UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark one)
For the Quarterly Period Ended
OR
For the Transition Period from to
(
(
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
| Trading Symbol(s) |
| Name of Each Exchange on Which Registered | |
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. | Icahn Enterprises Holdings L.P. |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Icahn Enterprises L.P. | Icahn Enterprises Holdings L.P. |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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. | ||||||||||
☒ | Accelerated Filer | ☐ | Large Accelerated Filer | ☐ | Accelerated Filer | ☐ | ||||||
Non-accelerated Filer | ☐ | ☐ | ☒ | ☐ | ||||||||
Emerging Growth Company | Emerging Growth Company | |||||||||||
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. ☐
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 | Icahn Enterprises Holdings L.P. Yes |
As of May 7, 2021, there were
ICAHN ENTERPRISES L.P.
ICAHN ENTERPRISES HOLDINGS L.P.
TABLE OF CONTENTS
Page No. | ||
1 | ||
PART I. FINANCIAL INFORMATION | ||
2 | ||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 39 | |
53 | ||
53 | ||
PART II. OTHER INFORMATION | ||
54 | ||
54 | ||
55 |
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.
FORWARD-LOOKING STATEMENTS
This Report contains certain statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or by Public Law 104-67. All statements included in this Report, other than statements that relate solely to historical fact, are “forward-looking statements.” Such statements include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events, including the impact of the COVID-19 pandemic, or any statement that may relate to strategies, plans or objectives for, or potential results of, future operations, financial results, financial condition, business prospects, growth strategy or liquidity, and are based upon management’s current plans and beliefs or current estimates of future results or trends. Forward-looking statements can generally be identified by phrases such as “believes,” “expects,” “potential,” “continues,” “may,” “should,” “seeks,” “predicts,” “anticipates,” “intends,” “projects,” “estimates,” “plans,” “could,” “designed,” “should be” and other similar expressions that denote expectations of future or conditional events rather than statements of fact.
Forward-looking statements include certain statements made under the caption, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under Part I, Item 2 of this Report, but also forward-looking statements that appear in other parts of this Report. Forward-looking statements reflect our current views with respect to future events and are based on certain assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from trends, plans, or expectations set forth in the forward-looking statements. These include risks related to economic downturns, substantial competition and rising operating costs; risks related to the severity, magnitude and duration of the COVID-19 pandemic and its impact on the global economy, financial markets and industries in which our subsidiaries operate; risks related to our investment activities, including the nature of the investments made by the private funds in which we invest, declines in the fair value of our investments as a result of the COVID-19 pandemic, losses in the private funds and loss of key employees; risks related to our ability to continue to conduct our activities in a manner so as to not be deemed an investment company under the Investment Company Act of 1940, as amended; risks related to our energy business, including the volatility and availability of crude oil, declines in global demand for crude oil, refined products and liquid transportation fuels as result of the COVID-19 pandemic, other feed stocks and refined products, unfavorable refining margin (crack spread), interrupted access to pipelines, significant fluctuations in nitrogen fertilizer demand in the agricultural industry and seasonality of results; risks related to our automotive activities and exposure to adverse conditions in the automotive industry, including as a result of the COVID-19 pandemic; risks related to our food packaging activities, including competition from better capitalized competitors, inability of its suppliers to timely deliver raw materials, and the failure to effectively respond to industry changes in casings technology; risks related to our scrap metals activities, including potential environmental exposure; risks related to our real estate activities, including the extent of any tenant bankruptcies and insolvencies; risks related to our home fashion operations, including changes in the availability and price of raw materials, and changes in transportation costs and delivery times. These risks and uncertainties also include the risks and uncertainties described in our Annual Report on Form 10-K for the year ended December 31, 2020 and those set forth in this Report, including under the caption “Risk Factors,” under Part II, Item 1A of this Report. Additionally, there may be other factors not presently known to us or which we currently consider to be immaterial that may cause our actual results to differ materially from the forward-looking statements.
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, | December 31, | |||||
| 2021 |
| 2020 | |||
(In millions, except unit amounts) | ||||||
ASSETS | ||||||
Cash and cash equivalents | $ | | $ | | ||
Cash held at consolidated affiliated partnerships and restricted cash |
| |
| | ||
Investments |
| |
| | ||
Due from brokers |
| |
| | ||
Accounts receivable, net |
| |
| | ||
Inventories, net |
| |
| | ||
Property, plant and equipment, net |
| |
| | ||
Unrealized gain on derivative contracts | | | ||||
Goodwill |
| |
| | ||
Intangible assets, net |
| |
| | ||
Other assets |
| |
| | ||
Total Assets | $ | | $ | | ||
LIABILITIES AND EQUITY |
|
|
|
| ||
Accounts payable | $ | | $ | | ||
Accrued expenses and other liabilities |
| |
| | ||
Deferred tax liabilities |
| |
| | ||
Unrealized loss on derivative contracts |
| |
| | ||
Securities sold, not yet purchased, at fair value |
| |
| | ||
Due to brokers |
| |
| | ||
Debt |
| |
| | ||
Total liabilities |
| |
| | ||
Commitments and contingencies (Note 16) |
|
|
|
| ||
Equity: |
|
|
|
| ||
Limited partners: Depositary units: |
| |
| | ||
General partner |
| ( |
| ( | ||
Equity attributable to Icahn Enterprises |
| |
| | ||
Equity attributable to non-controlling interests |
| |
| | ||
Total equity |
| |
| | ||
Total Liabilities and Equity | $ | | $ | | ||
See notes to condensed consolidated financial statements.
2
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended March 31, | ||||||
| 2021 |
| 2020 | |||
(In millions, except per unit amounts) | ||||||
Revenues: | ||||||
Net sales | $ | | $ | | ||
Other revenues from operations |
| |
| | ||
Net gain (loss) from investment activities |
| |
| ( | ||
Interest and dividend income |
| |
| | ||
Other loss, net |
| ( |
| ( | ||
| |
| ( | |||
Expenses: | ||||||
Cost of goods sold |
| |
| | ||
Other expenses from operations |
| |
| | ||
Selling, general and administrative |
| |
| | ||
Restructuring, net |
| — |
| | ||
Interest expense |
| |
| | ||
| |
| | |||
Income (loss) before income tax (expense) benefit |
| |
| ( | ||
Income tax (expense) benefit |
| ( |
| | ||
Net income (loss) |
| |
| ( | ||
Less: net income (loss) attributable to non-controlling interests |
| |
| ( | ||
Net income (loss) attributable to Icahn Enterprises | $ | | $ | ( | ||
Net income (loss) attributable to Icahn Enterprises allocated to: | ||||||
Limited partners | $ | | $ | ( | ||
General partner |
| |
| ( | ||
$ | | $ | ( | |||
Basic income (loss) per LP unit | $ | | $ | ( | ||
Basic weighted average LP units outstanding |
| |
| | ||
Diluted income (loss) per LP unit | $ | | $ | ( | ||
Diluted weighted average LP units outstanding |
| |
| | ||
Cash distributions declared per LP unit | $ | | $ | | ||
See notes to condensed consolidated financial statements.
3
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
Three Months Ended March 31, | ||||||
| 2021 |
| 2020 | |||
(in millions) | ||||||
Net income (loss) | $ | | $ | ( | ||
Other comprehensive loss, net of tax: |
|
| ||||
Translation adjustments |
| ( |
| ( | ||
Post-retirement benefits and other |
| — |
| — | ||
Other comprehensive loss, net of tax |
| ( |
| ( | ||
Comprehensive income (loss) |
| |
| ( | ||
Less: Comprehensive income (loss) attributable to non-controlling interests |
| |
| ( | ||
Comprehensive income (loss) attributable to Icahn Enterprises | $ | | $ | ( | ||
Comprehensive income (loss) attributable to Icahn Enterprises allocated to: |
|
| ||||
Limited partners | $ | | $ | ( | ||
General partner |
| |
| ( | ||
$ | | $ | ( | |||
See notes to condensed consolidated financial statements.
4
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
Equity Attributable to Icahn Enterprises |
| ||||||||||||||
General | Limited | Non- | |||||||||||||
Partner’s | Partners’ | Total Partners’ | controlling | ||||||||||||
| (Deficit) Equity |
| Equity |
| Equity |
| Interests |
| Total Equity | ||||||
(In millions) | |||||||||||||||
Balance, December 31, 2020 | $ | ( | $ | | $ | | $ | | $ | | |||||
Net income |
| |
| |
| |
| |
| | |||||
Other comprehensive loss |
| — |
| ( |
| ( |
| — |
| ( | |||||
Partnership distributions payable |
| ( |
| ( |
| ( |
| — |
| ( | |||||
Partnership contributions |
| |
| |
| |
| — |
| | |||||
Investment segment contributions from non-controlling interests |
| — |
| — |
| — |
| |
| | |||||
Changes in subsidiary equity and other |
| — |
| ( |
| ( |
| — |
| ( | |||||
Balance, March 31, 2021 | $ | ( | $ | | $ | | $ | | $ | | |||||
Equity Attributable to Icahn Enterprises |
| ||||||||||||||
General | Limited | Non- | |||||||||||||
Partner’s | Partners’ | Total Partners’ | controlling | ||||||||||||
| (Deficit) Equity |
| Equity |
| Equity |
| Interests |
| Total Equity | ||||||
(In millions) | |||||||||||||||
Balance, December 31, 2019 | $ | ( | $ | | $ | | $ | | $ | | |||||
Net loss |
| ( |
| ( |
| ( |
| ( |
| ( | |||||
Other comprehensive loss |
| — |
| ( |
| ( |
| — |
| ( | |||||
Partnership distributions payable |
| ( |
| ( |
| ( |
| — |
| ( | |||||
Partnership contributions |
| — |
| |
| |
| — |
| | |||||
Investment segment contributions from non-controlling interests |
| — |
| — |
| — |
| |
| | |||||
Dividends and distributions to non-controlling interests in subsidiaries |
| — |
| — |
| — |
| ( |
| ( | |||||
Changes in subsidiary equity and other |
| — |
| ( |
| ( |
| — |
| ( | |||||
Balance, March 31, 2020 | $ | ( | $ | | $ | | $ | | $ | | |||||
See notes to condensed consolidated financial statements.
5
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31, | ||||||
| 2021 |
| 2020 | |||
(in millions) | ||||||
Cash flows from operating activities: | ||||||
Net income (loss) | $ | |
| $ | ( | |
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
|
|
| |||
Net (gain) loss from securities transactions |
| ( |
| | ||
Purchases of securities |
| ( |
| ( | ||
Proceeds from sales of securities |
| |
| | ||
Payments to cover securities sold, not yet purchased |
| ( |
| ( | ||
Proceeds from securities sold, not yet purchased |
| |
| — | ||
Changes in receivables and payables relating to securities transactions |
| ( |
| | ||
Changes in unrealized gains/losses on derivative contracts |
| ( |
| ( | ||
Depreciation and amortization |
| |
| | ||
Deferred taxes |
| ( |
| ( | ||
Other, net |
| |
| | ||
Changes in other operating assets and liabilities |
| |
| ( | ||
Net cash used in operating activities |
| ( |
| ( | ||
Cash flows from investing activities: |
|
|
|
| ||
Capital expenditures |
| ( |
| ( | ||
Acquisition of businesses, net of cash acquired |
| ( |
| ( | ||
Purchases of investments |
| — |
| ( | ||
Proceeds from sale of investments |
| |
| — | ||
Other, net |
| |
| ( | ||
Net cash provided by (used in) investing activities |
| |
| ( | ||
Cash flows from financing activities: |
|
|
|
| ||
Investment segment contributions from non-controlling interests |
| |
| | ||
Partnership contributions |
| |
| | ||
Dividends and distributions to non-controlling interests in subsidiaries |
| — |
| ( | ||
Proceeds from Holding Company senior unsecured notes |
| |
| | ||
Repayments of Holding Company senior unsecured notes |
| ( |
| ( | ||
Proceeds from subsidiary borrowings |
| |
| | ||
Repayments of subsidiary borrowings |
| ( |
| ( | ||
Other, net |
| ( |
| ( | ||
Net cash provided by financing activities |
| |
| | ||
Effect of exchange rate changes on cash and cash equivalents and restricted cash and restricted cash equivalents |
| |
| | ||
Net decrease in cash and cash equivalents and restricted cash and restricted cash equivalents |
| ( |
| ( | ||
Cash and cash equivalents and restricted cash and restricted cash equivalents, beginning of period |
| |
| | ||
Cash and cash equivalents and restricted cash and restricted cash equivalents, end of period | $ | | $ | | ||
See notes to condensed consolidated financial statements.
6
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, | December 31, | |||||
| 2021 |
| 2020 | |||
(in millions) | ||||||
ASSETS | ||||||
Cash and cash equivalents | $ | | $ | | ||
Cash held at consolidated affiliated partnerships and restricted cash |
| |
| | ||
Investments |
| |
| | ||
Due from brokers |
| |
| | ||
Accounts receivable, net |
| |
| | ||
Inventories, net |
| |
| | ||
Property, plant and equipment, net |
| |
| | ||
Unrealized gain on derivative contracts | | | ||||
Goodwill |
| |
| | ||
Intangible assets, net |
| |
| | ||
Other assets |
| |
| | ||
Total Assets | $ | | $ | | ||
LIABILITIES AND EQUITY |
|
| ||||
Accounts payable | $ | | $ | | ||
Accrued expenses and other liabilities |
| |
| | ||
Deferred tax liabilities |
| |
| | ||
Unrealized loss on derivative contracts |
| |
| | ||
Securities sold, not yet purchased, at fair value |
| |
| | ||
Due to brokers |
| |
| | ||
Debt |
| |
| | ||
Total liabilities |
| |
| | ||
Commitments and contingencies (Note 16) |
| |||||
Equity: |
| |||||
Limited partner |
| |
| | ||
General partner |
| ( |
| ( | ||
Equity attributable to Icahn Enterprises Holdings |
| |
| | ||
Equity attributable to non-controlling interests |
| |
| | ||
Total equity |
| |
| | ||
Total Liabilities and Equity | $ | | $ | | ||
See notes to condensed consolidated financial statements.
7
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended March 31, | ||||||
| 2021 |
| 2020 | |||
(in millions) | ||||||
Revenues: | ||||||
Net sales | $ | | $ | | ||
Other revenues from operations |
| |
| | ||
Net gain (loss) from investment activities |
| |
| ( | ||
Interest and dividend income |
| |
| | ||
Other loss, net |
| ( |
| ( | ||
| |
| ( | |||
Expenses: | ||||||
Cost of goods sold |
| |
| | ||
Other expenses from operations |
| |
| | ||
Selling, general and administrative |
| |
| | ||
Restructuring, net |
| |
| | ||
Interest expense |
| |
| | ||
| |
| | |||
Income (loss) before income tax (expense) benefit |
| |
| ( | ||
Income tax (expense) benefit |
| ( |
| | ||
Net income (loss) |
| |
| ( | ||
Less: net income (loss) attributable to non-controlling interests |
| |
| ( | ||
Net income (loss) attributable to Icahn Enterprises Holdings | $ | | $ | ( | ||
Net income (loss) attributable to Icahn Enterprises Holdings allocated to: | ||||||
Limited partner | $ | | $ | ( | ||
General partner |
| |
| ( | ||
$ | | $ | ( | |||
See notes to condensed consolidated financial statements.
8
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
Three Months Ended March 31, | ||||||
| 2021 |
| 2020 | |||
(in millions) | ||||||
Net income (loss) | $ | | $ | ( | ||
Other comprehensive loss, net of tax: | ||||||
Translation adjustments |
| ( |
| ( | ||
Post-retirement benefits and other |
| — |
| — | ||
Other comprehensive loss, net of tax |
| ( |
| ( | ||
Comprehensive income (loss) |
| |
| ( | ||
Less: Comprehensive income (loss) attributable to non-controlling interests |
| |
| ( | ||
Comprehensive income (loss) attributable to Icahn Enterprises Holdings | $ | | $ | ( | ||
Comprehensive income (loss) attributable to Icahn Enterprises Holdings allocated to: | ||||||
Limited partner | $ | | $ | ( | ||
General partner |
| |
| ( | ||
$ | | $ | ( | |||
See notes to condensed consolidated financial statements.
9
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
Equity Attributable to Icahn Enterprises Holdings |
| ||||||||||||||
General | Limited | Non- | |||||||||||||
Partner’s | Partner’s | Total Partners’ | controlling | ||||||||||||
| (Deficit) Equity |
| Equity |
| Equity |
| Interests |
| Total Equity | ||||||
(In millions) | |||||||||||||||
Balance, December 31, 2020 | $ | ( | $ | | $ | | $ | | $ | | |||||
Net income |
| |
| |
| |
| |
| | |||||
Other comprehensive loss |
| — |
| ( |
| ( |
| — |
| ( | |||||
Partnership distributions payable |
| ( |
| ( |
| ( |
| — |
| ( | |||||
Partnership contributions |
| |
| |
| |
| — |
| | |||||
Investment segment contributions from non-controlling interests |
| — |
| — |
| — |
| |
| | |||||
Changes in subsidiary equity and other |
| — |
| ( |
| ( |
| — |
| ( | |||||
Balance, March 31, 2021 | $ | ( | $ | | $ | | $ | | $ | | |||||
Equity Attributable to Icahn Enterprises Holdings |
| ||||||||||||||
General | Limited | Non- | |||||||||||||
Partner’s | Partner’s | Total Partners’ | controlling | ||||||||||||
| (Deficit) Equity |
| Equity |
| Equity |
| Interests |
| Total Equity | ||||||
(In millions) | |||||||||||||||
Balance, December 31, 2019 | $ | ( | $ | | $ | | $ | | $ | | |||||
Net loss |
| ( |
| ( |
| ( |
| ( |
| ( | |||||
Other comprehensive loss |
| — |
| ( |
| ( |
| — |
| ( | |||||
Partnership distributions payable |
| ( |
| ( |
| ( |
| — |
| ( | |||||
Partnership contributions |
| — |
| |
| |
| — |
| | |||||
Investment segment contributions from non-controlling interests |
| — |
| — |
| — |
| |
| | |||||
Dividends and distributions to non-controlling interests in subsidiaries |
| — |
| — |
| — |
| ( |
| ( | |||||
Changes in subsidiary equity and other |
| — |
| ( |
| ( |
| — |
| ( | |||||
Balance, March 31, 2020 | $ | ( | $ | | $ | | $ | | $ | | |||||
See notes to condensed consolidated financial statements.
10
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31, | ||||||
| 2021 |
| 2020 | |||
(in millions) | ||||||
Cash flows from operating activities: | ||||||
Net income (loss) | $ | | $ | ( | ||
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
|
|
|
| ||
Net (gain) loss from securities transactions |
| ( |
| | ||
Purchases of securities |
| ( |
| ( | ||
Proceeds from sales of securities |
| |
| | ||
Payments to cover securities sold, not yet purchased |
| ( |
| ( | ||
Proceeds from securities sold, not yet purchased |
| |
| — | ||
Changes in receivables and payables relating to securities transactions |
| ( |
| | ||
Changes in unrealized gains/losses on derivative contracts | ( |
| ( | |||
Depreciation and amortization |
| |
| | ||
Deferred taxes |
| ( |
| ( | ||
Other, net |
| |
| | ||
Changes in other operating assets and liabilities |
| |
| ( | ||
Net cash used in operating activities |
| ( |
| ( | ||
Cash flows from investing activities: |
|
|
|
| ||
Capital expenditures |
| ( |
| ( | ||
Acquisition of businesses, net of cash acquired |
| ( |
| ( | ||
Purchases of investments |
| — |
| ( | ||
Proceeds from sale of investments |
| |
| — | ||
Other, net |
| |
| ( | ||
Net cash provided by (used in) investing activities |
| |
| ( | ||
Cash flows from financing activities: |
|
|
|
| ||
Investment segment contributions from non-controlling interests |
| |
| | ||
Partnership contributions |
| |
| | ||
Dividends and distributions to non-controlling interests in subsidiaries |
| — |
| ( | ||
Proceeds from Holding Company senior unsecured notes |
| |
| | ||
Repayments of Holding Company senior unsecured notes |
| ( |
| ( | ||
Proceeds from subsidiary borrowings |
| |
| | ||
Repayments of subsidiary borrowings |
| ( |
| ( | ||
Other, net |
| ( |
| ( | ||
Net cash provided by financing activities |
| |
| | ||
Effect of exchange rate changes on cash and cash equivalents and restricted cash and restricted cash equivalents |
| |
| | ||
Net decrease in cash and cash equivalents and restricted cash and restricted cash equivalents |
| ( |
| ( | ||
Cash and cash equivalents and restricted cash and restricted cash equivalents, beginning of period |
| |
| | ||
Cash and cash equivalents and restricted cash and restricted cash equivalents, end of period | $ | | $ | | ||
See notes to condensed consolidated financial statements.
11
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”) is a master limited partnership formed in Delaware on February 17, 1987. Icahn Enterprises Holdings L.P. (“Icahn Enterprises Holdings”) is a limited partnership formed in Delaware on February 17, 1987. References to “we,” “our” or “us” herein include both Icahn Enterprises and Icahn Enterprises Holdings and their subsidiaries, unless the context otherwise requires.
Icahn Enterprises owns a
Description of Continuing Operating Businesses
We are a diversified holding company owning subsidiaries currently engaged in the following continuing operating businesses: Investment, Energy, Automotive, Food Packaging, Metals, Real Estate, Home Fashion and Pharma. 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 is 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. 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. We and certain of Mr. Icahn’s family members and affiliates are the only investors in the Investment Funds. Interests in the Investment Funds are not offered to outside investors. We had interests in the Investment Funds with a fair value of approximately $
Energy
We conduct our Energy segment through our majority owned subsidiary, CVR Energy, Inc. (“CVR Energy”). CVR Energy is a diversified holding company primarily engaged in the petroleum refining and nitrogen fertilizer manufacturing businesses through its holdings in CVR Refining, LP (“CVR Refining”) and CVR Partners, LP (“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. CVR Energy has a general partner interest in each of CVR Refining and CVR Partners. In addition, CVR Energy is the sole limited partner of CVR Refining and owns approximately
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Notes to Condensed Consolidated Financial Statements (Unaudited)
Automotive
We conduct our Automotive segment through our wholly owned subsidiary, Icahn Automotive Group LLC (“Icahn Automotive”). Icahn Automotive is engaged in the retail and wholesale distribution of automotive parts in the aftermarket (“aftermarket parts”) as well as providing automotive repair and maintenance services (“automotive services”) to its customers. Icahn Automotive’s aftermarket parts and automotive services businesses serve different customer channels and have distinct strategies, opportunities and requirements and therefore are operated as
Food Packaging
We conduct our Food Packaging segment through our majority owned subsidiary, Viskase Companies, Inc. (“Viskase”). Viskase is a producer of cellulosic, fibrous and plastic casings used to prepare and package processed meat products. As of March 31, 2021, we owned approximately
Metals
We conduct our Metals segment through our wholly owned subsidiary, PSC Metals LLC (“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.
Real Estate
Our Real Estate segment consists primarily of investment properties, the development and sale of single-family homes and the management of a country club.
Home Fashion
We conduct our Home Fashion segment through our wholly owned subsidiary, WestPoint Home LLC (“WPH”). WPH’s business consists of manufacturing, sourcing, marketing, distributing and selling home fashion consumer products.
Pharma
We conduct our Pharma segment through our wholly owned subsidiary, Vivus, Inc. (“Vivus”). We acquired all of the outstanding common stock of Vivus in December 2020 upon its emergence from bankruptcy. Vivus is a specialty pharmaceutical company with
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Notes to Condensed Consolidated Financial Statements (Unaudited)
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 “Investment Company Act”). Therefore, no more than 40% of our total assets can be invested in investment securities, as such term is defined in the Investment Company 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.
Events beyond our control, including significant appreciation or depreciation in the market value of certain of our publicly traded holdings or adverse developments with respect to our ownership of certain of our subsidiaries, could result in our inadvertently becoming an investment company that is required to register under the Investment Company Act. Our sales of Federal-Mogul LLC, Tropicana Entertainment Inc., American Railcar Industries, Inc. and Ferrous Resources Ltd. in recent years did not result in our being considered an investment company. However, additional transactions involving the sale of certain assets could result in our being considered an investment company. Following such events or transactions, an exemption under the Investment Company Act would provide us up to one year to take steps to avoid becoming classified as an investment company. We expect to take steps to avoid becoming classified as an investment company, but no assurance can be made that we will successfully be able to take the steps necessary to avoid becoming classified as an investment company.
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, 2020. 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
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 and Holding Company, for equity investments in which we own 50% or less but greater than 20%, we generally account for such investments using the equity method. All other equity investments are accounted for at fair value.
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Notes to Condensed Consolidated Financial Statements (Unaudited)
Reclassifications
Certain reclassifications from the prior year presentation have been made to conform to the current year presentation, which did not have an impact on previously reported net income and equity and are not deemed material.
Consolidated Variable Interest Entities
The following is a discussion of variable interest entities in which we are deemed to be the primary beneficiary and in which we therefore consolidate.
Icahn Enterprises Holdings
We determined that Icahn Enterprises Holdings is a VIE because it is a limited partnership that lacks both substantive kick-out and participating rights. Although Icahn Enterprises is not the general partner of Icahn Enterprises Holdings, Icahn Enterprises is deemed to be the primary beneficiary of Icahn Enterprises Holdings principally based on its
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 Partners is considered a VIE because it is a limited partnership that lacks 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 Partners as afforded by CVR Partners’ partnership agreement, coupled with its exposure to losses and benefits in CVR Partners through its significant limited partner interest, intercompany credit facilities and services agreements, it is the primary beneficiary of CVR Partners.
Food Packaging
Viskase holds a variable interest in a joint venture for which Viskase is the primary beneficiary. Viskase’s interest in the joint venture includes a
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Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table includes balances of assets and liabilities of VIE’s included in Icahn Enterprises Holdings’ condensed consolidated balance sheets.
March 31, | December 31, | |||||
| 2021 |
| 2020 | |||
(in millions) | ||||||
Cash and cash equivalents | $ | | $ | | ||
Cash held at consolidated affiliated partnerships and restricted cash |
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Investments |
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Due from brokers |
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Accounts receivable, net | | | ||||
Inventories, net |
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Property, plant and equipment, net |
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Unrealized gain on derivative contracts | | | ||||
Intangible assets, net |
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Other assets |
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Accounts payable |
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Accrued expenses and other liabilities | | | ||||
Deferred tax liabilities | | | ||||
Unrealized loss on derivative contracts | | | ||||
Securities sold, not yet purchased, at fair value |
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Due to brokers |
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Debt |
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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 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 March 31, 2021 was approximately $
Cash Flow
Cash and cash equivalents and restricted cash and restricted cash equivalents on our condensed consolidated statements of cash flows is comprised of (i) cash and cash equivalents and (ii) cash held at consolidated affiliated partnerships and restricted cash.
Cash Held at Consolidated Affiliated Partnerships and Restricted Cash
Our cash held at consolidated affiliated partnerships balance was $
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Notes to Condensed Consolidated Financial Statements (Unaudited)
Our restricted cash balance was $
Revenue From Contracts With Customers and Contract Balances
Due to the nature of our business, we derive revenue from various sources in various industries. With the exception of all of our Investment segment’s and our Holding Company’s revenues, and our Real Estate segment’s leasing revenue, our revenue is generally derived from contracts with customers in accordance with U.S. GAAP. Such revenue from contracts with customers is included in net sales and other revenues from operations in the condensed consolidated statements of operations, however, our Real Estate segment’s leasing revenue, as disclosed in Note 9, “Leases,” is also included in other revenues from operations. Related contract assets are included in accounts receivable, net or other assets and related contract liabilities are included in accrued expenses and other liabilities in the condensed consolidated balance sheets. Our disaggregation of revenue information includes our net sales and other revenues from operations for each of our reporting segments as well as additional disaggregation of revenue information for our Energy and Automotive segments. See Note 12, “Segment Reporting,” for our complete disaggregation of revenue information. In addition, we disclose additional information with respect to revenue from contracts with customers and contract balances for our Energy and Automotive segments below.
Energy
Our Energy segment’s deferred revenue is a contract liability that primarily relates to fertilizer sales contracts requiring customer prepayment prior to product delivery to guarantee a price and supply of nitrogen fertilizer. Deferred revenue is recorded at the point in time in which a prepaid contract is legally enforceable and the associated right to consideration is unconditional prior to transferring product to the customer. An associated receivable is recorded for uncollected prepaid contract amounts. Contracts requiring prepayment are generally short-term in nature and, as discussed above, revenue is recognized at the point in time in which the customer obtains control of the product. Our Energy segment had deferred revenue of $
As of March 31, 2021, our Energy segment had $
Automotive
Our Automotive segment has deferred revenue with respect to extended warranty plans of $
Adoption of New Accounting Standards
In December 2019, the Financial Account Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes, which amends FASB ASC Topic 740, Income Taxes. This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in the standard and modifies other areas of the standard to clarify the application of U.S. GAAP. This ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. We have adopted this
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Notes to Condensed Consolidated Financial Statements (Unaudited)
standard on January 1, 2021. Certain amendments in this ASU are applied using a retrospective approach and others using the prospective approach. The adoption of this standard did not have a significant impact on our condensed consolidated financial statements.
Recently Issued Accounting Standards
In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which amends FASB ASC Topic 848, Reference Rate Reform. By the end of 2021, banks will no longer be required to report information that is used to determine London Interbank Offered Rate (“LIBOR”) which is used globally by all types of entities for various types of transactions. As a result, LIBOR could be discontinued, as well as other interest rates used globally. This ASU provides companies with optional expedients for contract modifications under U.S GAAP, excluded components of certain hedging relationships, fair value hedges, and cash flow hedges, as well as certain exceptions, which are intended to help ease the potential accounting burden associated with transitioning away from these reference rates. Companies can apply this ASU immediately and will only be available for a limited time (generally through December 31, 2022). We are currently assessing the impact of this standard on our condensed consolidated financial statements.
3. Related Party Transactions
Our second amended and restated agreement of limited partnership expressly permits us to enter into transactions with our general partner or any of its affiliates, including 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.
Investment Funds
During the three months ended March 31, 2020, Mr. Icahn and his affiliates (excluding us) contributed $
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). Based on an expense-sharing arrangement, certain expenses borne by us are reimbursed by the Investment Funds. For the three months ended March 31, 2021 and 2020, $
Hertz Global Holdings, Inc. and 767 Auto Leasing LLC
The Investment Funds had 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 (until sold in the second quarter of 2020). Icahn Automotive provides services to Hertz in the ordinary course of business. Revenue from Hertz was $
In addition to our transactions with Hertz disclosed above, in January 2018, we entered into a Master Motor Vehicle Lease and Management Agreement with Hertz, pursuant to which Hertz granted 767 Leasing the option to acquire
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Notes to Condensed Consolidated Financial Statements (Unaudited)
certain vehicles from Hertz at rates aligned with the rates at which Hertz sells vehicles to third parties. Under this agreement, as amended, Hertz will lease the vehicles that 767 Leasing purchases from Hertz, or from third parties, under a mutually developed fleet plan and Hertz will manage, service, repair, sell and maintain those leased vehicles on behalf of 767 Leasing. Additionally, Hertz will rent the leased vehicles to transportation network company drivers from rental counters within locations leased or owned by us. This agreement had an initial term of 18 months and is subject to automatic six-month renewals thereafter, unless terminated by either party (with or without cause) prior to the start of any such six-month renewal. Our agreement with Hertz was unanimously approved by the independent directors of Icahn Enterprises’ audit committee. Due to the nature of our involvement with 767 Leasing, which includes Icahn Enterprises and Icahn Enterprises Holdings guaranteeing the payment obligations of 767 Leasing and sharing in the profits of 767 Leasing with Hertz, we determined that 767 Leasing is a variable interest entity. Furthermore, we determined that we are not the primary beneficiary as we do not have the power to direct the activities of 767 Leasing that most significantly impact its economic performance. Therefore, we do not consolidate the results of 767 Leasing. Our exposure to loss with respect to 767 Leasing is primarily limited to our direct investment in 767 Leasing as well as any payment obligations of 767 Leasing that we guarantee, which are not material as of March 31, 2021 and December 31, 2020. For the three months ended March 31, 2021, 767 Leasing distributed $
Other Related Party Agreements
On October 1, 2020, we entered into a manager agreement with Brett Icahn, the son of Carl C. Icahn, and affiliates of Brett Icahn. Under the manager agreement, Brett Icahn serves as the portfolio manager of a designated portfolio of assets within the Investment Funds over a seven-year term, subject to veto rights by our Investment segment and Carl. C. Icahn. Additionally, Brett Icahn provides certain other services, at our request, which may entail research, analysis and advice with respect to a separate designated portfolio of assets within the Investment Funds. Subject to the terms of the manager agreement, at the end of the seven-year term, Brett Icahn will be entitled to receive a one-time lump sum payment as described in and computed pursuant to the manager agreement. Brett Icahn will not be entitled to receive from us any other compensation (including any salary or bonus) in respect of the services he is to provide under the manager agreement other than restricted depositary units granted under a restricted unit agreement, as discussed below. In accordance with the manager agreement, Brett Icahn will co-invest with the Investment Funds in certain positions, will make cash contributions to the Investment Funds in order to fund such co-investments and will have a special limited partnership interest in the Investment Funds through which the profit and loss attributable to such co-investments will be allocated to him. During 2021, Brett Icahn contributed $
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Notes to Condensed Consolidated Financial Statements (Unaudited)
4. Investments
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:
March 31, | December 31, | |||||
| 2021 |
| 2020 | |||
(in millions) | ||||||
Assets | ||||||
Investments: |
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Equity securities: |
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Consumer, non-cyclical | $ | | $ | | ||
Consumer, cyclical |
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Energy |
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Utilities |
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Technology |
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Industrial |
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Corporate debt securities |
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$ | | $ | | |||
Liabilities |
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Securities sold, not yet purchased, at fair value: |
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Equity securities: |
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Consumer, non-cyclical | $ | | $ | | ||
Consumer, cyclical |
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Energy |
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Utilities |
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$ | | $ | | |||
The portion of unrealized gains (losses) that relates to securities still held by our Investment segment, primarily equity securities, was $
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Notes to Condensed Consolidated Financial Statements (Unaudited)
Other Segments and Holding Company
With the exception of certain equity method investments at our operating subsidiaries and our Holding Company 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:
March 31, | December 31, | |||||
| 2021 |
| 2020 | |||
(in millions) | ||||||
Equity method investments | $ | | $ | | ||
Held to maturity debt investments measured at amortized cost | | | ||||
Other investments measured at fair value |
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$ | | $ | | |||
The portion of unrealized gains (losses) that relates to equity securities still held by our other segments and Holding Company was $
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. The inputs and assumptions of our Level 2 investments are derived from market observable sources including reported trades, broker/dealer quotes and other pertinent data.
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, the 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.
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Notes to Condensed Consolidated Financial Statements (Unaudited)
Assets and Liabilities 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:
March 31, 2021 | December 31, 2020 | |||||||||||||||||||||||
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | |||||||||
(in millions) | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||
Investments (Note 4) | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Derivative contracts, at fair value (Note 6) |
| — |
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$ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Liabilities | ||||||||||||||||||||||||
Securities sold, not yet purchased (Note 4) | $ | | $ | — | $ | — | $ | | $ | | $ | — | $ | — | $ | | ||||||||
Derivative contracts, at fair value (Note 6) |
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Other liabilities |
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$ | | $ | | $ | — | $ | | $ | | $ | | $ | — | $ | | |||||||||
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 the financial services 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
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Notes to Condensed Consolidated Financial Statements (Unaudited)
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.
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 as of March 31, 2021 and December 31, 2020 was $
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Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table summarizes the volume of our Investment segment’s derivative activities based on their notional exposure, categorized by primary underlying risk:
March 31, 2021 | December 31, 2020 | |||||||||||
| Long Notional Exposure |
| Short Notional Exposure |
| Long Notional Exposure |
| Short Notional Exposure | |||||
(in millions) | ||||||||||||
Primary underlying risk: | ||||||||||||
Equity contracts | $ | | $ | | $ | | $ | | ||||
Credit contracts(1) |
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| (1) |
Certain derivative contracts executed by each of the Investment Funds 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.
The following table presents the fair values of our Investment segment’s derivatives that are not designated as hedging instruments in accordance with U.S. GAAP:
Asset Derivatives | Liability Derivatives | |||||||||||
| March 31, 2021 |
| December 31, 2020 |
| March 31, 2021 |
| December 31, 2020 | |||||
(in millions) | ||||||||||||
Equity contracts | $ | | $ | | $ | | $ | | ||||
Credit contracts |
| |
| |
| |
| | ||||
Sub-total |
| |
| |
| |
| | ||||
Netting across contract types(1) |
| ( |
| ( |
| ( |
| ( | ||||
Total(1) | $ | | $ | | $ | | $ | | ||||
| (1) |
The following table presents the amount of gain (loss) recognized in the condensed consolidated statements of operations for our Investment segment’s derivatives not designated as hedging instruments:
Gain (Loss) Recognized in Income(1) | |||||
Three Months Ended March 31, | |||||
2021 |
| 2020 | |||
(in millions) | |||||
Equity contracts | $ | ( | $ | | |
Credit contracts |
| |
| | |
$ | ( | $ | | ||
24
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
| (1) |
Energy
CVR Energy’s businesses are subject to price fluctuations caused by supply conditions, weather, economic conditions, interest rate fluctuations and other factors. To manage price risk on crude oil and other inventories and to fix margins on certain future production, CVR Refining regularly enters into various commodity derivative transactions. CVR Refining holds derivative instruments, such as exchange-traded crude oil futures and over-the-counter forward swap agreements, which it believes provide an economic hedge on future transactions, but such instruments are not designated as hedge instruments. CVR Refining may enter into forward purchase or sale contracts associated with renewable identification numbers (“RINs”).
As of March 31, 2021 and December 31, 2020, CVR Refining had
Certain derivative contracts executed 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. As of March 31, 2021 and December 31, 2020, our Energy segment had net asset derivatives of $
7. Inventories, Net
Inventories, net consists of the following:
March 31, | December 31, | |||||
| 2021 |
| 2020 | |||
(in millions) | ||||||
Raw materials | $ | | $ | | ||
Work in process |
| |
| | ||
Finished goods |
| |
| | ||
$ | | $ | | |||
25
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
8. Goodwill and Intangible Assets, Net
Goodwill consists of the following:
March 31, 2021 | December 31, 2020 | |||||||||||||||||
| Gross |
|
| Net |
| Gross |
|
| Net | |||||||||
Carrying | Accumulated | Carrying | Carrying | Accumulated | Carrying | |||||||||||||
Amount | Impairment | Value | Amount | Impairment | Value | |||||||||||||
(in millions) | ||||||||||||||||||
Automotive | $ | | $ | ( | $ | | $ | | $ | ( |
| $ | | |||||
Food Packaging | | — | | | — | | ||||||||||||
Metals | | — | | | — | | ||||||||||||
Home Fashion |
| |
| ( |
| |
| |
| ( |
| | ||||||
Pharma | | — | | | — | | ||||||||||||
$ | | $ | ( | $ | | $ | | $ | ( | $ | | |||||||
Intangible assets, net consists of the following:
March 31, 2021 | December 31, 2020 | |||||||||||||||||
| Gross |
|
| Net |
| Gross |
|
| Net | |||||||||
Carrying | Accumulated | Carrying | Carrying | Accumulated | Carrying | |||||||||||||
Amount | Amortization | Value | Amount | Amortization | Value | |||||||||||||
(in millions) | ||||||||||||||||||
Definite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Customer relationships | $ | | $ | ( | $ | | $ | | $ | ( |
| $ | | |||||
Developed technology | | ( | | | ( |
| | |||||||||||
Other |
| |
| ( |
| |
| |
| ( |
| | ||||||
$ | | $ | ( | $ | | $ | | $ | ( | $ | | |||||||
| ||||||||||||||||||
Indefinite-lived intangible assets |
|
|
|
| $ | |
|
|
|
| $ | | ||||||
Intangible assets, net |
|
|
|
| $ | |
|
|
|
| $ | | ||||||
Amortization expense associated with definite-lived intangible assets was $
9. Leases
All Segments and Holding Company
We have operating and finance leases primarily within our Automotive, Energy and Food Packaging segments. Our Automotive segment leases assets, primarily real estate (operating) and vehicles (financing). Our Energy segment leases certain pipelines, storage tanks, railcars, office space, land and equipment (operating and financing). Our Food Packaging segment leases assets, primarily real estate, equipment and vehicles (primarily operating). Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Right-of-use assets and related liabilities are recorded on the balance sheet for leases with an initial lease term in excess of twelve months and therefore, do not include any lease arrangements with initial lease terms of twelve months or less.
26
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Right-of-use assets and lease liabilities are as follows:
| March 31, |
| December 31, | |||
2021 | 2020 | |||||
(in millions) | ||||||
Operating Leases: |
|
| ||||
Right-of-use assets (other assets) | $ | | $ | | ||
| |
| | |||
Financing Leases: |
|
| ||||
Right-of-use assets (property, plant and equipment, net) |
| |
| | ||
Lease liabilities (debt) |
| |
| | ||
Additional information with respect to our operating leases as of March 31, 2021 and December 31, 2020 is presented below. The lease terms and discount rates for our Energy, Automotive and Food Packaging segments represent weighted averages based on their respective lease liability balances.
| Right-Of-Use |
| Lease |
|
| Discount |
| ||||
Operating Leases as of March 31, 2021 | Assets | Liabilities | Lease Term | Rate |
| ||||||
(in millions) | |||||||||||
Energy | $ | | $ | | |||||||
Automotive |
| |
| |
|
| |||||
Food Packaging |
| |
| |
|
| |||||
Other segments and Holding Company |
| |
| |
|
|
|
| |||
$ | | $ | | ||||||||
| Right-Of-Use |
| Lease |
|
| Discount | |||||
Operating Leases as of December 31, 2020 | Assets | Liabilities | Lease Term | Rate | |||||||
(in millions) | |||||||||||
Energy | $ | | $ | | |||||||
Automotive |
| |
| |
|
| |||||
Food Packaging |
| |
| |
|
| |||||
Other segments and Holding Company |
| |
| |
|
|
|
| |||
$ | | $ | | ||||||||
For the three months ended March 31, 2021 and 2020, lease cost was comprised of (i) operating lease cost of $
Real Estate
Our Real Estate segment leases real estate, primarily commercial properties under long-term operating leases. As of March 31, 2021 and December 31, 2020, our Real Estate segment has assets leased to others included in property, plant
27
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
and equipment of $
10. Debt
Debt consists of the following:
March 31, | December 31, | |||||
| 2021 |
| 2020 | |||
(in millions) | ||||||
Holding Company: |
|
| ||||
$ | | $ | | |||
| |
| | |||
| |
| | |||
| |
| | |||
| |
| | |||
| |
| | |||
| | |||||
| |
| | |||
Reporting Segments: | ||||||
Energy |
| |
| | ||
Automotive |
| |
| | ||
Food Packaging |
| |
| | ||
Metals |
| |
| | ||
Real Estate |
| |
| | ||
Home Fashion |
| |
| | ||
| |
| | |||
Total Debt | $ | | $ | | ||
Holding Company
In January 2021, Icahn Enterprises and Icahn Enterprises Finance Corp. (together the “Issuers”) issued $
The New 2029 Notes and the related guarantee are the senior unsecured obligations of the Issuers and rank equally with all of the Issuers’ and the Guarantor’s existing and future senior unsecured indebtedness and senior to all of the Issuers’ and the Guarantor’s existing and future subordinated indebtedness. The New 2029 Notes and the related guarantees are effectively subordinated to the Issuers’ and the Guarantor’s existing and future secured indebtedness to the extent of the collateral securing such indebtedness. The New 2029 Notes and the related guarantees are also effectively subordinated to all indebtedness and other liabilities of the Issuers’ subsidiaries other than the Guarantor.
The indenture governing the New 2029 Notes restricts the payment of cash distributions, the purchase of equity interests or the purchase, redemption, defeasance or acquisition of debt subordinated to the senior unsecured notes. The indenture also restricts the incurrence of debt or the issuance of disqualified stock, as defined in the indenture, with certain exceptions. In addition, the indenture requires that on each quarterly determination date, Icahn Enterprises and
28
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
the guarantor of the New 2029 Notes (currently only Icahn Enterprises Holdings) maintain certain minimum financial ratios, as defined therein. The indenture also restricts the creation of liens, mergers, consolidations and sales of substantially all of our assets, and transactions with affiliates.
Subsequent Event
In April 2021, the Issuers issued $
Covenants
All of our subsidiaries are currently in compliance with all covenants and restrictions as described in the various executed agreements and contracts with respect to each debt instrument. These covenants include limitations on indebtedness, liens, investments, acquisitions, asset sales, dividends and other restricted payments and affiliate and extraordinary transactions.
Non-Cash Charges to Interest Expense
The amortization of deferred financing costs and debt discounts and premiums included in interest expense in the condensed consolidated statements of operations were $
11. Net Income Per LP Unit
The components of the computation of basic and diluted income (loss) per LP unit of Icahn Enterprises are as follows:
Three Months Ended March 31, | ||||||
| 2021 |
| 2020 | |||
(in millions, except per unit amounts) | ||||||
Net income (loss) attributable to Icahn Enterprises | $ | |
| $ | ( | |
Net income (loss) attributable to Icahn Enterprises allocated to limited partners (98.01% allocation) | $ | | $ | ( | ||
Basic income (loss) per LP unit | $ | | $ | ( | ||
Basic weighted average LP units outstanding |
| |
| | ||
Diluted income (loss) per LP unit | $ | | $ | ( | ||
Diluted weighted average LP units outstanding |
| |
| | ||
As their effect would have been anti-dilutive,
29
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
LP Unit Transactions
Unit Distributions
On February 24, 2021, Icahn Enterprises declared a quarterly distribution in the amount of $
On April 29, 2021, Icahn Enterprises distributed an aggregate
2019 and 2021 At-The-Market Offerings
On May 2, 2019, Icahn Enterprises announced the commencement of its “at-the-market” offering pursuant to its Open Market Sale Agreement, pursuant to which Icahn Enterprises may sell its depositary units, from time to time, during the term of the program ending on March 31, 2021, for up to $
On February 26, 2021, Icahn Enterprises announced the commencement of its “at-the-market” offering pursuant to its Open Market Sale Agreement, pursuant to which Icahn Enterprises may sell its depositary units, from time to time, during the term of the program ending on December 31, 2023, for up to $
12. Segment Reporting
We report segment information based on the various industries in which our businesses operate and how we manage those businesses in accordance with our investment strategies, which may include: identifying and acquiring undervalued assets and businesses, often through the purchase of distressed securities; increasing value through management, financial or other operational changes; and managing complex legal, regulatory or financial issues, which may include bankruptcy or insolvency, environmental, zoning, permitting and licensing issues. Therefore, although many of our businesses are operated under separate local management, certain of our businesses are grouped together when they operate within a similar industry, comprising similarities in products, customers, production processes and regulatory environments, and when such businesses, when considered together, may be managed in accordance with one or more investment strategies specific to those businesses. Among other measures, we assess and measure segment operating results based on net income from continuing operations attributable to Icahn Enterprises and Icahn Enterprises Holdings. Certain terms of financings for certain of our businesses impose restrictions on the business’ ability to transfer funds to us, including restrictions on dividends, distributions, loans and other transactions.
30
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Condensed Statements of Operations
Icahn Enterprises’ condensed statements of operations by reporting segment are presented below. Icahn Enterprises Holdings’ condensed statements of operations are substantially the same, with immaterial differences relating to our Holding Company’s interest expense.
Three Months Ended March 31, 2021 | ||||||||||||||||||||||||||||||
| Investment |
| Energy |
| Automotive |
| Food Packaging |
| Metals |
| Real Estate |
| Home Fashion |
| Pharma |
| Holding Company |
| Consolidated | |||||||||||
(in millions) | ||||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||
Net sales | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||
Other revenues from operations |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||
Net gain from investment activities |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||
Interest and dividend income |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||
Other (loss) income, net |
| ( |
| |
| ( |
| ( |
| |
| |
| |
| |
| |
| ( | ||||||||||
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | |||||||||||
Expenses: | ||||||||||||||||||||||||||||||
Cost of goods sold |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||
Other expenses from operations |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||
Selling, general and administrative |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||
Restructuring, net |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||
Interest expense |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | |||||||||||
Income (loss) before income tax benefit (expense) |
| |
| ( |
| ( |
| |
| |
| ( |
| ( |
| |
| ( |
| | ||||||||||
Income tax benefit (expense) |
| |
| |
| |
| ( |
| |
| |
| |
| |
| ( |
| ( | ||||||||||
Net income (loss) |
| |
| ( |
| ( |
| ( |
| |
| ( |
| ( |
| |
| ( |
| | ||||||||||
Less: net income (loss) attributable to non-controlling interests |
| |
| ( |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||
Net income (loss) attributable to Icahn Enterprises | $ | | $ | ( | $ | ( | $ | ( | $ | | $ | ( | $ | ( | $ | | $ | ( | $ | | ||||||||||
Supplemental information: | ||||||||||||||||||||||||||||||
Capital expenditures | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||
Depreciation and amortization | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||
Three Months Ended March 31, 2020 | ||||||||||||||||||||||||||||||
| Investment |
| Energy |
| Automotive |
| Food Packaging |
| Metals |
| Real Estate |
| Home Fashion |
| Pharma |
| Holding Company |
| Consolidated | |||||||||||
(in millions) |
| |||||||||||||||||||||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Net sales | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||
Other revenues from operations |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||
Net (loss) gain from investment activities |
| ( |
| |
| |
| |
| |
| |
| |
| |
| ( |
| ( | ||||||||||
Interest and dividend income |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||
Other (loss) income, net |
| ( |
| ( |
| |
| ( |
| |
| |
| |
| |
| ( |
| ( | ||||||||||
| ( |
| |
| |
| |
| |
| |
| |
| |
| ( |
| ( | |||||||||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Cost of goods sold |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||
Other expenses from operations |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||
Selling, general and administrative |
| ( |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||
Restructuring, net |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||
Interest expense |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | |||||||||||
(Loss) income before income tax benefit (expense) |
| ( |
| ( | ( |
| ( |
| ( |
| |
| ( |
| |
| ( |
| ( | |||||||||||
Income tax benefit (expense) |
| |
| |
| |
| ( |
| |
| |
| |
| |
| |
| | ||||||||||
Net (loss) income |
| ( |
| ( |
| ( |
| ( |
| ( |
| |
| ( |
| |
| ( |
| ( | ||||||||||
Less: net (loss) income attributable to non-controlling interests |
| ( |
| ( |
| |
| ( |
| |
| |
| |
| |
| |
| ( | ||||||||||
Net (loss) income attributable to Icahn Enterprises | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | | $ | ( | $ | | $ | ( | $ | ( | ||||||||||
Supplemental information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Capital expenditures | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||
Depreciation and amortization | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||
31
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Disaggregation of Revenue
In addition to the condensed statements of operations by reporting segment above, we provide additional disaggregated revenue information for our Energy and Automotive segments below.
Energy
Disaggregated revenue for our Energy segment net sales is presented below:
Three Months Ended March 31, | ||||||
| 2021 |
| 2020 | |||
Petroleum products | $ | | $ | | ||
Nitrogen fertilizer products |
| |
| | ||
$ | | $ | | |||
Automotive
Disaggregated revenue for our Automotive segment net sales and other revenues from operations is presented below:
Three Months Ended March 31, | ||||||
| 2021 |
| 2020 | |||
Automotive services | $ | | $ | | ||
Aftermarket parts sales |
| |
| | ||
$ | | $ | | |||
32
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Condensed Balance Sheets
Icahn Enterprises’ condensed balance sheets by reporting segment are presented below. Icahn Enterprises Holdings’ condensed balance sheets are substantially the same, with immaterial differences relating to our Holding Company’s debt and equity attributable to Icahn Enterprises Holdings.
March 31, 2021 | ||||||||||||||||||||||||||||||
Investment | Energy | Automotive | Food | Metals | Real | Home |
| Pharma | Holding | Consolidated | ||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | | $ | | $ | | $ | | $ | — | $ | | $ | | $ | | $ | | $ | | ||||||||||
Cash held at consolidated affiliated partnerships and restricted cash |
| |
| |
| |
| — |
| |
| |
| |
| — |
| |
| | ||||||||||
Investments |
| |
| |
| |
| — |
| — |
| |
| — |
| — |
| |
| | ||||||||||
Accounts receivable, net |
| — |
| |
| |
| |
| |
| |
| |
| |
| — |
| | ||||||||||
Inventories, net |
| — |
| |
| |
| |
| |
| — |
| |
| |
| — |
| | ||||||||||
Property, plant and equipment, net |
| — |
| |
| |
| |
| |
| |
| |
| — |
| |
| | ||||||||||
Goodwill and intangible assets, net |
| — |
| |
| |
| |
| |
| — |
| |
| |
| — |
| | ||||||||||
Other assets |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||
Total assets | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Accounts payable, accrued expenses and other liabilities | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||
Securities sold, not yet purchased, at fair value |
| |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| | ||||||||||
Debt |
| — |
| |
| |
| |
| |
| |
| |
| — |
| |
| | ||||||||||
Total liabilities |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||
Equity attributable to Icahn Enterprises |
| |
| |
| |
| |
| |
| |
| |
| |
| ( |
| | ||||||||||
Equity attributable to non-controlling interests |
| |
| |
| — |
| |
| — |
| — |
| — |
| — |
| — |
| | ||||||||||
Total equity |
| |
| |
| |
| |
| |
| |
| |
| |
| ( |
| | ||||||||||
Total liabilities and equity | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||
December 31, 2020 | ||||||||||||||||||||||||||||||
Investment | Energy | Automotive | Food | Metals | Real | Home |
| Pharma | Holding | Consolidated | ||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||
Cash held at consolidated affiliated partnerships and restricted cash |
| |
| |
| |
| — |
| |
| |
| |
| — |
| |
| | ||||||||||
Investments |
| |
| |
| |
| — |
| — |
| |
| — |
| — |
| |
| | ||||||||||
Accounts receivable, net |
| — |
| |
| |
| |
| |
| |
| |
| |
| — |
| | ||||||||||
Inventories, net |
| — |
| |
| |
| |
| |
| — |
| |
| |
| — |
| | ||||||||||
Property, plant and equipment, net |
| — |
| |
| |
| |
| |
| |
| |
| — |
| |
| | ||||||||||
Goodwill and intangible assets, net |
| — |
| |
| |
| |
| |
| |
| |
| |
| — |
| | ||||||||||
Other assets |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||
Total assets | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Accounts payable, accrued expenses and other liabilities | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||
Securities sold, not yet purchased, at fair value |
| |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| | ||||||||||
Debt |
| — |
| |
| |
| |
| |
| |
| |
| — |
| |
| | ||||||||||
Total liabilities |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||
Equity attributable to Icahn Enterprises |
| |
| |
| |
| |
| |
| |
| |
| |
| ( |
| | ||||||||||
Equity attributable to non-controlling interests |
| |
| |
| — |
| |
| — |
| — |
| — |
| — |
| — |
| | ||||||||||
Total equity |
| |
| |
| |
| |
| |
| |
| |
| |
| ( |
| | ||||||||||
Total liabilities and equity | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||
33
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
13. Income Taxes
For the three months ended March 31, 2021, we recorded an income tax expense of $
For the three months ended March 31, 2021, the effective tax rate was lower than the statutory federal rate of
For the three months ended March 31, 2020, the effective tax rate was lower than the statutory federal rate of
14. Changes in Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss consists of the following:
Translation | Post-Retirement | ||||||||
Adjustments, Net | Benefits and | ||||||||
| of Tax |
| Other, Net of Tax |
| Total | ||||
(in millions) | |||||||||
Balance, December 31, 2020 | $ | ( | $ | ( | $ | ( | |||
Other comprehensive loss before reclassifications, net of tax |
| ( |
| — |
| ( | |||
Reclassifications from accumulated other comprehensive loss to earnings, net of tax |
| — |
| — |
| — | |||
Other comprehensive loss, net of tax |
| ( |
| — |
| ( | |||
Balance, March 31, 2021 | $ | ( | $ | ( | $ | ( | |||
15. Other Income, Net
Other income, net consists of the following:
Three Months Ended March 31, | ||||||
| 2021 |
| 2020 | |||
(in millions) | ||||||
Dividend expense | $ | ( | $ | ( | ||
Equity earnings from non-consolidated affiliates | | | ||||
Gain on disposition of assets, net | — | | ||||
Foreign currency transaction loss |
| ( |
| ( | ||
Gain (loss) on extinguishment of debt |
| |
| ( | ||
Other |
| |
| ( | ||
$ | ( | $ | ( | |||
34
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
16. Commitments and Contingencies
Environmental Matters
Due to the nature of our business, certain of our subsidiaries’ operations are subject to numerous existing and proposed laws and governmental regulations designed to protect the environment, particularly regarding plant wastes and emissions and solid waste disposal. Our consolidated environmental liabilities were $
On August 21, 2018, CVR Refining received a letter from the United States Department of Justice (the “DOJ”) on behalf of the Environmental Protection Agency (the “EPA”) and the Kansas Department of Health and Environment (“KDHE”) alleging violations of the Clean Air Act and a 2012 Consent Decree (“CD”) between CVR Refining, the United States (on behalf of the EPA) and KDHE at CVR Energy’s Coffeyville refinery. In June 2020, a tolling agreement between the parties relating to such allegations expired, and the United States and KDHE sent demand letters relating to the allegations (the “Stipulated Claims”) and seeking stipulated penalties. In February 2021, the DOJ and KDHE sent CVR Refining a statement of position under the CD regarding its demand for Stipulated Claims. As CVR Refining disputes most claims asserted by the government, in accordance with the CD, CVR Refining deposited funds into a commercial escrow account pending resolution of disputed claims. The escrowed funds are legally restricted for use and are included within other assets on the consolidated balance sheets. In December 2020, the DOJ and KDHE filed a supplement complaint in the United States District Court for the District of Kansas asserting nine counts for alleged violations of the Clean Air Act, the Kansas State Implementation Plan and Kansas law (the “Statutory Claims”) and seeking civil penalties, injunctive and related relief. Negotiations relating to the Stipulated Claims and the Statutory Claims are ongoing and CVR Energy cannot at this time determine the outcome of this matter, including whether such outcome, or any subsequent enforcement or litigation relating thereto would have a material impact on our Energy segment’s financial position, results of operations, or cash flows.
Renewable Fuel Standards
CVR Refining is subject to the Renewable Fuel Standard (“RFS”) of the EPA which requires refiners to either blend renewable fuels in with their transportation fuels or purchase renewable fuel credits, known as RINs, in lieu of blending. CVR Refining is not able to blend the substantial majority of its transportation fuels and has to purchase RINs on the open market and may have to obtain waiver credits for cellulosic biofuels from the EPA, in order to comply with the RFS.
For the three months ended March 31, 2021 and 2020, our Energy segment recognized expenses of $
35
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Litigation
From time to time, we and our subsidiaries are involved in various lawsuits arising in the normal course of business. We do not believe that such normal routine litigation will have a material effect on our financial condition or results of operations.
Energy
In 2019, CVR Energy, CVR Refining and its general partner, CVR Refining Holdings, Icahn Enterprises and certain directors and affiliates were named in at least one of nine lawsuits filed by purported former unitholders of CVR Refining, on behalf of themselves and an alleged class of similarly situated unitholders relating to CVR Energy’s exercise of the call option (“Call Option”) under the CVR Refining Amended and Restated Agreement of Limited Partnership assigned to it by CVR Refining’s general partner (the “Delaware Lawsuits”). The Delaware Lawsuits primarily allege breach of contract, tortious interference and breach of the implied covenant of good faith and fair dealing and seek monetary damages and attorneys’ fees, among other remedies. In January 2020, the court dismissed CVR Holdings and certain former directors of CVR Refining’s general partner from the Delaware Lawsuits, though permitted some or all of the claims to proceed against each remaining defendant. On April 6, 2020, a lawsuit was filed in the United States District Court for the Southern District of New York against the CVR Energy, CVR Refining and its general partner, CVR Refining Holdings, Icahn Enterprises, and CVR Energy’s Chief Executive Officer by purported former unitholders of CVR Refining on behalf of themselves and an alleged class of similarly situated unitholders also relating to CVR Energy’s exercise of the Call Option (the “New York Lawsuit” and together with the Delaware Lawsuits, the “Call Option Lawsuits”). The New York Lawsuit primarily alleges violations of Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 thereunder and seeks monetary damages and attorney’s fees, among other remedies. CVR Energy believes the Call Option Lawsuits are without merit and intends to vigorously defend against them. The Call Option Lawsuits remain in the early stages of litigation, and discovery is currently on-going. Accordingly, CVR Energy cannot determine at this time the outcome of the Call Option Lawsuits, including whether the outcome of this matter would have a material impact on our Energy segment’s financial position, results of operations, or cash flows.
On January 27, 2021, a lawsuit was filed against the defendants in the Call Option Lawsuits in the 434th Judicial District Court of Fort Bend County, Texas by their primary and excess insurers seeking declaratory judgements determining that they owe no indemnity coverage and, for certain defendants, no defense obligations relating to the Call Option Lawsuits (the “Call Option Insurer Case”). The defendants believe the Call Option Insurer Case is without merit, intends to vigorously defend the claims against them and filed a related lawsuit in the Delaware Court of Chancery. These lawsuits are in the early stages of litigation. Accordingly, CVR Energy cannot determine at this time their outcome, including whether such outcome would have a material impact on our Energy Segment’s financial position, results of operations, or cash flows.
Other Matters
Pension Obligations
Mr. Icahn, through certain affiliates, owns
36
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
As a result of the more than 80% ownership interest in us by Mr. Icahn’s affiliates, we and our subsidiaries are subject to the pension liabilities of entities in which Mr. Icahn has a direct or indirect ownership interest of at least 80%, which includes the liabilities of pension plans sponsored by Viskase and ACF. All the minimum funding requirements of the Internal Revenue Code, as amended, and the Employee Retirement Income Security Act of 1974, as amended, for the Viskase and ACF plans have been met as of March 31, 2021. If the plans were voluntarily terminated, they would be underfunded by approximately $
The current underfunded status of the pension plans of Viskase and ACF requires them to notify the PBGC of certain “reportable events,” such as if we cease to be a member of the Viskase or ACF controlled group, or if we make certain extraordinary dividends or stock redemptions. The obligation to report could cause us to seek to delay or reconsider the occurrence of such reportable events.
Starfire Holding Corporation (“Starfire”), which is
Other
The U.S. Attorney’s office for the Southern District of New York contacted Icahn Enterprises L.P. in September 2017 seeking production of information pertaining to our and Mr. Icahn’s activities relating to the Renewable Fuels Standard and Mr. Icahn’s former role as an advisor to the former President of the United States. We cooperated with the request and provided information in response to the subpoena. The U.S. Attorney’s office for the Southern District of New York contacted Icahn Enterprises L.P. in June 2018 seeking production of information pertaining to trading in Manitowoc Company, Inc. securities. We cooperated with the request and provided documents in response to the subpoena. The U.S. Attorney’s office has not made any claims or allegations against us or Mr. Icahn with respect to either of the foregoing inquiries. We believe that we maintain a strong compliance program and, while no assurances can be made, we do not believe these inquiries will have a material impact on our business, financial condition, results of operations or cash flows.
17. Supplemental Cash Flow Information
Supplemental cash flow information consists of the following:
Three Months Ended March 31, | ||||||
| 2021 |
| 2020 | |||
(in millions) | ||||||
Cash payments for interest, net of amounts capitalized | $ | ( | $ | ( | ||
Cash receipts (payments) for income taxes, net of payments |
| |
| | ||
Non-cash Investment segment contributions from non-controlling interests | — | | ||||
Partnership distributions payable |
| ( |
| ( | ||
37
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
18. Subsequent Events
Icahn Enterprises
LP Unit Distribution
On May 5, 2021, the Board of Directors of the general partner of Icahn Enterprises declared a quarterly distribution in the amount of $
Debt Issuance
In April 2021, we refinanced certain of our senior unsecured notes. Refer to Note 10, “Debt,” for further discussion.
38
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion is intended to assist you in understanding our present business and the results of operations together with our present financial condition. This section should be read in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes contained in this Quarterly Report on Form 10-Q for the period ended March 31, 2021 (this “Report”), as well as our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission on February 26, 2021.
Executive Overview
Introduction
Icahn Enterprises L.P. (“Icahn Enterprises”) is a master limited partnership formed in Delaware on February 17, 1987. Icahn Enterprises Holdings L.P. (“Icahn Enterprises Holdings”) is a limited partnership formed in Delaware on February 17, 1987. References to “we,” “our” or “us” herein include both Icahn Enterprises and Icahn Enterprises Holdings and their subsidiaries, unless the context otherwise requires.
Icahn Enterprises owns a 99% limited partner interest in Icahn Enterprises Holdings. 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 to the general and limited partners. We do not discuss Icahn Enterprises and Icahn Enterprises Holdings separately unless we believe it is necessary to an understanding of the businesses.
We are a diversified holding company owning subsidiaries currently engaged in the following continuing operating businesses: Investment, Energy, Automotive, Food Packaging, Metals, Real Estate, Home Fashion and Pharma. 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.
Significant Transactions and Developments
Debt Issuances
In January 2021, Icahn Enterprises and Icahn Enterprises Finance Corp. (together the “Issuers”) issued $750 million in aggregate principal amount of 4.375% senior unsecured notes due 2029 (the “New 2029 Notes”). The proceeds from the New 2029 Notes were used to redeem $750 million principal amount of 6.250% senior unsecured notes due 2022, and to pay accrued interest, related fees and expenses.
In April 2021, the Issuers issued $455 million in aggregate principal amount of additional 5.250% senior unsecured notes due 2027. The proceeds from this issuance were used to redeem the remaining $455 million principal amount of 6.250% senior unsecured notes due 2022, and to pay accrued interest, related fees and expenses.
Management Changes
On April 5, 2021, we announced the hiring of Aris Kekedjian, who will succeed Keith Cozza as President and Chief Executive Officer as of May 10, 2021. Mr. Kekedjian also joined the board of directors of our general partner. Mr. Cozza will remain with Icahn Enterprises and provide transition services through May 31, 2021 and will leave the board of directors upon his departure. We also announced on April 5, 2021 the departure of SungHwan Cho, our Chief Financial Officer, who will remain with Icahn Enterprises through a mutually agreeable transition period and will also leave the board of directors upon his departure. We are currently conducting a search for Mr. Cho’s successor.
39
Results of Operations
Consolidated Financial Results
Our operating businesses comprise consolidated subsidiaries which operate in various industries and are managed on a decentralized basis. In addition to our Investment segment’s revenues from investment transactions, revenues for our operating businesses primarily consist of net sales of various products, services revenue, franchisor operations and leasing of real estate. Due to the structure and nature of our business, we primarily discuss the results of operations by individual reporting segment in order to better understand our consolidated operating performance. Certain other financial information is discussed on a consolidated basis following our segment discussion, including other revenues and expenses included in continuing operations as well as our results from discontinued operations. In addition to the summarized financial results below, refer to Note 12, “Segment Reporting,” to the condensed consolidated financial statements for a reconciliation of each of our reporting segment’s results of continuing operations to our consolidated results.
Throughout 2020, the COVID-19 pandemic, and actions taken by governments and others in response thereto, has negatively impacted the global economy, financial markets, and the industries in which our subsidiaries operate. Our consolidated results of operations and financial condition have been impacted primarily by the volatility in the fair value of investments held by our Investment segment and the Holding Company as well as declines in the global demand for refined products, especially gasoline and diesel fuels, with respect to our Energy segment. The impact on our businesses has also included the acceleration of selective planned store closures in our Automotive segment and recording write-downs to inventories. The economic conditions that persisted for much of 2020 have improved in 2021 as more governments reduce restrictions and more businesses resume operations.
The comparability of our summarized consolidated financial results presented below is affected primarily by the performance of the Investment Funds (as defined below), the results of operations of our Energy segment, impacted by the demand and pricing for its products, and our Holding Company’s realized and unrealized gains and losses on certain equity investments. Refer to our respective segment discussions and “Other Consolidated Results of Operations,” below for further discussion.
Net Income (Loss) | ||||||||||||||||||
Revenues | Net Income (Loss) | Attributable to Icahn Enterprises | ||||||||||||||||
Three Months Ended March 31, | Three Months Ended March 31, | Three Months Ended March 31, | ||||||||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||||
(in millions) | ||||||||||||||||||
Investment | $ | 943 | $ | (1,765) | $ | 862 | $ | (1,802) | $ | 391 | $ | (926) | ||||||
Holding Company |
| 8 |
| (337) |
| (157) |
| (310) |
| (157) |
| (310) | ||||||
Other Operating Segments: |
|
|
|
|
|
| ||||||||||||
Energy |
| 1,532 |
| 1,157 |
| (67) |
| (113) |
| (33) |
| (68) | ||||||
Automotive |
| 597 |
| 636 |
| (46) |
| (73) |
| (46) |
| (73) | ||||||
Food Packaging |
| 95 |
| 91 |
| (1) |
| (4) |
| (1) |
| (3) | ||||||
Metals |
| 121 |
| 86 |
| 5 |
| (3) |
| 5 |
| (3) | ||||||
Real Estate |
| 17 |
| 22 |
| (1) |
| 1 |
| (1) |
| 1 | ||||||
Home Fashion |
| 41 |
| 50 |
| (4) |
| (2) |
| (4) |
| (2) | ||||||
Pharma |
| 30 |
| — |
| 8 |
| — |
| 8 |
| — | ||||||
Other operating segments |
| 2,433 |
| 2,042 |
| (106) |
| (194) |
| (72) |
| (148) | ||||||
Consolidated | $ | 3,384 | $ | (60) | $ | 599 | $ | (2,306) | $ | 162 | $ | (1,384) | ||||||
Investment
We invest our proprietary capital through various private investment funds (“Investment Funds”). As of March 31, 2021 and December 31, 2020, we had investments with a fair market value of approximately $4.7 billion and $4.3 billion, respectively, in the Investment Funds. As of March 31, 2021 and December 31, 2020, the total fair market
40
value of investments in the Investment Funds made by Mr. Icahn and his affiliates (excluding us) was approximately $5.5 billion and $5.0 billion, respectively.
Our Investment segment’s results of operations are reflected in net income (loss) in the condensed consolidated statements of operations. Our Investment segment’s net income (loss) is driven by the amount of funds allocated to the Investment Funds and the performance of the underlying investments in the Investment Funds. Future funds allocated to the Investment Funds may increase or decrease based on the contributions and redemptions by our Holding Company, Mr. Icahn and his affiliates and by Brett Icahn, son of Mr. Icahn. Additionally, historical performance results of the Investment Funds are not indicative of future results as past market conditions, investment opportunities and investment decisions may not occur in the future. Changes in general market conditions coupled with changes in exposure to short and long positions have significant impact on our Investment segment’s results of operations and the comparability of results of operations year over year and as such, future results of operations will be impacted by our future exposures and future market conditions, which may not be consistent with prior trends. Refer to the “Investment Segment Liquidity” section of our “Liquidity and Capital Resources” discussion for additional information regarding our Investment segment’s exposure as of March 31, 2021.
For the three months ended March 31, 2021 and 2020, our Investment Funds’ returns were 9.2% and (17.6)%, respectively. Our Investment Funds’ returns represent a weighted-average composite of the average returns, net of expenses.
The following table sets forth the performance attribution for the Investment Funds’ returns.
Three Months Ended March 31, | |||||
| 2021 |
| 2020 |
| |
Long positions |
| 18.5 | % | (46.7) | % |
Short positions |
| (9.2) | % | 29.0 | % |
Other |
| (0.1) | % | 0.1 | % |
| 9.2 | % | (17.6) | % | |
The following table presents net income (loss) for our Investment segment for the three months ended March 31, 2021 and 2020.
Three Months Ended March 31, | ||||||
| 2021 |
| 2020 | |||
(in millions) | ||||||
Long positions | $ | 1,914 | $ | (4,601) | ||
Short positions |
| (1,041) |
| 2,791 | ||
Other |
| (11) |
| 8 | ||
$ | 862 | $ | (1,802) | |||
Three Months Ended March 31, 2021 and 2020
For the three months ended March 31, 2021, the Investment Funds’ positive performance was driven by net gains in their long positions, offset in part by net losses in their short positions. The positive performance of our Investment segment’s long positions was driven primarily by gains from an energy sector investment of $925 million a consumer, cyclical sector investment of $253 million and two consumer, non-cyclical sector investments aggregating $322 million. The aggregate performance of investments with net gains across various sectors accounted for an additional positive performance of our Investment segment’s long positions. The negative performance of our Investment segment’s short positions was driven primarily by the negative performance of an energy sector investment of $494 million and broad market hedges of $329 million. The aggregate performance of investments with net losses across various sectors accounted for an additional negative performance of our Investment segment’s short positions. The negative performance of our Investment segment’s short positions was offset in part by gains from a consumer, cyclical sector investment of $196 million.
41
For the three months ended March 31, 2020, the Investment Funds’ negative performance was driven by net losses in their long positions, offset in part by net gains in their short positions. The negative performance of our Investment segment’s long positions was driven by losses from a consumer, cyclical sector investment of $973 million, aggregate losses from four other consumer, cyclical sector investments of $585 million, two energy sector investments aggregating approximately $1.1 billion, two consumer, non-cyclical sector investments aggregating $850 million and four technology sector investments aggregating $693 million. The aggregate performance of investments with net losses across various other sectors accounted for an additional negative performance of our Investment segment’s long positions. The positive performance of our Investment segment’s short positions was driven primarily by the positive performance of broad market hedges as well as short exposure to commercial mortgage-backed securities through credit default swap contracts.
Energy
Our Energy segment is primarily engaged in the petroleum refining and nitrogen fertilizer manufacturing businesses. The petroleum business accounted for approximately 96% and 93% of our Energy segment’s net sales for the three months ended March 31, 2021 and 2020, respectively.
The results of operations of the petroleum business are primarily affected by the relationship between refined product prices and the prices for crude oil and other feedstocks that are processed and blended into petroleum products, such as gasoline, diesel fuel and jet fuel, that are produced by a refinery (“refined products”). The cost to acquire crude oil and other feedstocks and the price for which refined products are ultimately sold depend on factors beyond our Energy segment’s control, including the supply of and demand for crude oil, as well as gasoline and other refined products. This supply and demand depend on, among other factors, changes in domestic and foreign economies, weather conditions, domestic and foreign political affairs, production levels, the availability of imports, the marketing of competitive fuels and the extent of government regulation. Because the petroleum business applies first-in, first-out accounting to value its inventory, crude oil price movements may impact gross margin in the short-term fluctuations in the market price of inventory. The effect of changes in crude oil prices on the petroleum business’ results of operations is influenced by the rate at which the prices of refined products adjust to reflect these changes.
The COVID-19 pandemic, and the actions taken by governments and others, has negatively impacted the energy industry. The COVID-19 pandemic has also resulted in significant business and operational disruptions, including business closures, liquidity strains, destruction of non-essential demand, as well as supply chain challenges, travel restrictions, stay-at home orders, and limitations on the availability of the workforce. As a result, the demand for gasoline and diesel in the regions that our Energy segment operates declined beginning in the first quarter of 2020. The declines were amplified in the first quarter of 2020 by market plays between the world’s largest oil producers. The simultaneous shocks in oil supply and demand has resulted in a decline in the price of crude oil and lead to a significant decrease in the price of refined products sold by our Energy segment. However, beginning in late 2020 and into 2021, the U.S. market for refined products improved and demand increased as travel restrictions and stay-at-home orders were eased.
In addition to recent market conditions, there are long-term factors that may impact the demand for refined products. These factors include mandated renewable fuels standards, proposed climate change laws and regulations, and increased mileage standards for vehicles. The petroleum business is also subject to the Renewable Fuel Standard of the United States Environmental Protection Agency, which requires it to either blend “renewable fuels” with its transportation fuels or purchase renewable identification numbers (“RINs”), in lieu of blending. The price of RINs has been extremely volatile and the future cost of RINs for the petroleum business is difficult to estimate. Additionally, the cost of RINs is dependent upon a variety of factors, which include the availability of RINs for purchase, the price at which RINs can be purchased, transportation fuel production levels, the mix of the petroleum business’ petroleum products, as well as the fuel blending performed at its refineries and downstream terminals, all of which can vary significantly from period to period. Refer to Note 16, “Commitments and Contingencies,” to the condensed consolidated financial statements for further discussion of RINs.
In December 2020, our Energy segment approved a renewable diesel project at one of its refineries, which would convert the refinery’s hydrocracker to a renewable diesel unit (“RDU”) capable of producing 100 million gallons of
42
renewable diesel per year and approximately 180 million RINs annually. As a result of conversion, the crude oil capacity of the refinery will be reduced. Further, the conversion enables our Energy segment to capture additional benefits associated with the existing blenders’ tax credit that expires at the end of 2022 and low carbon fuel standard programs in states such as California. Our Energy segment has additional plans to add pretreating capabilities for the RDU and construction of a similar facility at its other refinery. These collective renewable diesel efforts could reduce our Energy segment’s Renewable Fuels Standard (“RFS”) exposure. However, any actions taken by the Supreme Court, resulting administration efforts under the RFS, such as denial of existing or previous waiver applications, and market conditions could significantly impact the amount by which our Energy segment’s renewable diesel business.
Three Months Ended March 31, | ||||||
| 2021 |
| 2020 | |||
Net sales | $ | 1,463 | $ | 1,130 | ||
Cost of goods sold |
| 1,579 |
| 1,250 | ||
Gross margin | $ | (116) | $ | (120) | ||
Three Months Ended March 31, 2021 and 2020
Net sales for our Energy segment increased by $333 million (29%) for the three months ended March 31, 2021 as compared to the comparable prior year period, primarily due to an increase in our petroleum business’ net sales, which increased $347 million, offset in part by a decrease in our nitrogen fertilizer business’ net sales, which decreased $14 million over the comparable periods. The increase in the petroleum business’ net sales was primarily due to an increase in sales of gasoline and distillates attributable to an increase in volumes and more favorable pricing conditions. Volumes were lower in the comparable prior year period due to the full planned turnaround at one of the refineries while another refinery experienced reduced utilization in response to demand reductions driven by the impacts of the COVID-19 pandemic. Our nitrogen fertilizer business’ net sales decreased primarily due to a decrease in urea ammonium nitrate (“UAN”) sales primarily due to a decrease in volumes.
Cost of goods sold for our Energy segment increased by $329 million (26%) for the three months ended March 31, 2021 as compared to the comparable prior year period. The increase was primarily due to our petroleum business as a result of higher cost of consumed crude oil. The higher cost of consumed crude oil was due to an increase in volumes, as discussed above, as well as lower derivative performance of $78 million and a $159 million increase in the net cost of RINs. Gross margin for our Energy segment improved by $4 million for the three months ended March 31, 2021 as compared to the comparable prior year period. Gross margin as a percentage of net sales was (8)% and (11)% for the three months ended March 31, 2021 and 2020, respectively. The improvement in the gross margin as a percentage of net sales was primarily attributable to the petroleum business, which was primarily due to higher crack spreads, offset in part by the derivatives and net cost of RINs, as discussed above.
Automotive
Our Automotive segment’s results of operations are generally driven by the distribution and installation of automotive aftermarket parts and the demand for automotive service and maintenance, and is affected by the relative strength of automotive part replacement trends, among other factors.
Our Automotive segment is in the process of implementing a multi-year transformation plan, which includes the restructuring of its businesses. The transformation plan includes operating the automotive services and aftermarket parts businesses as separate businesses, streamlining Icahn Automotive’s corporate and field support teams, facility closures, consolidations and conversions, inventory optimization actions, and the re-focusing of its automotive parts business on certain core markets. As part of this plan, Icahn Automotive entered into an agreement to sell certain inventory assets relating to its aftermarket parts business at 109 locations and a distribution center in California and certain other inventory and fixed assets in California. Aftermarket parts sales from these locations aggregated $35 million during the
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three months ended March 31, 2021. Costs to implement the transformation plan will include restructuring charges, which will be recorded when specific plans are approved, and which may be significant.
Our Automotive segment’s priorities include:
| ● | Positioning the service business to take advantage of opportunities in the do-it-for-me market and vehicle fleets; |
| ● | Optimizing the value of the commercial parts distribution business in certain high-volume core markets; |
| ● | Exiting the automotive parts distribution business in certain low volume, non-core markets; |
| ● | Improving inventory management across Icahn Automotive’s parts and tire distribution network; |
| ● | Investment in customer experience initiatives and selective upgrades in facilities; |
| ● | Investment in employees with focus on training and career development investments; and |
| ● | Business process improvements, including investments in our supply chain and information technology capabilities. |
The following table presents our Automotive segment’s operating revenue, cost of revenue and gross margin. Our Automotive segment’s results of operations also include automotive services labor. Automotive services labor revenues are included in other revenues from operations in our condensed consolidated statements of operations, however, the sale of any installed parts or materials related to automotive services are included in net sales. Therefore, we discuss the combined results of our automotive net sales and automotive services labor revenues below.
Three Months Ended March 31, | ||||||
| 2021 |
| 2020 | |||
Net sales and other revenue from operations | $ | 598 | $ | 635 | ||
Cost of goods sold and other expenses from operations |
| 425 |
| 475 | ||
Gross margin | $ | 173 | $ | 160 | ||
Three Months Ended March 31, 2021 and 2020
Net sales and other revenue from operations for our Automotive segment for the three months ended March 31, 2021 decreased by $37 million (6%) as compared to the comparable prior year period. The decrease was attributable to a decrease in aftermarket parts sales of $50 million (15%) offset in part by an increase in automotive services revenues of $13 million (4%). On an organic basis, aftermarket parts sales decreased $10 million over the comparable periods due to a decrease in commercial sales of $7 million (4%) and a decrease in retail sales of $3 million (5%). Store closures related to the transformation plan accounted for another $40 million decrease in aftermarket parts sales. The increase in automotive services revenues represents an increase on a primarily organic basis as sales have improved over the comparable prior year period. The COVID-19 pandemic, and the impacts of the actions taken by governments and others, have significantly contributed to a decline in revenues beginning in March 2020.
Cost of goods sold and other expenses from operations for the three months ended March 31, 2021 decreased by $50 million (11%) as compared to the comparable prior year period. The decrease was due to lower sales volumes as described above. Gross margin on net sales and other revenue from operations for the three months ended March 31, 2021 increased by $13 million (8%) as compared to the comparable prior year period. Gross margin as a percentage of net sales and other revenue from operations was 29% and 25% for the three months ended March 31, 2021 and 2020, respectively. Due to the COVID-19 pandemic, our Automotive segment accelerated planned store closures in 2020, shifting our Automotive segment’s business from a majority attributable to aftermarket parts sales to a majority attributable to higher margin automotive services.
Food Packaging
Our Food packaging segment’s results of operations are primarily driven by the production and sale of cellulosic, fibrous and plastic casings for the processed meat and poultry industry and derives a majority of its total net sales from customers located outside the United States.
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Three Months Ended March 31, 2021 and 2020
Net sales for the three months ended March 31, 2021 increased $3 million (3%) as compared to the comparable prior year period. The increase was due to an increase of $1 million in volumes and $2 million from the favorable effects of foreign exchange. Cost of goods sold for the three months ended March 31, 2021 increased by $2 million (3%) as compared to the comparable prior year period due to the effects of foreign exchange and distribution costs. Gross margin as a percentage of net sales was 21% and 20% for the three months ended March 31, 2021 and 2020, respectively.
Metals
The scrap metals business is highly cyclical and is substantially dependent upon the overall economic conditions in the United States and other global markets. Ferrous and non-ferrous scrap has been historically vulnerable to significant declines in consumption and product pricing during prolonged periods of economic downturn or stagnation.
Three Months Ended March 31, 2021 and 2020
Net sales for the three months ended March 31, 2021 increased by $34 million (40%) compared to the comparable prior year period primarily due to higher pricing. Cost of goods sold for the three months ended March 31, 2021 increased by $27 million (32%) compared to the comparable prior year period due to higher material costs. Gross margin as a percentage of net sales was 7% and 1% for the three months ended March 31, 2021 and 2020, respectively, primarily due to higher material margins.
Real Estate
Our Real Estate segment consists primarily of investment properties, the development and sale of single-family homes, and the management of a country club. Sales of single-family homes are included in net sales in our consolidated statements of operations. Results from investment properties and country club operations are included in other revenues from operations in our consolidated statements of operations. Revenue from our real estate operations for each of the three months ended March 31, 2021 and 2020 were primarily derived from the sale of residential units and rental operations.
Home Fashion
Our Home Fashion segment is significantly influenced by the overall economic environment, including consumer spending, at the retail level, for home textile products.
Three Months Ended March 31, 2021 and 2020
Net sales for the three months ended March 31, 2021 decreased by $9 million (18%) compared to the comparable prior year period primarily due to the impact of the COVID-19 pandemic on our Home Fashion segment’s hospitality business. Cost of goods sold for the three months ended March 31, 2021 decreased $7 million (17%) compared to the comparable prior year period due to lower volumes, offset in part by higher material and freight costs. Gross margin as a percentage of net sales was 17% and 18% for the three months ended March 31, 2021 and 2020, respectively. The decrease is due to higher material and freight costs.
Pharma
Our Pharma segment derives revenues primarily from the sale of its products directly to customers, wholesalers and pharmacies. To a lesser extent, our Pharma segment derives revenues through supply, licensing and royalty arrangements. We began consolidating our Pharma segment in the fourth quarter of 2020. For the three months ended March 31, 2021, our Pharma segment had $15 million of net product revenue, $14 million of supply revenue and $1 million of royalty revenue. For our Pharma segment’s supply revenue, $13 million is attributable to the one-time sale of product to a single customer.
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Holding Company
Our Holding Company’s results of operations primarily reflect investment gains and losses from equity investments and the interest expense on its senior unsecured notes for each of the three months ended March 31, 2021 and 2020.
Other Consolidated Results of Operations
Selling, General and Administrative
Three Months Ended March 31, 2021 and 2020
Our consolidated selling, general and administrative during the three months ended March 31, 2021 increased by $8 million (3%) as compared the comparable prior year period primarily due to higher compensation costs for our Investment segment and the addition of the results of our Pharma segment, offset in part by lower costs resulting from store closures for our Automotive segment.
Interest Expense
Three Months Ended March 31, 2021 and 2020
Our consolidated interest expense during the three months ended March 31, 2021 increased by $24 million (14%) as compared the comparable prior year period. The increase was primarily due to higher interest expense from our Investment segment attributable to an increase in average due to broker balances over the respective periods offset in part by lower interest expense for our Holding Company due to lower weighted average interest rates resulting from debt refinancings.
Income Tax Expense
Certain of our subsidiaries are partnerships not subject to taxation in our condensed consolidated financial statements and certain other subsidiaries are corporations, or subsidiaries of corporations, subject to taxation in our condensed consolidated financial statements. Therefore, our consolidated effective tax rate generally differs from the statutory federal tax rate. Refer to Note 13, “Income Taxes,” to the condensed consolidated financial statements for a discussion of income taxes.
Liquidity and Capital Resources
Holding Company Liquidity
We are a holding company. Our cash flow and our ability to meet our debt service obligations and make distributions with respect to depositary units will depend on the cash flow resulting from divestitures, equity and debt financings, interest income, returns on our interests in the Investment Funds and the payment of funds to us by our subsidiaries in the form of loans, dividends and distributions. We may pursue various means to raise cash from our subsidiaries. To date, such means include receipt of dividends and distributions from subsidiaries, obtaining loans or other financings based on the asset values of subsidiaries or selling debt or equity securities of subsidiaries through capital market transactions. To the degree any distributions and transfers are impaired or prohibited, our ability to make payments on our debt or distributions on our depositary units could be limited. The operating results of our subsidiaries may not be sufficient for them to make distributions to us. In addition, our subsidiaries are not obligated to make funds available to us and distributions and intercompany transfers from our subsidiaries to us may be restricted by applicable law or covenants contained in debt agreements and other agreements.
As of March 31, 2021, our Holding Company had cash and cash equivalents of approximately $1.1 billion and total debt of approximately $5.8 billion. As of March 31, 2021, our Holding Company had investments in the Investment Funds with a total fair market value of approximately $4.7 billion. We may redeem our direct investment in the Investment Funds upon notice. See “Investment Segment Liquidity” below for additional information with respect to our
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Investment segment liquidity. See “Consolidated Cash Flows” below for additional information with respect to our Holding Company liquidity.
Holding Company Borrowings and Availability
March 31, | December 31, | |||||
| 2021 |
| 2020 | |||
(in millions) | ||||||
6.250% senior unsecured notes due 2022 | $ | 456 | $ | 1,209 | ||
6.750% senior unsecured notes due 2024 |
| 499 |
| 499 | ||
4.750% senior unsecured notes due 2024 |
| 1,106 |
| 1,106 | ||
6.375% senior unsecured notes due 2025 |
| 748 |
| 748 | ||
6.250% senior unsecured notes due 2026 |
| 1,250 |
| 1,250 | ||
5.250% senior unsecured notes due 2027 |
| 999 |
| 999 | ||
4.375% senior unsecured notes due 2029 |
| 747 |
| — | ||
$ | 5,805 | $ | 5,811 | |||
Holding Company debt consists of various issues of fixed-rate senior unsecured notes issued by the Issuers and guaranteed by Icahn Enterprises Holdings (the “Guarantor”). Interest on each tranche of senior unsecured notes are payable semi-annually.
In January 2021, Icahn Enterprises and Icahn Enterprises Finance Corp. (together the “Issuers”) issued $750 million in aggregate principal amount of 4.375% senior unsecured notes due 2029 (the “New 2029 Notes”). The proceeds from the New 2029 Notes were used to redeem $750 million principal amount of 6.250% senior unsecured notes due 2022, and to pay accrued interest, related fees and expenses. Interest on the New 2029 Notes is payable semi-annually.
In April 2021, the Issuers issued $455 million in aggregate principal amount of additional 5.250% senior unsecured notes due 2027. The proceeds from this issuance were used to redeem the remaining $455 million principal amount of 6.250% senior unsecured notes due 2022, and to pay accrued interest, related fees and expenses.
Each of our senior unsecured notes and the related guarantees are the senior unsecured obligations of the Issuers and rank equally with all of the Issuers’ and the Guarantor’s existing and future senior unsecured indebtedness and senior to all of the Issuers’ and the Guarantor’s existing and future subordinated indebtedness. Each of our senior unsecured notes and the related guarantees are effectively subordinated to the Issuers’ and the Guarantor’s existing and future secured indebtedness to the extent of the collateral securing such indebtedness. Each of our senior unsecured notes and the related guarantees are also effectively subordinated to all indebtedness and other liabilities of the Issuers’ subsidiaries other than the Guarantor.
The indentures governing our senior unsecured notes described above restrict the payment of cash distributions, the purchase of equity interests or the purchase, redemption, defeasance or acquisition of debt subordinated to the senior unsecured notes. The indentures also restrict the incurrence of debt or the issuance of disqualified stock, as defined in the indentures, with certain exceptions. In addition, the indentures require that on each quarterly determination date, Icahn Enterprises and the guarantor of the notes (currently only Icahn Enterprises Holdings) maintain certain minimum financial ratios, as defined therein. The indentures also restrict the creation of liens, mergers, consolidations and sales of substantially all of our assets, and transactions with affiliates. Additionally, each of the senior unsecured notes outstanding as of March 31, 2021, except for the 4.750% senior unsecured notes due 2024, the 5.250% senior unsecured notes due 2027 and 4.375% senior unsecured notes due 2029, are subject to optional redemption premiums in the event we redeem any of the notes prior to certain dates as described in the indentures.
As of March 31, 2021 and December 31, 2020, we were in compliance with all covenants, including maintaining certain minimum financial ratios, as defined in the indentures. Additionally, as of March 31, 2021, based on covenants in the indentures governing our senior unsecured notes, we are not permitted to incur additional indebtedness; however, we are permitted to issue new notes in connection with debt refinancings of existing notes.
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2021 At-The-Market Offering
On February 26, 2021, Icahn Enterprises announced the commencement of its “at-the-market” offering pursuant to its Open Market Sale Agreement, pursuant to which Icahn Enterprises may sell its depositary units, from time to time, during the term of the program ending on December 31, 2023, for up to $400 million in aggregate sale proceeds. During the three months ended March 31, 2021, Icahn Enterprises sold 3,109,345 depositary units pursuant to this agreement, resulting in gross proceeds of $184 million. As of March 31, 2021, Icahn Enterprises may sell its depositary units for up to an additional $216 million in aggregate sale proceeds pursuant to this agreement. No assurance can be made that any or all amounts will be sold during the term of the program. Icahn Enterprises’ prior “at-the-market” offering was terminated on February 26, 2021.
LP Unit Distributions
On February 24, 2021, Icahn Enterprises declared a quarterly distribution in the amount of $2.00 per depositary unit in which each depositary unitholder had the option to make an election to receive either cash or additional depositary units. In connection with this distribution, aggregate cash distributions to all depositary unitholders was $27 million in April 2021.
On May 5, 2021, the Board of Directors of the general partner of Icahn Enterprises declared a quarterly distribution in the amount of $2.00 per depositary unit. The quarterly distribution is payable in either cash or additional depositary units, at the election of each depositary unitholder and will be paid on or about June 30, 2021 to depositary unitholders of record at the close of business on June 1, 2021. Depositary unitholders will have until June 18, 2021 to make an election to receive either cash or additional depositary units. If a holder does not make a timely election to receive cash, it will automatically be deemed to have elected to receive the distribution in additional depositary units. Icahn Enterprises will make a cash payment in lieu of issuing fractional depositary units to any unitholders electing to receive (or who are deemed to have elected to receive) depositary units.
The declaration and payment of distributions is reviewed quarterly by Icahn Enterprises GP’s board of directors based upon a review of our balance sheet and cash flow, our expected capital and liquidity requirements, the provisions of our partnership agreement and provisions in our financing arrangements governing distributions, and keeping in mind that limited partners subject to U.S. federal income tax have recognized income on our earnings even if they do not receive distributions that could be used to satisfy any resulting tax obligations. The payment of future distributions will be determined by the board of directors quarterly, based upon the factors described above and other factors that it deems relevant at the time that declaration of a distribution is considered. Payments of distributions are subject to certain restrictions, including certain restrictions on our subsidiaries which limit their ability to distribute dividends to us. There can be no assurance as to whether or in what amounts any future distributions might be paid.
Investment Segment Liquidity
In addition to investments by us and Mr. Icahn, the Investment Funds historically have access to significant amounts of cash available from prime brokerage lines of credit, subject to customary terms and market conditions.
Additionally, our Investment segment liquidity is driven by the investment activities and performance of the Investment Funds. As of March 31, 2021, the Investment Funds’ had a net short notional exposure of 19%. The Investment Funds’ long exposure was 109% (108% long equity and 1% long credit) and its short exposure was 128% (88% short equity and 40% short credit and other). The notional exposure represents the ratio of the notional exposure of the Investment Funds’ invested capital to the net asset value of the Investment Funds at March 31, 2021.
Of the Investment Funds’ 109% long exposure, 107% was comprised of the fair value of its long positions (with certain adjustments) and 2% was comprised of single name equity forward contracts and credit contracts. Of the Investment Funds’ 128% short exposure, 48% was comprised of the fair value of its short positions and 80% was comprised of short broad market index swap derivative contracts and short credit default swap contracts.
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With respect to both our long positions that are not notionalized (108% long exposure) and our short positions that are not notionalized (48% short exposure), each 1% change in exposure as a result of purchases or sales (assuming no change in value) would have a 1% impact on our cash and cash equivalents (as a percentage of net asset value). Changes in exposure as a result of purchases and sales as well as adverse changes in market value would also have an effect on funds available to us pursuant to prime brokerage lines of credit.
With respect to the notional value of our other short positions (80% short exposure), our liquidity would decrease by the balance sheet unrealized loss if we were to close the positions at quarter end prices. This would be offset by a release of restricted cash balances collateralizing these positions as well as an increase in funds available to us pursuant to certain prime brokerage lines of credit. If we were to increase our short exposure by adding to these short positions, we would be required to provide cash collateral equal to a small percentage of the initial notional value at counterparties that require cash as collateral and then post additional collateral equal to 100% of the mark to market on adverse changes in fair value. For our counterparties who do not require cash collateral, funds available from lines of credit would decrease.
Other Segment Liquidity
Segment Cash and Cash Equivalents
Segment cash and cash equivalents (excluding our Investment segment) consists of the following:
March 31, | December 31, | |||||
| 2021 |
| 2020 | |||
(in millions) | ||||||
Energy | $ | 707 | $ | 667 | ||
Automotive |
| 42 |
| 25 | ||
Food Packaging |
| 13 |
| 16 | ||
Metals |
| — |
| 1 | ||
Real Estate |
| 27 |
| 21 | ||
Home Fashion |
| 2 |
| 2 | ||
Pharma | 2 | 8 | ||||
$ | 791 | $ | 732 | |||
Segment Borrowings and Availability
Segment debt consists of the following:
March 31, | December 31, | |||||
| 2021 |
| 2020 | |||
(in millions) | ||||||
Energy | $ | 1,691 | $ | 1,691 | ||
Automotive |
| 352 |
| 368 | ||
Food Packaging |
| 156 |
| 151 | ||
Metals |
| 28 |
| 16 | ||
Real Estate |
| 1 |
| 1 | ||
Home Fashion |
| 23 |
| 21 | ||
$ | 2,251 | $ | 2,248 | |||
Refer to our Annual Report on Form 10-K for the year ended December 31, 2020 for information concerning terms, restrictions and covenants pertaining to our subsidiaries’ debt. As of March 31, 2021, all of our subsidiaries were in compliance with all debt covenants.
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Our segments have additional borrowing availability under certain revolving credit facilities as summarized below:
| March 31, | ||
2021 | |||
(in millions) | |||
Energy | $ | 389 | |
Automotive |
| 99 | |
Food Packaging |
| 19 | |
Metals |
| 65 | |
Home Fashion |
| 14 | |
$ | 586 | ||
The above outstanding debt and borrowing availability with respect to each of our continuing operating segments reflects third-party obligations.
Subsidiary Stock Repurchase Program
On October 23, 2019, the Board of Directors of CVR Energy approved a stock repurchase program which would enable it to repurchase up to $300 million of its common stock from time to time through open market transactions, block trades, privately negotiated transactions or otherwise in accordance with applicable securities laws. The stock repurchase program has a duration of four years, which may be terminated by the Board of Directors of CVR Energy at any time. Repurchases, if any, including the timing, price and amount, may be made at the discretion of CVR Energy management and CVR Energy is not obligated to make any repurchases. CVR Energy did not repurchase any shares of its common stock as of March 31, 2021. Due to the market and oil price volatility, coupled with the current economic conditions, CVR Energy does not currently intend to repurchase any stock if these, and other, conditions continue.
On May 6, 2020, the Board of Directors of CVR Partners’ general partner approved a unit repurchase program which would enable it to repurchase up to $10 million of its common units from time to time through open market transactions, block trades, privately negotiated transactions or otherwise in accordance with applicable securities laws. On February 22, 2021, the Board of Directors of CVR Partners authorized an additional $10 million under the unit repurchase program. During 2021, CVR Partners repurchased common units on the open market at a cost of $1 million. As of March 31, 2021, CVR Partners has $12 million remaining under its unit repurchase program.
Consolidated Cash Flows
Our Holding Company’s cash flows are generally driven by payments and proceeds associated with our senior unsecured debt obligations and payments and proceeds associated with equity transactions with Icahn Enterprises’ depositary unitholders. Additionally, our Holding Company’s cash flows include transactions with our Investment and other operating segments. Our Investment segment’s cash flows are primarily driven by investment transactions, which are included in net cash flows from operating activities due to the nature of its business, as well as contributions to and distributions from Mr. Icahn and his affiliates (including Icahn Enterprises and Icahn Enterprises Holdings) and Brett Icahn, which are included in net cash flows from financing activities. Our other operating segments’ cash flows are driven by the activities and performance of each business as well as transactions with our Holding Company, as discussed below.
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The following table summarizes cash flow information for Icahn Enterprises’ reporting segments and our Holding Company:
Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | |||||||||||||||||
Net Cash Provided By (Used In) | Net Cash Provided By (Used In) | |||||||||||||||||
Operating | Investing | Financing | Operating | Investing | Financing | |||||||||||||
| Activities |
| Activities |
| Activities |
| Activities |
| Activities |
| Activities | |||||||
(in millions) | ||||||||||||||||||
Holding Company | $ | (81) | $ | 116 | $ | 179 | $ | (103) | $ | (1,121) | $ | (480) | ||||||
Investment |
| (519) |
| — |
| 40 |
| (1,138) |
| — |
| 1,001 | ||||||
Other Operating Segments: |
|
|
|
|
|
| ||||||||||||
Energy |
| 96 |
| (54) |
| (2) |
| (58) |
| (196) |
| 407 | ||||||
Automotive |
| (21) | 3 |
| 33 |
| (54) |
| (6) |
| 65 | |||||||
Food Packaging |
| (12) |
| (2) |
| 4 |
| (6) |
| (2) |
| (4) | ||||||
Metals |
| (9) |
| (1) |
| 9 |
| (11) |
| — |
| 10 | ||||||
Real Estate |
| 4 |
| (1) |
| 5 |
| 3 |
| (4) |
| 4 | ||||||
Home Fashion |
| (3) |
| — |
| 1 |
| (6) |
| (2) |
| 11 | ||||||
Pharma |
| (6) |
| — |
| — |
| — |
| — |
| — | ||||||
Other operating segments |
| 49 |
| (55) |
| 50 |
| (132) |
| (210) |
| 493 | ||||||
Total before eliminations |
| (551) |
| 61 |
| 269 |
| (1,373) |
| (1,331) |
| 1,014 | ||||||
Eliminations |
| — |
| 55 |
| (55) |
| — |
| 1,007 |
| (1,007) | ||||||
Consolidated | $ | (551) | $ | 116 | $ | 214 | $ | (1,373) | $ | (324) | $ | 7 | ||||||
Eliminations
Eliminations in the table above relate to certain of our Holding Company’s transactions with our Investment and other operating segments. Our Holding Company’s net (investments in) distributions from the Investments Funds, when applicable, are included in cash flows from investing activities for our Holding Company and cash flows from financing activities for our Investment segment. Similarly, our Holding Company’s net distributions from (investments in) our other operating segments are included in cash flows from investing activities for our Holding Company and cash flows from financing activities for our other operating segments.
Holding Company
Our Holding Company’s cash flows from operating activities for each of the three months ended March 31, 2021 and 2020 were primarily attributable to our semi-annual interest payments on our senior unsecured notes. The decrease in interest payments over the comparable periods is due to the timing of the payment of the semi-annual interest as our recent debt transactions resulted in a change in certain interest payment dates as well as a lower weighted average interest rate over the comparative periods.
Our Holding Company’s cash flows from investing activities for the three months ended March 31, 2021 were primarily attributable to proceeds from the sale of equity investments of $171 million offset in part by investments in/contributions to our operating subsidiaries aggregating $55 million, including an investment in our Automotive segment of $50 million. Our Holding Company’s cash flows from investing activities for the three months ended March 31, 2020 were primarily due to our investment in the Investment Funds of $1.0 billion, our purchase of an equity investment of $114 million and investments in/contributions to our operating subsidiaries aggregating $64 million, including an investment in our Automotive segment of $55 million. This was offset in part by net cash dividends from our Energy segment of $57 million.
Our Holding Company’s cash flows from financing activities for the three months ended March 31, 2021 were due to proceeds from our “at-the-market” offering, offset in part by the net effect of a debt refinancing transaction. Our Holding Company’s cash flows from financing activities for the three months ended March 31, 2020 were primarily due to the effects of certain debt refinancing transactions, which included the repayment of certain senior unsecured notes in
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January 2020 using proceeds from senior unsecured note issuances in December 2019. This was offset in part by proceeds from our “at-the-market” offering.
Investment Segment
Our Investment segment’s cash flows from operating activities for the comparable periods were attributable to its net investment transactions.
Our Investment segment’s cash flows from financing activities for the three months ended March 31, 2021 were attributable to Brett Icahn’s contribution to the Funds of $40 million. Our Investment segment’s cash flows from financing activities for the three months ended March 31, 2020 were attributable to our investment in the Investment Funds of $1.0 billion, and $1 million from Mr. Icahn and his affiliates (excluding us).
Other Operating Segments
Our other operating segments’ cash flows from operating activities included net cash flows from operating activities before changes in operating assets and liabilities of $(82) million and $(91) million for the three months ended March 31, 2021 and 2020, respectively, primarily due to the result of our Energy and Automotive segments for each period. The change in cash flows from operating activities for the three months ended March 31, 2021 as compared to the comparable prior year period was primarily due to changes in working capital attributable to our Energy segment. Our Energy segment’s working capital improved over the comparable periods primarily due to the increase in crude oil prices during the first quarter of 2021 and increases in its open RFS obligation.
Our other operating segments’ cash flows from investing activities were primarily due to the purchase of investments of zero in 2021 compared to $140 million in 2020 and due to capital expenditures of $47 million in 2021, primarily for its RDU project, and $55 million in 2020, primarily within our Energy and Automotive segments for both periods. In addition, our Energy segment acquired a pipeline for cash consideration of $20 million in the first quarter of 2021.
Our other operating segments’ cash flows from financing activities were primarily due net debt transactions. In 2020, our Energy segment had net proceeds from senior debt transactions of $500 million. In addition, our other operating segments also had net contributions from our Holding Company of $55 million for the three months ended March 31, 2021 compared to $7 million for the three months ended March 31, 2020, as described above. For the three months ended March 31, 2020, our Energy segment had distributions to non-controlling interests of $23 million.
Consolidated Capital Expenditures
There have been no material changes to our planned capital expenditures as compared to the estimated capital expenditures for 2021 reported in our Annual Report on Form 10-K for the year ended December 31, 2020.
Critical Accounting Estimates
The critical accounting estimates used in the preparation of our condensed consolidated financial statements that we believe affect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements presented in this Report are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in the Notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020.
There have been no material changes to our critical accounting policies and estimates during the three months ended March 31, 2021 as compared to those reported in our Annual Report on Form 10-K for the year ended December 31, 2020.
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Recently Issued Accounting Standards
Refer to Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” to the condensed consolidated financial statements for a discussion of recent accounting pronouncements applicable to us.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Except as discussed below, information about our quantitative and qualitative disclosures about market risk did not differ materially from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.
Market Risk
Our predominant exposure to market risk is related to our Investment segment and the sensitivities to movements in the fair value of the Investment Funds’ investments.
Investment
The fair value of the financial assets and liabilities of the Investment Funds primarily fluctuates in response to changes in the value of securities. The net effect of these fair value changes impacts the net gains from investment activities in our condensed consolidated statements of operations. The Investment Funds’ risk is regularly evaluated and is managed on a position basis as well as on a portfolio basis. Senior members of our investment team meet on a regular basis to assess and review certain risks, including concentration risk, correlation risk and credit risk for significant positions. Certain risk metrics and other analytical tools are used in the normal course of business by the Investment segment.
The Investment Funds hold investments that are reported at fair value as of the reporting date, which include securities owned, securities sold, not yet purchased and derivatives as reported on our condensed consolidated balance sheets. Based on their respective balances as of March 31, 2021, we estimate that in the event of a 10% adverse change in the fair value of these investments, the fair values of securities owned, securities sold, not yet purchased and derivatives would be negatively impacted by approximately $1,093 million, $486 million and $1,070 million, respectively. However, as of March 31, 2021, we estimate that the impact to our share of the net gain (loss) from investment activities reported in our condensed consolidated statement of operations would be less than the change in fair value since we have an investment of approximately 46% in the Investment Funds, and the non-controlling interests in income would correspondingly offset approximately 54% of the change in fair value.
Item 4. Controls and Procedures
As of March 31, 2021, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of Icahn Enterprises’ and Icahn Enterprises Holdings’ and subsidiaries’ disclosure controls and procedures pursuant to the Rule 13a-15(e) and 15d-15(e) promulgated under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
53
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are, and will continue to be, subject to litigation from time to time in the ordinary course of business. Refer to Note 16, “Commitments and Contingencies” to the condensed consolidated financial statements, which is incorporated by reference into this Part II, Item 1 of this Report, for information regarding our lawsuits and proceedings. Except for the lawsuits and proceedings disclosed in Note 16, there were no material changes to our lawsuits and proceedings as compared to those reported in our Annual Report on Form 10-K for the year ended December 31, 2020.
Item 1A. Risk Factors
There were no material changes to our risk factors during the three months ended March 31, 2021 as compared to those reported in our Annual Report on Form 10-K for the year ended December 31, 2020.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Icahn Enterprises L.P. | ||
By: | Icahn Enterprises G.P. Inc., its general partner | |
By: | /s/SungHwan Cho | |
SungHwan Cho, Chief Financial Officer and Director | ||
By: | Icahn Enterprises G.P. Inc., its general partner | |
By: | /s/Ted Papapostolou | |
Ted Papapostolou, Chief Accounting Officer | ||
Date: May 7, 2021
Icahn Enterprises Holdings L.P. | ||
By: | Icahn Enterprises G.P. Inc., its general partner | |
By: | /s/SungHwan Cho | |
SungHwan Cho, Chief Financial Officer and Director | ||
By: | Icahn Enterprises G.P. Inc., its general partner | |
By: | /s/Ted Papapostolou | |
Ted Papapostolou, Chief Accounting Officer | ||
Date: May 7, 2021
56
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Pursuant to Section 302(a) of the Sarbanes Oxley Act of 2002 and
Rule 13a-14(a) of the Securities Exchange Act of 1934
I, Keith Cozza, certify that:
1. I have reviewed this joint quarterly report on Form 10-Q of Icahn Enterprises L.P. and Icahn Enterprises Holdings L.P. for the period ended March 31, 2021;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report;
4. The registrants' other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrants and we have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrants' disclosure controls and procedures and presented in the report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrants' internal control over financial reporting that occurred during the registrants' most recent fiscal quarter (the registrants' fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants' internal control over financial reporting.
5. The registrants' other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants' auditors and the audit committee of the registrants' board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants' ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants' internal control over financial reporting.
Date: May 7, 2021
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Pursuant to Section 302(a) of the Sarbanes Oxley Act of 2002 and
Rule 13a-14(a) of the Securities Exchange Act of 1934
I, SungHwan Cho, certify that:
1. I have reviewed this joint quarterly report on Form 10-Q of Icahn Enterprises L.P. and Icahn Enterprises Holdings L.P. for the period ended March 31, 2021;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report;
4. The registrants' other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrants and we have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrants' disclosure controls and procedures and presented in the report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrants' internal control over financial reporting that occurred during the registrants' most recent fiscal quarter (the registrants' fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants' internal control over financial reporting.
5. The registrants' other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants' auditors and the audit committee of the registrants' board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants' ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants' internal control over financial reporting.
Date: May 7, 2021
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
Pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (18 U.S.C. 1350) and
Rules 13a-14(b) of the Securities Exchange Act of 1934
In connection with the joint quarterly report on Form 10-Q of Icahn Enterprises L.P. and Icahn Enterprises Holdings L.P., for the period ended March 31, 2021, the undersigned certify that, to the best of his knowledge, based upon a review of the Icahn Enterprises L.P. and Icahn Enterprises Holdings L.P. joint quarterly report on Form 10-Q for the period ended March 31, 2021:
(1) The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the registrants.
Date: May 7, 2021
Date: May 7, 2021