Icahn Enterprises L.P. — 2022 Form 10-K Summary
Business context and reporting period
Annual report for the year ended December 31, 2022. Icahn Enterprises is a diversified master limited partnership with Investment, Energy, Automotive, Food Packaging, Real Estate, Home Fashion and Pharma segments. Metals was sold in December 2021. Carl Icahn and affiliates held approximately 85% of the depositary units at year-end.
Key financial results and liquidity
| Metric | 2022 | 2021 |
|---|---|---|
| Net sales | $13.378 billion | $10.304 billion |
| Total revenues | $14.101 billion | $11.338 billion |
| Net loss | $25 million | $500 million |
| Net loss attributable to Icahn Enterprises | $183 million | $518 million |
| Loss per limited partner unit | $0.57 | $2.32 |
| Net cash from operating activities | $1.055 billion | $321 million |
| Net cash used in investing activities | $260 million | Net cash provided: $528 million |
| Net cash used in financing activities | $344 million | Net cash provided: $293 million |
| Total debt | $7.096 billion | $7.692 billion |
Total assets were $27.914 billion and total equity was $9.558 billion at year-end. Cash and cash equivalents were $2.337 billion; cash held at consolidated affiliated partnerships and restricted cash added $2.549 billion, bringing combined cash and restricted cash to $4.886 billion. The latter amounts include Investment Funds cash and restricted collateral and should not be treated as wholly available corporate liquidity. The Holding Company reported $1.7 billion of cash and $5.3 billion of debt.
Consolidated gross profit and margin are not presented as a single comparable operating measure in the filing. Segment highlights: Energy gross profit was $1.085 billion, with a 10% gross margin versus 2% in 2021; Automotive gross profit was $620 million, with a 26% margin versus 24%; Food Packaging margin was 17% versus 18%; Home Fashion 14% versus 19%; and Pharma 27% versus 38%.
Material changes versus 2021
- Total revenues rose 24%, led by Energy: segment net sales increased 50% to $10.896 billion, principally from higher petroleum prices and demand, stronger refining margins, and higher fertilizer prices. Energy net income attributable to Icahn Enterprises was $304 million, compared with a $5 million loss in 2021.
- The Investment Funds returned negative 2.4% in 2022 versus negative 0.3% in 2021. Investment segment net loss was $223 million versus $32 million. Losses included a healthcare position and other holdings, partly offset by gains in two energy investments; short-position losses included credit-default swaps and an energy hedge.
- Automotive segment net sales and other operating revenue declined 1% to $2.349 billion. Aftermarket-parts sales fell 13%, partly offset by a 21% increase in automotive services revenue. Automotive reported a $192 million loss attributable to Icahn Enterprises.
- Consolidated interest expense fell 15% to $568 million. The Holding Company redeemed $500 million of 6.750% notes due 2024 at par in February 2022; the company estimated about $34 million of annual interest savings.
- Icahn Enterprises sold 14.6 million units through its at-the-market program for $759 million gross proceeds. Year-end units outstanding rose to 353.6 million from 293.4 million. The 2022 declared distribution remained $8.00 per unit; $222 million was paid in cash to unitholders.
Outlook, risks, contingencies and unusual items
- Management estimated 2023 capital expenditures of approximately $386–$411 million: $200–$225 million for Energy, $127 million for Automotive and about $59 million for other segments. Energy’s estimate includes $39–$47 million for renewable-diesel-unit capital spending. A refinery pretreater project was expected to be completed in the third quarter of 2023 at an estimated cost of $95 million.
- In January 2023, Automotive subsidiary Auto Plus filed for Chapter 11 and planned to seek court approval to sell substantially all its assets. The filing states this is expected to reduce Automotive assets and negatively affect future segment sales.
- CVR Energy authorized exploration of a possible spin-off of its nitrogen fertilizer interests. Completion, structure, timing and tax treatment were uncertain; there was no assurance the transaction would occur.
- Energy recognized $435 million of Renewable Fuel Standard compliance expense in 2022. Its obligated-party subsidiaries’ RFS position was $692 million at year-end. Related litigation and regulatory challenges were ongoing, and outcomes could materially affect Energy results.
- CVR refinery environmental proceedings remained unresolved. The company could not determine their outcome or potential financial impact. Consolidated environmental liabilities were $22 million at year-end.
- A $76 million legal settlement loss was included in 2022 other loss; CVR Energy described an approximately $79 million estimated probable loss for settlement of the call-option litigation. Insurance recovery was disputed and litigation continued.
- Automotive recorded $33 million of current-period inventory write-downs and $51 million of out-of-period adjustments related to inventory write-downs. The filing describes the latter as an income adjustment in one section and as an inventory write-down adjustment elsewhere.
- Key risks include volatile refining margins and commodity prices, RIN costs, investment concentration and leverage, subsidiary restrictions on upstreaming cash, debt covenant and refinancing risk, inflation and higher interest rates, environmental regulation, and the possibility of becoming subject to Investment Company Act registration or losing partnership tax treatment.
- The partnership was in compliance with debt covenants at December 31, 2022, but reported that Holding Company indenture covenants did not permit additional indebtedness except in connection with refinancing. The general partner determines distributions quarterly; future payments are not assured. A February 2023 distribution of $2.00 per unit was declared, with unitholders able to elect cash or additional units and defaulting to units if no election was made.
Important facts for investors to verify
- Review the 2022 audited statements and segment disclosures, particularly the distinction between consolidated net loss and loss attributable to Icahn Enterprises.
- Assess the accessibility of reported cash and Investment Funds assets, including restricted cash, collateral needs, subsidiary debt covenants and limits on distributions to the Holding Company.
- Track Auto Plus’s Chapter 11 asset-sale process and the resulting Automotive losses, liquidity needs and restructuring costs.
- Monitor CVR’s RFS compliance costs and litigation, environmental proceedings, and any decision or progress on the fertilizer-business spin-off.
- Evaluate the effect of ATM unit issuance and distributions paid in units on per-unit ownership and future distribution obligations.
- Consider related-party and governance risks: Icahn control, affiliate transactions, limited unitholder voting rights and exemptions from certain Nasdaq governance requirements.
Grant Thornton issued an unqualified opinion on the financial statements and internal controls; it reported no critical audit matters. Management and the auditor concluded internal control over financial reporting was effective as of year-end.