In addition, during the three and six months ended June 30, 2017, we recorded a loss of $2 million and $7 million, respectively, from marking inventory down to net realizable value at our Automotive segment. Additionally, in connection with our reclassification of certain railcars leased to others from held and used to assets held for sale, we recorded an impairment charge at our Railcar segment of $67 million for each of the three and six months ended June 30, 2017, which represents the difference between the carrying value and fair value less cost to sell of such assets.
Refer to Note 8, "Goodwill and Intangible Assets, Net," for discussion of our goodwill and intangible asset impairments.
Refer to Note 12, "Segment Reporting," for total impairment recorded by each of our segments.

6.
Financial Instruments.
Overview
Investment
In the normal course of business, the Investment Funds may trade various financial instruments and enter into certain investment activities, which may give rise to off-balance-sheet risks, with the objective of capital appreciation or as economic hedges against other securities or the market as a whole. The Investment Funds' investments may include futures, options, swaps and securities sold, not yet purchased. These financial instruments represent future commitments to purchase or sell other financial instruments or to exchange an amount of cash based on the change in an underlying instrument at specific terms at specified future dates. Risks arise with these financial instruments from potential counterparty non-performance and from changes in the market values of underlying instruments.
Credit concentrations may arise from investment activities and may be impacted by changes in economic, industry or political factors. The Investment Funds routinely execute transactions with counterparties in the financial services industry, resulting in credit concentration with respect to this industry. In the ordinary course of business, the Investment Funds may also be subject to a concentration of credit risk to a particular counterparty. The Investment Funds seek to mitigate these risks by actively monitoring exposures, collateral requirements and the creditworthiness of its counterparties.
The Investment Funds have entered into various types of swap contracts with other counterparties. These agreements provide that they are entitled to receive or are obligated to pay in cash an amount equal to the increase or decrease, respectively, in the value of the underlying shares, debt and other instruments that are the subject of the contracts, during the period from inception of the applicable agreement to its expiration. In addition, pursuant to the terms of such agreements, they are entitled to receive or obligated to pay other amounts, including interest, dividends and other distributions made in respect of the underlying shares, debt and other instruments during the specified time frame. They are also required to pay to the counterparty a floating interest rate equal to the product of the notional amount multiplied by an agreed-upon rate, and they receive interest on any cash collateral that they post to the counterparty at the federal funds or LIBOR rate in effect for such period.
The Investment Funds may trade futures contracts. A futures contract is a firm commitment to buy or sell a specified quantity of a standardized amount of a deliverable grade commodity, security, currency or cash at a specified price and specified future date unless the contract is closed before the delivery date. Payments (or variation margin) are made or received by the Investment Funds each day, depending on the daily fluctuations in the value of the contract, and the whole value change is recorded as an unrealized gain or loss by the Investment Funds. When the contract is closed, the Investment Funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
The Investment Funds may utilize forward contracts to seek to protect their assets denominated in foreign currencies and precious metals holdings from losses due to fluctuations in foreign exchange rates and spot rates. The Investment Funds' exposure to credit risk associated with non-performance of such forward contracts is limited to the unrealized gains or losses inherent in such contracts, which are recognized in other assets and accrued expenses and other liabilities in our condensed consolidated balance sheets.


22


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

The Investment Funds may also enter into foreign currency contracts for purposes other than hedging denominated securities. When entering into a foreign currency forward contract, the Investment Funds agree to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed-upon future date unless the contract is closed before such date. The Investment Funds record unrealized gains or losses on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into such contracts and the forward rates at the reporting date.
The Investment Funds may also purchase and write option contracts. As a writer of option contracts, the Investment Funds receive a premium at the outset and then bear the market risk of unfavorable changes in the price of the underlying financial instrument. As a result of writing option contracts, the Investment Funds are obligated to purchase or sell, at the holder's option, the underlying financial instrument. Accordingly, these transactions result in off-balance-sheet risk, as the Investment Funds' satisfaction of the obligations may exceed the amount recognized in our condensed consolidated balance sheets.
Certain terms of the Investment Funds' contracts with derivative counterparties, which are standard and customary to such contracts, contain certain triggering events that would give the counterparties the right to terminate the derivative instruments. In such events, the counterparties to the derivative instruments could request immediate payment on derivative instruments in net liability positions. The aggregate fair value of all of the Investment Funds' derivative instruments with credit-risk-related contingent features that are in a liability position at June 30, 2017 and December 31, 2016 was $9 million and $39 million, respectively.
Automotive
Federal-Mogul is exposed to market risk, such as fluctuations in foreign currency exchange rates, commodity prices, and changes in interest rates, which may result in cash flow risks. To manage the volatility relating to these exposures, Federal-Mogul aggregates the exposures on a consolidated basis to take advantage of natural offsets. For exposures not offset within its operations, Federal-Mogul enters into various derivative transactions pursuant to its risk management policies, which prohibit holding or issuing derivative financial instruments for speculative purposes, and designation of derivative instruments is performed on a transaction basis to support hedge accounting. The changes in fair value of these hedging instruments are offset in part or in whole by corresponding changes in the fair value or cash flows of the underlying exposures being hedged. Federal-Mogul assesses the initial and ongoing effectiveness of its hedging relationships in accordance with its documented policy.
Energy
CVR Refining enters into commodity swap contracts in order to fix the margin on a portion of future production. Additionally, CVR Refining may enter into price and basis swaps in order to fix the price on a portion of its commodity purchases and product sales. The physical volumes are not exchanged and these contracts are net settled with cash. The contract fair value of the commodity swaps is reflected on the condensed consolidated balance sheets with changes in fair value currently recognized in the condensed consolidated statements of operations. Quoted prices for similar assets or liabilities in active markets (Level 2) are considered to determine the fair values for the purpose of marking to market the hedging instruments at each period end. As of June 30, 2017, CVR Refining did not have any open commodity swap contracts.
Consolidated Derivative Information
Certain derivative contracts executed by the Investment Funds with a single counterparty, by our Automotive segment with a single counterparty, or by our Energy segment with a single counterparty are reported on a net-by-counterparty basis where a legal right of offset exists under an enforceable netting agreement. Values for the derivative financial instruments, principally swaps, forwards, over-the-counter options and other conditional and exchange contracts, are reported on a net-by-counterparty basis. As a result, the net exposure to counterparties is reported in either other assets or accrued expenses and other liabilities in our condensed consolidated balance sheets.


23


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table presents the consolidated fair values of our derivatives that are not designated as hedging instruments in accordance with U.S GAAP:
Derivatives Not Designated as Hedging Instruments
 
Asset Derivatives(1)
 
Liability Derivatives(2)
 
June 30, 2017
 
December 31, 2016
 
June 30, 2017
 
December 31, 2016
 
 
(in millions)
Equity contracts
 
$
113

 
$
15

 
$
1,452

 
$
1,104

Credit contracts
 
1

 
17

 
9

 
39

Commodity contracts
 

 
2

 
18

 
11

Sub-total
 
114

 
34

 
1,479

 
1,154

Netting across contract types(3)
 
(113
)
 
(15
)
 
(113
)
 
(15
)
Total(3)
 
$
1

 
$
19

 
$
1,366

 
$
1,139


(1) 
Net asset derivatives are located within other assets in our condensed consolidated balance sheets.
(2) 
Net liability derivatives are located within accrued expenses and other liabilities in our condensed consolidated balance sheets.
(3) 
Excludes netting of cash collateral received and posted. The total collateral posted at June 30, 2017 and December 31, 2016 was $910 million and $634 million, respectively, across all counterparties, which are included in cash held at consolidated affiliated partnerships and restricted cash on the condensed consolidated balance sheets.
The following table presents the amount of gain (loss) recognized in the condensed consolidated statements of operations for our derivatives not designated as hedging instruments:
 
 
Gain (Loss) Recognized in Income(1)
Derivatives Not Designated as Hedging Instruments
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
 
 
(in millions)
Equity contracts
 
$
(262
)
 
$
(250
)
 
$
(835
)
 
$
(658
)
Foreign exchange contracts
 

 
24

 

 
(14
)
Credit contracts
 
8

 
6

 
(17
)
 
131

Interest rate contracts
 

 

 

 
(12
)
Commodity contracts
 
(11
)
 
(19
)
 
(16
)
 
(68
)
 
 
$
(265
)
 
$
(239
)
 
$
(868
)
 
$
(621
)
(1) 
Gains (losses) recognized on derivatives are classified in net gain (loss) from investment activities in our condensed consolidated statements of operations for our Investment segment and are included in other income (loss), net for all other segments.
The volume of our derivative activities based on their notional exposure, categorized by primary underlying risk, is as follows:
 
June 30, 2017
 
December 31, 2016
  
Long Notional Exposure
 
Short Notional Exposure
 
Long Notional Exposure
 
Short Notional Exposure
Primary underlying risk:
(in millions)
Equity contracts
$
258

 
$
11,024

 
$
112

 
$
14,094

Credit contracts(1)

 
460

 
202

 
472

Commodity contracts
484

 
217

 
16

 
754

(1) 
The short notional amount on our credit default swap positions was approximately $2.7 billion and $2.6 billion as of June 30, 2017 and December 31, 2016, respectively. However, because credit spreads cannot compress below zero, our downside short notional exposure to loss is $460 million and $472 million as of June 30, 2017 and December 31, 2016, respectively.



24


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

Non-Derivative Instruments Designated as Hedging Instruments
Federal-Mogul has foreign currency denominated debt, of which $860 million was designated as a net investment hedge in certain foreign subsidiaries and affiliates of Federal-Mogul. Changes to its carrying value are included in other comprehensive loss as translation adjustments and other. These debt instruments are discussed further in Note 9, “Debt.” The amount recognized in accumulated other comprehensive loss for the three and six months ended June 30, 2017 was a loss of $60 million and $46 million, respectively.

7.
Inventories, Net.
Inventories, net consists of the following:
  
June 30, 2017
 
December 31, 2016
 
(in millions)
Raw materials
$
361

 
$
483

Work in process
340

 
299

Finished goods
2,441

 
2,201

 
$
3,142

 
$
2,983


8.
Goodwill and Intangible Assets, Net.
Goodwill consists of the following:
 
June 30, 2017
 
December 31, 2016
 
Gross Carrying Amount
 
Accumulated
Impairment
 
Net
Carrying
Value
 
Gross
Carrying
Amount
 
Accumulated
Impairment
 
Net
Carrying
Value
 
(in millions)
Automotive
$
1,693

 
$
(537
)
 
$
1,156