Icahn Enterprises L.P. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited. Icahn Enterprises is a diversified holding company with Investment, Energy, Automotive, Food Packaging, Real Estate, Home Fashion and Pharma businesses. Carl Icahn and affiliates owned approximately 85% of its depositary units at quarter-end.
Financial results and liquidity
| Metric | Q1 2024 | Q1 2023 / prior date |
|---|---|---|
| Total reported revenues | $2.468 billion | $2.673 billion |
| Net sales | $2.244 billion | $2.758 billion |
| Net loss attributable to Icahn Enterprises | $38 million | $270 million |
| Loss per LP unit | $0.09 | $0.75 |
| Operating cash flow | $(251) million | $265 million provided |
| Capital expenditures | $68 million | $58 million |
| Total debt at March 31 | $6.608 billion | $7.207 billion at Dec. 31, 2023 |
Cash and cash equivalents were $2.468 billion; an additional $2.565 billion was held by consolidated affiliated partnerships or restricted. Cash, cash equivalents and restricted cash totaled $5.033 billion, down $913 million during the quarter. Restricted and partnership cash should not be assumed to be freely available for general corporate needs. Holding Company cash was approximately $1.7 billion against $4.8 billion of debt. The filing reports $324 million of revolving-credit availability for Energy and Food Packaging, including $294 million for Energy.
Icahn Enterprises declared a $1.00-per-unit quarterly distribution. The quarter-end distribution liability was $439 million; in April, unitholders received approximately 19.2 million units and $97 million in cash. Q1 ATM unit sales raised approximately $50 million.
Material changes and segment performance
- Reported revenues declined about 8% year over year, while net sales fell about 19%. The reported total includes a smaller investment-activity loss than in 2023.
- The net loss improved substantially, partly because Q1 2023 included a $226 million non-cash loss on deconsolidation of bankrupt Auto Plus. Investment segment loss narrowed to $40 million from $375 million.
- Energy revenue fell to $1.863 billion from $2.286 billion; gross margin declined to $150 million from $360 million, with gross margin percentage at 8% versus 16%. Lower refined-product prices and refining margins, weaker fertilizer pricing, and derivative impacts contributed. Energy reported $78 million of net income, versus $247 million.
- Automotive revenue declined 16% to $369 million, reflecting the absence of Auto Plus and lower service revenue; gross margin percentage was 28% versus 30%. Automotive reported a $9 million net loss.
- Food Packaging revenue decreased 14% to $101 million and gross margin percentage fell to 21% from 23%. Home Fashion revenue declined 10% to $36 million, while gross margin percentage improved to 25% from 20%. Pharma revenue rose 20% to $25 million.
- CVR Energy redeemed $600 million of 5.25% notes in February. Consolidated debt declined $599 million from year-end, primarily reflecting this redemption. Holding Company debt was unchanged at $4.847 billion.
Outlook, risks and unusual items
The filing provides no quantified earnings or revenue guidance. Management said it is considering potential strategic transactions involving CVR Energy and its subsidiaries, including possible acquisitions, but gave no assurance any transaction will occur. It expects no material change to previously disclosed 2024 capital expenditure plans.
- Investment Funds returned negative 0.8% in Q1. Long positions gained 11.4%, while short positions lost 13.4%; net short notional exposure was 27%. Management identifies market movements, short positions and derivative exposure as significant sources of volatility.
- Energy results face refining-margin, commodity-price and demand volatility, as well as Renewable Fuel Standard (RFS) compliance costs and litigation. The quarter-end RFS obligation was $294 million. Outcomes of exemption and related regulatory cases remain uncertain and could materially affect Energy results or cash flows.
- Holding Company indentures restrict additional indebtedness, subject to exceptions including refinancing, and the partnership depends on subsidiary distributions and financing access. The filing says the company and subsidiaries were in covenant compliance.
- Icahn Enterprises is cooperating with SEC and U.S. Attorney information requests. Securities class-action, derivative and books-and-records matters are pending; management said it does not currently expect them to have a material impact, while noting uncertainty.
- Controlled-group pension rules may expose the partnership and subsidiaries to certain pension liabilities. Viskase and ACF plans would be underfunded by an estimated $39 million in aggregate upon voluntary termination; an affiliate indemnity is disclosed, but may not be able to fund its obligations.
- Other exposures include geopolitical and supply-chain disruption, interest rates, operating costs, Auto Plus bankruptcy-related effects, and the risk of inadvertently becoming an investment company or being taxed as a corporation. Management reported effective disclosure controls and no material change in internal control over financial reporting.
Investor verification priorities
- Review the accessibility and restrictions of cash balances, the Holding Company’s debt maturities and refinancing options, and the effect of subsidiary distribution limits.
- Track Energy refining margins, RFS liabilities and litigation, and the potential cash consequences of regulatory outcomes.
- Assess Investment Funds’ net short and derivative exposures, collateral needs and sensitivity to adverse market moves.
- Confirm the distribution’s cash-versus-unit mix, resulting unit dilution and future distribution decisions.
- Monitor the SEC and U.S. Attorney inquiries, pending lawsuits, controlled-group pension exposure and any CVR strategic transaction announcements.