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 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).
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⌧ | Accelerated Filer | ◻ | Emerging Growth Company | ||||
Non-accelerated Filer | ◻ | Smaller Reporting 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. ☐
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As of August 4, 2022, there were
ICAHN ENTERPRISES 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 | 33 | |
48 | ||
49 | ||
PART II. OTHER INFORMATION | ||
50 | ||
50 | ||
51 | ||
51 | ||
52 |
i
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 the Private Securities Litigation Reform Act. 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; the impacts from the Russia/Ukraine conflict, including economic volatility and the impacts of export controls and other economic sanctions; 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 our suppliers to timely deliver raw materials, and the failure to effectively respond to industry changes in casings technology; supply chain issues; inflation, including increased costs of raw materials and shipping, including as a result of the Russia/Ukraine conflict; labor shortages and workforce availability; 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, 2021 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)
June 30, | December 31, | |||||
| 2022 |
| 2021 | |||
(in millions, except unit amounts) | ||||||
ASSETS | ||||||
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 |
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Inventories, net |
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Property, plant and equipment, net |
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Derivative assets, net | | | ||||
Goodwill |
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Intangible assets, net |
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Other assets |
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Total Assets | $ | | $ | | ||
LIABILITIES AND EQUITY |
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Accounts payable | $ | | $ | | ||
Accrued expenses and other liabilities |
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Deferred tax liabilities |
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Derivative liabilities, net |
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Securities sold, not yet purchased, at fair value |
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Due to brokers |
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Debt |
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Total liabilities |
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Commitments and contingencies (Note 16) |
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Equity: |
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Limited partners: Depositary units: |
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General partner |
| ( |
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Equity attributable to Icahn Enterprises |
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Equity attributable to non-controlling interests |
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Total equity |
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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 June 30, | Six Months Ended June 30, | ||||||||||
2022 |
| 2021 |
| 2022 |
| 2021 | |||||
(in millions, except per unit amounts) | |||||||||||
Revenues: | |||||||||||
Net sales | $ | | $ | | $ | | $ | | |||
Other revenues from operations |
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Net (loss) gain from investment activities |
| ( |
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Interest and dividend income |
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Other loss, net |
| ( |
| ( |
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Expenses: | |||||||||||
Cost of goods sold |
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Other expenses from operations |
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Selling, general and administrative |
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Restructuring, net |
| — |
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| — |
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Interest expense |
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(Loss) income before income tax expense |
| ( |
| ( |
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Income tax expense |
| ( |
| ( |
| ( |
| ( | |||
Net (loss) income |
| ( |
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Less: net (loss) income attributable to non-controlling interests |
| ( |
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Net (loss) income attributable to Icahn Enterprises | $ | ( | $ | ( | $ | | $ | | |||
Net (loss) income attributable to Icahn Enterprises allocated to: | |||||||||||
Limited partners | $ | ( | $ | ( | $ | | $ | | |||
General partner |
| ( |
| ( |
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$ | ( | $ | ( | $ | | $ | | ||||
Basic (loss) income per LP unit | $ | ( | $ | ( | $ | | $ | | |||
Basic weighted average LP units outstanding |
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Diluted (loss) income per LP unit | $ | ( | $ | ( | $ | | $ | | |||
Diluted weighted average LP units outstanding |
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Distributions declared per LP unit | $ | | $ | | $ | | $ | |
See notes to condensed consolidated financial statements.
3
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
(in millions) | ||||||||||||
Net (loss) income | $ | ( | $ | ( | $ | | $ | | ||||
Other comprehensive (loss) income, net of tax: |
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Translation adjustments |
| ( |
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| ( |
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Post-retirement benefits and other |
| — |
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| — |
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Other comprehensive income, net of tax |
| ( |
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| ( |
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Comprehensive (loss) income |
| ( |
| ( |
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Less: Comprehensive (loss) income attributable to non-controlling interests |
| ( |
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Comprehensive (loss) income attributable to Icahn Enterprises | $ | ( | $ | ( | $ | | $ | | ||||
Comprehensive (loss) income attributable to Icahn Enterprises allocated to: |
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Limited partners | $ | ( | $ | ( | $ | | $ | | ||||
General partner |
| ( |
| ( |
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$ | ( | $ | ( | $ | | $ | |
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 |
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General | Limited | Non- | |||||||||||||
Partner’s | Partners’ | Total Partners’ | controlling | ||||||||||||
| Deficit |
| Equity |
| Equity |
| Interests |
| Total Equity | ||||||
(in millions) | |||||||||||||||
Balance, December 31, 2021 | $ | ( | $ | | $ | | $ | | $ | | |||||
Net income | |
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Partnership distributions payable |
| ( |
| ( |
| ( |
| — |
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Partnership contributions |
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| — |
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Dividends and distributions to non-controlling interests in subsidiaries |
| — |
| — |
| — |
| ( |
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Changes in subsidiary equity and other |
| — |
| ( |
| ( |
| ( |
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Balance, March 31, 2022 |
| $ | ( |
| $ | |
| $ | |
| $ | |
| $ | |
Net loss |
| ( |
| ( |
| ( |
| ( |
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Other comprehensive income |
| — | ( |
| ( |
| — |
| ( | ||||||
Partnership distributions payable reversal | | | | — | | ||||||||||
Partnership distributions |
| ( |
| ( |
| ( |
| — |
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Partnership contributions | | | | — | | ||||||||||
Investment segment contributions from non-controlling interests |
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Investment segment distributions from non-controlling interests |
| — |
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| ( |
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Dividends and distributions to non-controlling interests in subsidiaries |
| — |
| — |
| — |
| ( |
| ( | |||||
Changes in subsidiary equity and other |
| ( |
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| ( |
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Balance, June 30, 2022 | $ | ( | $ | | $ | | $ | | $ | |
Equity Attributable to Icahn Enterprises |
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General | Limited | Non- | |||||||||||||
Partner’s | Partners’ | Total Partners’ | controlling | ||||||||||||
| Deficit |
| Equity |
| Equity |
| Interests |
| Total Equity | ||||||
(in millions) | |||||||||||||||
Balance, December 31, 2020 | $ | ( | $ | | $ | | $ | | $ | | |||||
Net income | |
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Other comprehensive loss |
| — |
| ( |
| ( |
| — |
| ( | |||||
Partnership distributions payable |
| ( |
| ( |
| ( |
| — |
| ( | |||||
Partnership contributions |
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| — |
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Investment segment contributions from non-controlling interests |
| — |
| — |
| — |
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Changes in subsidiary equity and other |
| — |
| ( |
| ( |
| — |
| ( | |||||
Balance, March 31, 2021 |
| $ | ( |
| $ | |
| $ | |
| $ | |
| $ | |
Net (loss) income |
| ( |
| ( |
| ( |
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| ( | |||||
Other comprehensive income |
| — |
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Partnership distributions payable reversal |
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Partnership distributions |
| ( |
| ( |
| ( |
| — |
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Partnership contributions | |
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Investment segment contributions from non-controlling interests |
| — |
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Dividends and distributions to non-controlling interests in subsidiaries |
| — |
| — |
| — |
| ( |
| ( | |||||
Changes in subsidiary equity and other | ( |
| ( |
| ( |
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Balance, June 30, 2021 | $ | ( | $ | | $ | | $ | | $ | |
See notes to condensed consolidated financial statements.
5
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30, | ||||||
| 2022 |
| 2021 | |||
(in millions) | ||||||
Cash flows from operating activities: | ||||||
Net income | $ | |
| $ | | |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
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Net gain from securities transactions |
| ( |
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Purchases of securities |
| ( |
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Proceeds from sales of securities |
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Payments to cover securities sold, not yet purchased |
| ( |
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Proceeds from securities sold, not yet purchased |
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Changes in receivables and payables relating to securities transactions |
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Changes in derivative assets and liabilities |
| ( |
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Gain on disposition of assets, net |
| ( |
| — | ||
Depreciation and amortization |
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Deferred taxes |
| ( |
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Other, net |
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Changes in other operating assets and liabilities |
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Net cash provided by (used in) operating activities |
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Cash flows from investing activities: |
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Capital expenditures |
| ( |
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Turnaround expenditures | ( | ( | ||||
Acquisition of businesses, net of cash acquired |
| — |
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Proceeds from sale of investments |
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Proceeds from disposition of businesses and assets |
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Other, net |
| ( |
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Net cash (used in) provided by investing activities |
| ( |
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Cash flows from financing activities: |
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Investment segment contributions from non-controlling interests |
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Partnership contributions |
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Partnership distributions |
| ( |
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Dividends and distributions to non-controlling interests in subsidiaries |
| ( |
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Proceeds from Holding Company senior unsecured notes |
| — |
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Repayments of Holding Company senior unsecured notes |
| ( |
| ( | ||
Proceeds from subsidiary borrowings |
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Repayments of subsidiary borrowings |
| ( |
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Other, net |
| ( |
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Net cash (used in) provided by financing activities |
| ( |
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Effect of exchange rate changes on cash and cash equivalents and restricted cash and restricted cash equivalents |
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Net increase in cash and cash equivalents and restricted cash and restricted cash equivalents |
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Cash and cash equivalents and restricted cash and restricted cash equivalents, beginning of period |
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Cash and cash equivalents and restricted cash and restricted cash equivalents, end of period | $ | | $ | |
See notes to condensed consolidated financial statements.
6
ICAHN ENTERPRISES 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. 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, Real Estate, Home Fashion and Pharma. In addition, we operated our Metals segment until sold in December 2021. We also report the results of our Holding Company, which includes the results of certain subsidiaries of Icahn Enterprises (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
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
7
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
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 June 30, 2022, we owned approximately
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 LLC, formerly Vivus, Inc. (“Vivus”). Vivus is a specialty pharmaceutical company with
Metals
We conducted our Metals segment through our wholly owned subsidiary, PSC Metals LLC (“PSC Metals”). PSC Metals was 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 collected industrial and obsolete scrap metal, processed it into reusable forms and supplied the recycled metals to its customers.
On December 7, 2021, we closed on the previously announced sale of
8
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
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 structure and intend to continue structuring our investments 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., Ferrous Resources Ltd., and PSC Metals 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, 2021. 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 (ii) the wholly and majority owned subsidiaries of Icahn Enterprises, 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.
Consolidated Variable Interest Entities
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
9
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
its
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 June 30, 2022 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 $
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.
10
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
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 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 June 30, 2022, our Energy segment had $
Automotive
Our Automotive segment has deferred revenue with respect to extended warranty plans of $
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 June 30 2023, 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 adopting this new accounting standard and do not expect it to have a material impact 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
As of June 30, 2022 and December 31, 2021, the total fair market value of investments in the Investment Funds made by Mr. Icahn and his affiliates (excluding us and Brett Icahn) was approximately $
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ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
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 June 30, 2022 and 2021, $
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. On May 5, 2022, we entered into an amendment to the manager agreement, which allows the Investment Funds to add, from time to time, two additional separately tracked portfolios, in addition to the existing portfolios, which will not be subject to the manager agreement. 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. 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 2022, Brett Icahn contributed $
4. Investments
Investments
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. In addition, our Investment segment has certain derivative transactions which are discussed in Note 6, “Financial Instruments.” The
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ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
carrying value and detail by security type, including business sector for equity securities, with respect to investments and securities sold, not yet purchased held by our Investment segment consist of the following:
June 30, | December 31, | |||||
| 2022 |
| 2021 | |||
(in millions) | ||||||
Assets | ||||||
Investments: |
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Equity securities: |
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Communications | $ | | $ | | ||
Consumer, cyclical |
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Energy |
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Utilities |
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Healthcare |
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Technology |
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Materials |
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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, cyclical | $ | | $ | | ||
Energy |
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Utilities |
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Healthcare |
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Materials |
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Industrial | | | ||||
$ | | $ | |
The portion of unrealized (losses) and gains that relates to securities still held by our Investment segment, primarily equity securities, was $(
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:
June 30, | December 31, | |||||
| 2022 |
| 2021 | |||
(in millions) | ||||||
Equity method investments | $ | | $ | | ||
Other investments measured at fair value |
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$ | | $ | |
The portion of unrealized gains that relates to equity securities still held by our other segments and Holding Company was $
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ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
5. Fair Value Measurements
U.S. GAAP requires enhanced disclosures about 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 assets and liabilities at fair value. Market price observability is impacted by a number of factors, including the type of, and the characteristics specific to, the assets and liabilities. Assets and liabilities 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.
Assets and 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 assets and 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 assets and liabilities are derived from market observable sources including reported trades, broker/dealer quotes and other pertinent data.
Level 3 - Pricing inputs are unobservable for the assets and liabilities and include situations where there is little, if any, market activity for the assets and liabilities. 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 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 assets and liabilities. 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.
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:
June 30, 2022 | December 31, 2021 | |||||||||||||||||||||||
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | |||||||||
(in millions) | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||
Investments (Note 4) | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Derivative assets, net (Note 6) |
| — |
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| — |
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| — |
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| — |
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$ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Liabilities | ||||||||||||||||||||||||
Securities sold, not yet purchased (Note 4) | $ | | $ | — | $ | — | $ | | $ | | $ | — | $ | — | $ | |