Business Context and Reporting Period
This summary covers the Form 10-K for Icahn Enterprises L.P. for the fiscal year ended December 31, 2009. Icahn Enterprises is a diversified master limited partnership and holding company. As of the reporting date, its continuing operating businesses included Investment Management, Automotive (Federal-Mogul), Metals (PSC Metals), Real Estate, and Home Fashion (WestPoint International). Subsequent to year-end, the company acquired controlling interests in American Railcar Industries (Railcar) and Viskase Companies (Food Packaging).
Carl C. Icahn, through affiliates, owned approximately 92.0% of the outstanding depositary units and 86.5% of the preferred units as of December 31, 2009.
Key Financial Metrics
| Metric (in millions) | 2009 | 2008 |
|---|---|---|
| Total Revenues | $7,865 | $5,027 |
| Net Income (Loss) | $1,195 | $(2,688) |
| Net Income Attributable to Icahn Enterprises | $234 | $(43) |
| EBITDA | $727 | $786 |
| Adjusted EBITDA | $846 | $398 |
| Cash and Cash Equivalents | $1,870 | $2,612 |
| Total Debt | $4,735 | $4,571 |
| Basic Income per LP Unit | $3.05 | $(0.80) |
Material Changes vs. Prior Period
- Investment Management: The segment generated income of $469 million in 2009, a significant turnaround from a loss of $335 million in 2008. This was driven by a 33.3% gross return in the Private Funds, compared to a -35.6% return in 2008. Assets Under Management (AUM) increased to $5.8 billion from $4.4 billion.
- Automotive: Net sales decreased 22% to $5.3 billion due to a global decline in vehicle production. The segment reported a loss of $29 million in 2009, an improvement from a $350 million loss in 2008, largely due to a reduction in impairment charges (from $434 million in 2008 to $17 million in 2009).
- Metals: Net sales plummeted 69% to $384 million due to the global recession impacting scrap metal prices and demand. The segment reported a loss of $30 million, including a $13 million impairment charge, compared to income of $66 million in 2008.
- Home Fashion: Net sales declined 13% to $382 million. The segment reported a loss of $40 million, an improvement from a $55 million loss in 2008, aided by reduced restructuring and impairment charges.
- Discontinued Operations: In 2008, the company sold its gaming subsidiary (ACEP) for a gain of $472 million. There were no revenues from discontinued operations in 2009.
Guidance, Outlook, and Risks
- Subsequent Acquisitions: On January 15, 2010, the company acquired controlling interests in American Railcar Industries (54.3%) and Viskase Companies (71.4%) through common control transactions. These will be consolidated in future filings.
- Debt Refinancing: In January 2010, the company issued $2.0 billion in new senior notes (2016 and 2018 maturities) to refinance approximately $1.28 billion of existing 2012 and 2013 notes, increasing liquidity by approximately $625 million.
- Preferred Unit Redemption: The company is required to redeem all outstanding preferred units by March 31, 2010. The redemption price is payable in cash or depositary units.
- Key Risks:
- Investment Management: Performance is highly dependent on market conditions and the "high watermark" provision, which prevented incentive allocations in 2009 despite positive returns.
- Automotive: Continued exposure to global automotive production volumes, raw material costs, and currency fluctuations. Federal-Mogul faces significant pension underfunding risks.
- Home Fashion: Ongoing litigation challenges the company's ownership control of WestPoint International (WPI). A loss of control could alter consolidation and financial reporting.
- Metals: Highly cyclical industry dependent on steel mill capacity and economic conditions.
Important Facts for Investor Verification
- WPI Litigation: Verify the status of the Delaware and federal court proceedings challenging Icahn Enterprises' ownership of WestPoint International. A loss of majority control could materially alter the consolidated financial statements.
- Preferred Unit Redemption: Confirm the method of payment (cash vs. depositary units) for the mandatory redemption of preferred units due March 31, 2010, and the impact on the capital structure.
- Debt Covenants: Review the covenants associated with the new 2016 and 2018 notes issued in January 2010 and the impact of the refinancing on future liquidity and interest expense.
- Investment Fund Performance: Monitor the Private Funds' performance relative to the "high watermark" to assess the sustainability of future incentive allocations and special profits interest allocations.
- Environmental Liabilities: Review the estimated liabilities for environmental remediation at Federal-Mogul ($22 million accrued) and PSC Metals ($27 million accrued) sites, noting the potential for additional losses.