IEP-6.30.14-10Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2014
|
| | | |
(Commission File Number) | (Exact Name of Registrant as Specified in Its Charter) (Address of Principal Executive Offices) (Zip Code) (Telephone Number) | (State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) |
1-9516 | ICAHN ENTERPRISES L.P. | Delaware | 13-3398766 |
| 767 Fifth Avenue, Suite 4700 New York, NY 10153 (212) 702-4300 | | |
| | | |
333-118021-01 | ICAHN ENTERPRISES HOLDINGS L.P. | Delaware | 13-3398767 |
| 767 Fifth Avenue, Suite 4700 New York, NY 10153 (212) 702-4300 | | |
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. Yes x No o Icahn Enterprises Holdings L.P. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
Icahn Enterprises L.P. Yes x No o Icahn Enterprises Holdings L.P. Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check One):
|
| | | | |
Icahn Enterprises L.P. | | Icahn Enterprises Holdings L.P. |
Large Accelerated Filer x | Accelerated Filer o | | Large Accelerated Filer o | Accelerated Filer o |
Non-accelerated Filer o | Smaller Reporting Company o | | Non-accelerated Filer x | Smaller Reporting Company o |
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 o No x Icahn Enterprises Holdings L.P. Yes o No x
As of August 4, 2014, there were 120,031,377 of Icahn Enterprises' depositary units outstanding.
ICAHN ENTERPRISES L.P.
ICAHN ENTERPRISES HOLDINGS L.P.
TABLE OF CONTENTS
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| | Page No. |
| PART I. FINANCIAL INFORMATION | |
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| PART II. OTHER INFORMATION | |
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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.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except unit amounts)
|
| | | | | | | |
| June 30, | | December 31, |
| 2014 | | 2013 |
ASSETS | (Unaudited) | | |
Cash and cash equivalents | $ | 3,333 |
| | $ | 3,262 |
|
Cash held at consolidated affiliated partnerships and restricted cash | 1,285 |
| | 396 |
|
Investments | 17,227 |
| | 12,261 |
|
Accounts receivable, net | 1,918 |
| | 1,750 |
|
Inventories, net | 1,998 |
| | 1,902 |
|
Property, plant and equipment, net | 8,535 |
| | 8,077 |
|
Goodwill | 2,109 |
| | 2,074 |
|
Intangible assets, net | 1,140 |
| | 1,113 |
|
Other assets | 1,014 |
| | 910 |
|
Total Assets | $ | 38,559 |
| | $ | 31,745 |
|
LIABILITIES AND EQUITY | | | |
Accounts payable | $ | 1,431 |
| | $ | 1,353 |
|
Accrued expenses and other liabilities | 3,218 |
| | 2,196 |
|
Deferred tax liability | 1,531 |
| | 1,394 |
|
Securities sold, not yet purchased, at fair value | 929 |
| | 884 |
|
Due to brokers | 4,318 |
| | 2,203 |
|
Post-employment benefit liability | 1,062 |
| | 1,111 |
|
Debt | 11,343 |
| | 9,295 |
|
Total liabilities | 23,832 |
| | 18,436 |
|
| | | |
Commitments and contingencies (Note 17) |
| |
|
| | | |
Equity: | | | |
Limited partners: Depositary units: 120,031,377 and 115,900,309 units issued and outstanding at June 30, 2014 and December 31, 2013, respectively | 6,836 |
| | 6,308 |
|
General partner | (205 | ) | | (216 | ) |
Equity attributable to Icahn Enterprises | 6,631 |
| | 6,092 |
|
Equity attributable to non-controlling interests | 8,096 |
| | 7,217 |
|
Total equity | 14,727 |
| | 13,309 |
|
Total Liabilities and Equity | $ | 38,559 |
| | $ | 31,745 |
|
See notes to consolidated financial statements.
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per unit amounts)
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
Revenues: | (Unaudited) |
Net sales | $ | 4,867 |
| | $ | 4,497 |
| | $ | 9,533 |
| | $ | 9,071 |
|
Other revenues from operations | 323 |
| | 251 |
| | 584 |
| | 487 |
|
Net gain (loss) from investment activities | 1,132 |
| | (228 | ) | | 1,101 |
| | 350 |
|
Interest and dividend income | 44 |
| | 54 |
| | 103 |
| | 80 |
|
Other income, net | 13 |
| | 96 |
| | 48 |
| | 51 |
|
| 6,379 |
| | 4,670 |
| | 11,369 |
| | 10,039 |
|
Expenses: | | | | | | | |
Cost of goods sold | 4,327 |
| | 3,887 |
| | 8,469 |
| | 7,780 |
|
Other expenses from operations | 163 |
| | 126 |
| | 292 |
| | 248 |
|
Selling, general and administrative | 456 |
| | 317 |
| | 816 |
| | 688 |
|
Restructuring | 30 |
| | 9 |
| | 38 |
| | 17 |
|
Impairment | 1 |
| | 5 |
| | 2 |
| | 5 |
|
Interest expense | 197 |
| | 136 |
| | 367 |
| | 281 |
|
| 5,174 |
| | 4,480 |
| | 9,984 |
| | 9,019 |
|
Income before income tax expense | 1,205 |
| | 190 |
| | 1,385 |
| | 1,020 |
|
Income tax expense | (82 | ) | | (97 | ) | | (185 | ) | | (217 | ) |
Net income | 1,123 |
| | 93 |
| | 1,200 |
| | 803 |
|
Less: net income attributable to non-controlling interests | (634 | ) | | (39 | ) | | (740 | ) | | (472 | ) |
Net income attributable to Icahn Enterprises | $ | 489 |
| | $ | 54 |
| | $ | 460 |
| | $ | 331 |
|
| | | | | | | |
Net income attributable to Icahn Enterprises allocable to: | | | | | | | |
Limited partners | $ | 479 |
| | $ | 53 |
| | $ | 451 |
| | $ | 324 |
|
General partner | 10 |
| | 1 |
| | 9 |
| | 7 |
|
| $ | 489 |
| | $ | 54 |
| | $ | 460 |
| | $ | 331 |
|
| | | | | | | |
Basic income per LP unit | $ | 4.06 |
| | $ | 0.48 |
| | $ | 3.85 |
| | $ | 3.00 |
|
Basic weighted average LP units outstanding | 118 |
| | 110 |
| | 117 |
| | 108 |
|
| | | | | | | |
Diluted income per LP unit | $ | 4.06 |
| | $ | 0.48 |
| | $ | 3.85 |
| | $ | 2.99 |
|
Diluted weighted average LP units outstanding | 118 |
| | 111 |
| | 117 |
| | 109 |
|
Cash distributions declared per LP unit | $ | 1.50 |
| | $ | 1.00 |
| | $ | 3.00 |
| | $ | 2.00 |
|
See notes to consolidated financial statements.
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
| (Unaudited) |
Net income | $ | 1,123 |
| | $ | 93 |
| | $ | 1,200 |
| | $ | 803 |
|
Other comprehensive income (loss), net of tax: | | | | | | | |
Post-employment benefits | 3 |
| | (7 | ) | | 5 |
| | 6 |
|
Hedge instruments | 2 |
| | (3 | ) | | 2 |
| | 3 |
|
Translation adjustments and other | 3 |
| | (40 | ) | | (2 | ) | | (81 | ) |
Other comprehensive income (loss), net of tax | 8 |
| | (50 | ) | | 5 |
| | (72 | ) |
Comprehensive income | 1,131 |
| | 43 |
| | 1,205 |
| | 731 |
|
Less: Comprehensive income attributable to non-controlling interests | (635 | ) | | (27 | ) | | (740 | ) | | (454 | ) |
Comprehensive income attributable to Icahn Enterprises | $ | 496 |
| | $ | 16 |
| | $ | 465 |
| | $ | 277 |
|
| | | | | | | |
Comprehensive income attributable to Icahn Enterprises allocable to: | | | | | | | |
Limited partners | $ | 486 |
| | $ | 15 |
| | $ | 456 |
| | $ | 271 |
|
General partner | 10 |
| | 1 |
| | 9 |
| | 6 |
|
| $ | 496 |
| | $ | 16 |
| | $ | 465 |
| | $ | 277 |
|
Accumulated other comprehensive loss was $800 million and $805 million at June 30, 2014 and December 31, 2013, respectively.
See notes to consolidated financial statements.
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(In millions, Unaudited)
|
| | | | | | | | | | | | | | | | | | | |
| Equity Attributable to Icahn Enterprises | | | | |
| General Partner's (Deficit) Equity | | Limited Partners' Equity | | Total Partners' Equity | | Non-controlling Interests | | Total Equity |
Balance, December 31, 2013 | $ | (216 | ) | | $ | 6,308 |
| | $ | 6,092 |
| | $ | 7,217 |
| | $ | 13,309 |
|
Net income | 9 |
| | 451 |
| | 460 |
| | 740 |
| | 1,200 |
|
Other comprehensive income | — |
| | 5 |
| | 5 |
| | — |
| | 5 |
|
Partnership distributions | (1 | ) | | (71 | ) | | (72 | ) | | — |
| | (72 | ) |
Investment segment contributions | — |
| | — |
| | — |
| | 500 |
| | 500 |
|
Distributions to non-controlling interests in subsidiaries | — |
| | — |
| | — |
| | (493 | ) | | (493 | ) |
Subsidiary equity offering | — |
| | 9 |
| | 9 |
| | 131 |
| | 140 |
|
Changes in subsidiary equity and other | 3 |
| | 134 |
| | 137 |
| | 1 |
| | 138 |
|
Balance, June 30, 2014 | $ | (205 | ) | | $ | 6,836 |
| | $ | 6,631 |
| | $ | 8,096 |
| | $ | 14,727 |
|
|
| | | | | | | | | | | | | | | | | | | |
| Equity Attributable to Icahn Enterprises | | | | |
| General Partner's (Deficit) Equity | | Limited Partners' Equity | | Total Partners' Equity | | Non-controlling Interests | | Total Equity |
Balance, December 31, 2012 | $ | (244 | ) | | $ | 4,913 |
| | $ | 4,669 |
| | $ | 5,147 |
| | $ | 9,816 |
|
Net income | 7 |
| | 324 |
| | 331 |
| | 472 |
| | 803 |
|
Other comprehensive loss | (1 | ) | | (53 | ) | | (54 | ) | | (18 | ) | | (72 | ) |
Partnership distributions | (2 | ) | | (121 | ) | | (123 | ) | | — |
| | (123 | ) |
Proceeds from equity offerings | 6 |
| | 311 |
| | 317 |
| | — |
| | 317 |
|
Distributions to non-controlling interests in subsidiaries | — |
| | — |
| | — |
| | (214 | ) | | (214 | ) |
Subsidiary equity offerings | 2 |
| | 87 |
| | 89 |
| | 902 |
| | 991 |
|
Changes in subsidiary equity and other | — |
| | 27 |
| | 27 |
| | (25 | ) | | 2 |
|
Balance, June 30, 2013 | $ | (232 | ) | | $ | 5,488 |
| | $ | 5,256 |
| | $ | 6,264 |
| | $ | 11,520 |
|
See notes to consolidated financial statements.
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
|
| | | | | | | |
| Six Months Ended June 30, |
| 2014 | | 2013 |
| (Unaudited) |
Cash flows from operating activities: | | | |
Net income | $ | 1,200 |
| | $ | 803 |
|
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | | | |
Net gain from securities transactions | (1,849 | ) | | (1,141 | ) |
Purchases of securities | (4,005 | ) | | (3,625 | ) |
Proceeds from sales of securities | 1,074 |
| | 794 |
|
Purchases to cover securities sold, not yet purchased | (83 | ) | | (1 | ) |
Proceeds from securities sold, not yet purchased | 54 |
| | 79 |
|
Changes in receivables and payables relating to securities transactions | 2,299 |
| | 2,495 |
|
Loss (gain) on extinguishment of debt | 162 |
| | (5 | ) |
(Gain) loss on disposal of assets | (8 | ) | | 50 |
|
Depreciation and amortization | 395 |
| | 360 |
|
Deferred taxes | 90 |
| | 64 |
|
Other, net | 11 |
| | (11 | ) |
Changes in cash held at consolidated affiliated partnerships and restricted cash | (898 | ) | | 384 |
|
Changes in other operating assets and liabilities | 720 |
| | 251 |
|
Net cash (used in) provided by operating activities | (838 | ) | | 497 |
|
Cash flows from investing activities: | | | |
Capital expenditures | (587 | ) | | (512 | ) |
Acquisitions of business, net of cash acquired | (402 | ) | | — |
|
Net payments associated with business dispositions | — |
| | (25 | ) |
Proceeds from sale of investments | — |
| | 13 |
|
Purchases of investments | (78 | ) | | (46 | ) |
Other, net | 19 |
| | 10 |
|
Net cash used in investing activities | (1,048 | ) | | (560 | ) |
Cash flows from financing activities: | | | |
Investment segment contributions | 500 |
| | 45 |
|
Proceeds from equity offerings | — |
| | 317 |
|
Partnership distributions | (72 | ) | | (13 | ) |
Proceeds from offering of subsidiary equity | 164 |
| | 1,242 |
|
Distributions to non-controlling interests in subsidiaries | (493 | ) | | (259 | ) |
Proceeds from issuance of senior unsecured notes | 4,991 |
| | — |
|
Proceeds from other borrowings | 4,242 |
| | 146 |
|
Repayment of senior unsecured notes | (3,625 | ) | | — |
|
Repayments of other borrowings | (3,730 | ) | | (493 | ) |
Change in restricted cash relating to variable rate note discharge | — |
| | (600 | ) |
Other, net | (24 | ) | | (8 | ) |
Net cash provided by financing activities | 1,953 |
| | 377 |
|
Effect of exchange rate changes on cash and cash equivalents | 4 |
| | (19 | ) |
Net increase in cash and cash equivalents | 71 |
| | 295 |
|
Cash and cash equivalents, beginning of period | 3,262 |
| | 3,108 |
|
Cash and cash equivalents, end of period | $ | 3,333 |
| | $ | 3,403 |
|
| | | |
|
| | | | | | | |
Supplemental information: | | | |
Cash payments for interest, net of amounts capitalized | $ | 300 |
| | $ | 270 |
|
Net cash payments for income taxes | $ | 57 |
| | $ | 86 |
|
Distribution payable to Icahn Enterprises unitholders | $ | — |
| | $ | 110 |
|
Construction in progress additions included in accounts payable | $ | 24 |
| | $ | 38 |
|
Changes in accounts payable related to construction in progress additions | $ | (9 | ) | | $ | (18 | ) |
See notes to consolidated financial statements.
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions)
|
| | | | | | | |
| June 30, | | December 31, |
| 2014 | | 2013 |
ASSETS | (Unaudited) | | |
Cash and cash equivalents | $ | 3,333 |
| | $ | 3,262 |
|
Cash held at consolidated affiliated partnerships and restricted cash | 1,285 |
| | 396 |
|
Investments | 17,227 |
| | 12,261 |
|
Accounts receivable, net | 1,918 |
| | 1,750 |
|
Inventories, net | 1,998 |
| | 1,902 |
|
Property, plant and equipment, net | 8,535 |
| | 8,077 |
|
Goodwill | 2,109 |
| | 2,074 |
|
Intangible assets, net | 1,140 |
| | 1,113 |
|
Other assets | 1,037 |
| | 926 |
|
Total Assets | $ | 38,582 |
| | $ | 31,761 |
|
LIABILITIES AND EQUITY | | | |
Accounts payable | $ | 1,431 |
| | $ | 1,353 |
|
Accrued expenses and other liabilities | 3,218 |
| | 2,196 |
|
Deferred tax liability | 1,531 |
| | 1,394 |
|
Securities sold, not yet purchased, at fair value | 929 |
| | 884 |
|
Due to brokers | 4,318 |
| | 2,203 |
|
Post-employment benefit liability | 1,062 |
| | 1,111 |
|
Debt | 11,343 |
| | 9,289 |
|
Total liabilities | 23,832 |
| | 18,430 |
|
| | | |
Commitments and contingencies (Note 17) |
| |
|
| | | |
Equity: | | | |
Limited partner | 6,928 |
| | 6,393 |
|
General partner | (274 | ) | | (279 | ) |
Equity attributable to Icahn Enterprises Holdings | 6,654 |
| | 6,114 |
|
Equity attributable to non-controlling interests | 8,096 |
| | 7,217 |
|
Total equity | 14,750 |
| | 13,331 |
|
Total Liabilities and Equity | $ | 38,582 |
| | $ | 31,761 |
|
See notes to consolidated financial statements.
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions)
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
Revenues: | (Unaudited) |
Net sales | $ | 4,867 |
| | $ | 4,497 |
| | $ | 9,533 |
| | $ | 9,071 |
|
Other revenues from operations | 323 |
| | 251 |
| | 584 |
| | 487 |
|
Net gain (loss) from investment activities | 1,132 |
| | (228 | ) | | 1,101 |
| | 350 |
|
Interest and dividend income | 44 |
| | 54 |
| | 103 |
| | 80 |
|
Other income, net | 13 |
| | 96 |
| | 48 |
| | 51 |
|
| 6,379 |
| | 4,670 |
| | 11,369 |
| | 10,039 |
|
Expenses: | | | | | | | |
Cost of goods sold | 4,327 |
| | 3,887 |
| | 8,469 |
| | 7,780 |
|
Other expenses from operations | 163 |
| | 126 |
| | 292 |
| | 248 |
|
Selling, general and administrative | 456 |
| | 317 |
| | 816 |
| | 688 |
|
Restructuring | 30 |
| | 9 |
| | 38 |
| | 17 |
|
Impairment | 1 |
| | 5 |
| | 2 |
| | 5 |
|
Interest expense | 196 |
| | 136 |
| | 366 |
| | 281 |
|
| 5,173 |
| | 4,480 |
| | 9,983 |
| | 9,019 |
|
Income before income tax expense | 1,206 |
| | 190 |
| | 1,386 |
| | 1,020 |
|
Income tax expense | (82 | ) | | (97 | ) | | (185 | ) | | (217 | ) |
Net income | 1,124 |
| | 93 |
| | 1,201 |
| | 803 |
|
Less: net income attributable to non-controlling interests | (634 | ) | | (39 | ) | | (740 | ) | | (472 | ) |
Net income attributable to Icahn Enterprises Holdings | $ | 490 |
| | $ | 54 |
| | $ | 461 |
| | $ | 331 |
|
| | | | | | | |
Net income attributable to Icahn Enterprises Holdings allocable to: | | | | | | | |
Limited partner | $ | 485 |
| | $ | 54 |
| | $ | 456 |
| | $ | 328 |
|
General partner | 5 |
| | — |
| | 5 |
| | 3 |
|
| $ | 490 |
| | $ | 54 |
| | $ | 461 |
| | $ | 331 |
|
See notes to consolidated financial statements.
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
| (Unaudited) |
Net income | $ | 1,124 |
| | $ | 93 |
| | $ | 1,201 |
| | $ | 803 |
|
Other comprehensive income (loss), net of tax: | | | | | | | |
Post-employment benefits | 3 |
| | (7 | ) | | 5 |
| | 6 |
|
Hedge instruments | 2 |
| | (3 | ) | | 2 |
| | 3 |
|
Translation adjustments and other | 3 |
| | (40 | ) | | (2 | ) | | (81 | ) |
Other comprehensive income (loss), net of tax | 8 |
| | (50 | ) | | 5 |
| | (72 | ) |
Comprehensive income | 1,132 |
| | 43 |
| | 1,206 |
| | 731 |
|
Less: Comprehensive income attributable to non-controlling interests | (635 | ) | | (27 | ) | | (740 | ) | | (454 | ) |
Comprehensive income attributable to Icahn Enterprises Holdings | $ | 497 |
| | $ | 16 |
| | $ | 466 |
| | $ | 277 |
|
| | | | | | | |
Comprehensive income attributable to Icahn Enterprises Holdings allocable to: | | | | | | | |
Limited partner | $ | 492 |
| | $ | 17 |
| | $ | 461 |
| | $ | 275 |
|
General partner | 5 |
| | (1 | ) | | 5 |
| | 2 |
|
| $ | 497 |
| | $ | 16 |
| | $ | 466 |
| | $ | 277 |
|
Accumulated other comprehensive loss was $800 million and $805 million at June 30, 2014 and December 31, 2013, respectively.
See notes to consolidated financial statements.
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(In millions, Unaudited)
|
| | | | | | | | | | | | | | | | | | | |
| Equity Attributable to Icahn Enterprises Holdings | | | | |
| General Partner's Equity (Deficit) | | Limited Partner's Equity | | Total Partners' Equity | | Non-controlling Interests | | Total Equity |
Balance, December 31, 2013 | $ | (279 | ) | | $ | 6,393 |
| | $ | 6,114 |
| | $ | 7,217 |
| | $ | 13,331 |
|
Net income | 5 |
| | 456 |
| | 461 |
| | 740 |
| | 1,201 |
|
Other comprehensive income | — |
| | 5 |
| | 5 |
| | — |
| | 5 |
|
Partnership distributions | (1 | ) | | (71 | ) | | (72 | ) | | — |
| | (72 | ) |
Investment segment contributions | — |
| | — |
| | — |
| | 500 |
| | 500 |
|
Distributions to non-controlling interests in subsidiaries | — |
| | — |
| | — |
| | (493 | ) | | (493 | ) |
Subsidiary equity offering | — |
| | 9 |
| | 9 |
| | 131 |
| | 140 |
|
Changes in subsidiary equity and other | 1 |
| | 136 |
| | 137 |
| | 1 |
| | 138 |
|
Balance, June 30, 2014 | $ | (274 | ) | | $ | 6,928 |
| | $ | 6,654 |
| | $ | 8,096 |
| | $ | 14,750 |
|
|
| | | | | | | | | | | | | | | | | | | |
| Equity Attributable to Icahn Enterprises Holdings | | | | |
| General Partner's Equity (Deficit) | | Limited Partner's Equity | | Total Partners' Equity | | Non-controlling Interests | | Total Equity |
Balance, December 31, 2012 | $ | (293 | ) | | $ | 4,984 |
| | $ | 4,691 |
| | $ | 5,147 |
| | $ | 9,838 |
|
Net income | 3 |
| | 328 |
| | 331 |
| | 472 |
| | 803 |
|
Other comprehensive loss | (1 | ) | | (53 | ) | | (54 | ) | | (18 | ) | | (72 | ) |
Partnership distributions | (1 | ) | | (122 | ) | | (123 | ) | | — |
| | (123 | ) |
Proceeds from equity offerings | 6 |
| | 311 |
| | 317 |
| | — |
| | 317 |
|
Distributions to non-controlling interests in subsidiaries | — |
| | — |
| | — |
| | (214 | ) | | (214 | ) |
Subsidiary equity offerings | 1 |
| | 88 |
| | 89 |
| | 902 |
| | 991 |
|
Changes in subsidiary equity and other | — |
| | 27 |
| | 27 |
| | (25 | ) | | 2 |
|
Balance, June 30, 2013 | $ | (285 | ) | | $ | 5,563 |
| | $ | 5,278 |
| | $ | 6,264 |
| | $ | 11,542 |
|
See notes to consolidated financial statements.
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
|
| | | | | | | |
| Six Months Ended June 30, |
| 2014 | | 2013 |
| (Unaudited) |
Cash flows from operating activities: | | | |
Net income | $ | 1,201 |
| | $ | 803 |
|
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | | | |
Net gain from securities transactions | (1,849 | ) | | (1,141 | ) |
Purchases of securities | (4,005 | ) | | (3,625 | ) |
Proceeds from sales of securities | 1,074 |
| | 794 |
|
Purchases to cover securities sold, not yet purchased | (83 | ) | | (1 | ) |
Proceeds from securities sold, not yet purchased | 54 |
| | 79 |
|
Changes in receivables and payables relating to securities transactions | 2,299 |
| | 2,495 |
|
Loss (gain) on extinguishment of debt | 162 |
| | (5 | ) |
Loss on disposal of assets | (8 | ) | | 50 |
|
Depreciation and amortization | 394 |
| | 360 |
|
Deferred taxes | 90 |
| | 64 |
|
Other, net | 11 |
| | (11 | ) |
Changes in cash held at consolidated affiliated partnerships and restricted cash | (898 | ) | | 384 |
|
Changes in other operating assets and liabilities | 720 |
| | 251 |
|
Net cash (used in) provided by operating activities | (838 | ) | | 497 |
|
Cash flows from investing activities: | | | |
Capital expenditures | (587 | ) | | (512 | ) |
Acquisitions of business, net of cash acquired | (402 | ) | | — |
|
Net payments associated with business dispositions | — |
| | (25 | ) |
Proceeds from sale of investments | — |
| | 13 |
|
Purchases of investments | (78 | ) | | (46 | ) |
Other, net | 19 |
| | 10 |
|
Net cash used in investing activities | (1,048 | ) | | (560 | ) |
Cash flows from financing activities: | | | |
Investment segment contributions | 500 |
| | 45 |
|
Proceeds from equity offerings | — |
| | 317 |
|
Partnership distributions | (72 | ) | | (13 | ) |
Proceeds from offering of subsidiary equity | 164 |
| | 1,242 |
|
Distributions to non-controlling interests in subsidiaries | (493 | ) | | (259 | ) |
Proceeds from issuance of senior unsecured notes | 4,991 |
| | — |
|
Proceeds from other borrowings | 4,242 |
| | 146 |
|
Repayment of senior unsecured notes | (3,625 | ) | | — |
|
Repayments of other borrowings | (3,730 | ) | | (493 | ) |
Change in restricted cash relating to variable rate note discharge | — |
| | (600 | ) |
Other, net | (24 | ) | | (8 | ) |
Net cash provided by financing activities | 1,953 |
| | 377 |
|
Effect of exchange rate changes on cash and cash equivalents | 4 |
| | (19 | ) |
Net increase in cash and cash equivalents | 71 |
| | 295 |
|
Cash and cash equivalents, beginning of period | 3,262 |
| | 3,108 |
|
Cash and cash equivalents, end of period | $ | 3,333 |
| | $ | 3,403 |
|
| | | |
|
| | | | | | | |
Supplemental information: | | | |
Cash payments for interest, net of amounts capitalized | $ | 300 |
| | $ | 270 |
|
Net cash payments for income taxes | $ | 57 |
| | $ | 86 |
|
Distribution payable to Icahn Enterprises unitholders | $ | — |
| | $ | 110 |
|
Construction in progress additions included in accounts payable | $ | 24 |
| | $ | 38 |
|
Changes in accounts payable related to construction in progress additions | $ | (9 | ) | | $ | (18 | ) |
See notes to consolidated financial statements.
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2014 (Unaudited)
1. Description of Business and Basis of Presentation.
General
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 G.P. Inc. (“Icahn Enterprises GP”), which is owned and controlled by Mr. Carl C. Icahn, owns a 1% general partner interest in each of Icahn Enterprises and Icahn Enterprises Holdings as of June 30, 2014. Icahn Enterprises Holdings and its subsidiaries own substantially all of our assets and liabilities and conduct substantially all of our operations. Therefore, the financial results of Icahn Enterprises and Icahn Enterprises Holdings are substantially the same, with differences relating primarily to debt, as discussed further in Note 10, "Debt," and to the allocation of the general partner interest, which is reflected as an aggregate 1.99% general partner interest in the financial statements of Icahn Enterprises. In addition to the above, Mr. Icahn and his affiliates owned 105,842,441, or approximately 88.2%, of Icahn Enterprises' outstanding depositary units as of June 30, 2014.
We are a diversified holding company owning subsidiaries currently engaged in the following continuing operating businesses: Investment, Automotive, Energy, Metals, Railcar, Gaming, Food Packaging, Real Estate and Home Fashion. 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 the Holding Company. Further information regarding our continuing reportable segments is contained in Note 2, “Operating Units,” and Note 13, “Segment Reporting.”
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 “'40 Act”). Therefore, no more than 40% of our total assets can be invested in investment securities, as such term is defined in the '40 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 (the “Code”).
The accompanying 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, 2013. The 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.
Reclassifications
Certain reclassifications from the prior year presentation have been made to conform to the current year presentation.
Principles of Consolidation
Our 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 those entities in which we have a controlling interest as a general partner interest. In evaluating whether we have a controlling financial interest in entities that we consolidate, we consider the following: (1) for voting interest entities, we consolidate these entities in which we own a majority of the voting interests; and (2) for limited partnership entities, we consolidate these entities if we are the general partner of such entities and for which no substantive kick-out rights (the rights underlying the limited partners' ability to dissolve the limited partnership or otherwise remove the general partners are collectively referred to as “kick-out” rights) or participating rights exist. All material intercompany accounts and transactions have been eliminated in consolidation.
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2014 (Unaudited)
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 to/from brokers, accounts payable, accrued expenses and other liabilities are deemed to be reasonable estimates of their fair values because of their short-term nature. See Note 4, “Investments and Related Matters,” and Note 5, “Fair Value Measurements,” for a detailed discussion of our investments.
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, 2014 was approximately $11.3 billion and $11.6 billion, respectively. The carrying value and estimated fair value of our long-term debt as of December 31, 2013 was approximately $9.3 billion and $9.4 billion, respectively.
Restricted Cash
Our restricted cash balance was $1,250 million and $330 million as of June 30, 2014 and December 31, 2013, respectively.
Adoption of New Accounting Standards
In February 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2013-04, which amends FASB ASC Topic 405, Liabilities. This ASU requires the measurement of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date as the sum of (1) the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and (2) any additional amount the reporting entity expects to pay on behalf of its co-obligors. This guidance also requires the disclosure of the nature and amount of the obligation as well as other information about those obligations. The guidance is effective for interim and annual periods beginning after December 15, 2013. The adoption of this guidance during the first quarter of 2014 did not have a material impact on our consolidated financial position, results of operations or cash flows.
In March 2013, the FASB issued ASU No. 2013-05, which amends FASB ASC Topic 830, Foreign Currency Matters. This ASU resolves the accounting for certain foreign currency matters with respect to the release of cumulative translation adjustment into net income within a foreign entity under certain circumstances. This ASU is effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. This ASU should be applied prospectively to derecognition events occurring after the effective date. The adoption of this guidance during the first quarter of 2014 did not have a material impact on our consolidated financial position, results of operations or cash flows.
In July 2013, the FASB issued ASU No. 2013-11, which amends FASB ASC Topic 740, Income Taxes. This ASU requires that unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operation loss carryforward, a similar tax loss, or a tax credit carryforward, except in certain cases. This ASU is effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. The adoption of this guidance during the first quarter of 2014 did not have a material impact on our consolidated financial position, results of operations or cash flows.
Recently Issued Accounting Standards
In April 2014, the FASB issued ASU No. 2014-08, which amends FASB ASC Topic 205, Presentation of Financial Statements and FASB ASC Topic 360, Property, Plant, and Equipment. This ASU is effective on a prospective basis applicable to activities that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years, and changes the requirements for reporting discontinued operations. Early adoption is permitted, but only for disposals that have not been reported in financial statements previously issued or available for issuance. We believe that ASU No. 2014-08 will reduce the number of dispositions that would qualify for discontinued operations at our parent company level, thereby reducing the complexity associated with the reporting and disclosure requirements of discontinued operations that would have been otherwise required previously.
In May 2014, the FASB issued ASU No. 2014-09, creating a new topic, FASB ASC Topic, 606, Revenue from Contracts with Customers, superseding revenue recognition requirements in FASB ASC Topic 605, Revenue Recognition. This ASU requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In addition, an entity is required to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. This ASU is effective for fiscal years,
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2014 (Unaudited)
and interim reporting periods within those years, beginning after December 15, 2016, using one of two retrospective application methods. We are currently evaluating the impact that the adoption of this guidance will have on our consolidated financial position, results of operations, cash flows and disclosures.
Filing Status of Subsidiaries
Federal-Mogul Holdings Corporation (“Federal-Mogul”), CVR Energy, Inc. ("CVR"), American Railcar Industries, Inc. (“ARI”) and Tropicana Entertainment Inc. (“Tropicana”) are each a public reporting entity under the Securities Exchange Act of 1934, as amended, and file annual, quarterly and current reports and proxy and information statements with the SEC. Each of these reports is publicly available at www.sec.gov.
Investment
Our Investment segment is comprised of various private investment funds, including Icahn Partners L.P. ("Icahn Partners"), Icahn Partners Master Fund LP, Icahn Partners Master Fund II LP and Icahn Partners Master Fund III LP (collectively, the "Master Funds," and together with Icahn Partners, the "Investment Funds"), through which we invest our proprietary capital. We and certain of Mr. Icahn's wholly owned affiliates are the sole investors in the Investment Funds. Icahn Onshore LP and Icahn Offshore LP (together, the "General Partners") act as the general partner of Icahn Partners and the Master Funds, respectively. The General Partners 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. Interests in the Investment Funds are not offered to outside investors.
Effective January 1, 2014, Icahn Partners Master Fund II LP and Icahn Partners Master Fund III LP were merged with and into Icahn Partners. As a result, the Investment Funds now consist solely of Icahn Partners and Icahn Partners Master Fund LP. Other than this merger, no other organizational or policy changes were made within our Investment segment.
We had interests in the Investment Funds with a fair value of approximately $5.1 billion and $3.7 billion as of June 30, 2014 and December 31, 2013, respectively. Mr. Icahn and his affiliates (excluding Icahn Enterprises and Icahn Enterprises Holdings) had direct investments in the Investment Funds of approximately $5.7 billion and $4.7 billion as of June 30, 2014 and December 31, 2013, respectively.
Automotive
We conduct our Automotive segment through our majority ownership in Federal-Mogul. Federal-Mogul is a leading global supplier of a broad range of components, accessories and systems to the automotive, small engine, heavy-duty, marine, railroad, agricultural, off-road, aerospace and energy, industrial and transport markets, including customers in both the original equipment manufacturers and servicers (“OE”) market and the replacement market (“aftermarket”). Federal-Mogul’s customers include the world’s largest automotive OEs and major distributors and retailers in the independent aftermarket.
Federal-Mogul operates with two end-customer focused business segments. The Powertrain business unit focuses on original equipment products for automotive, heavy duty and industrial applications. The Motorparts business unit sells and distributes a broad portfolio of products in the global aftermarket, while also serving original equipment manufacturers with products including braking, chassis, wipers and other vehicle components. This dual organizational model allows for a strong product line focus benefitting both original equipment and aftermarket customers and enables the global Federal-Mogul teams to be responsive to customers’ needs for superior products and to promote greater identification with Federal-Mogul premium brands. Additionally, this organizational model enhances management's focus to capitalize on opportunities for organic or acquisition growth, profit improvement, resource utilization and business model optimization in line with the unique requirements of the two different customer bases.
As of June 30, 2014, we owned approximately 80.7% of the total outstanding common stock of Federal-Mogul.
Reorganization
On April 15, 2014, Federal-Mogul Corporation completed a holding company reorganization (the “Federal-Mogul Reorganization”). As a result of the Federal-Mogul Reorganization, the outstanding shares of Federal-Mogul Corporation common stock were automatically converted on a one-for-one basis into shares of Federal-Mogul Holdings Corporation common stock, and all of the stockholders of Federal-Mogul Corporation immediately prior to the Federal-Mogul
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2014 (Unaudited)
Reorganization automatically became stockholders of Federal-Mogul Holdings Corporation. The rights of stockholders of Federal-Mogul Holdings Corporation are generally governed by Delaware law and Federal-Mogul Holdings Corporation’s certificate of incorporation and bylaws, which are the same in all material respects as those of Federal-Mogul Corporation immediately prior to the Federal-Mogul Reorganization. References herein to Federal-Mogul refer to Federal-Mogul Corporation for the period prior to the effective time of the Federal-Mogul Reorganization on April 15, 2014 and to Federal-Mogul Holdings Corporation for the period after the effective time of the Federal-Mogul Reorganization.
Acquisitions
On May 1, 2014, Federal-Mogul completed the Affinia Group Inc. ("Affinia") chassis business acquisition (the "Affinia Acquisition"). The acquisition of this business, which serves leading U.S. aftermarket customers with private label chassis product lines allows Federal-Mogul to broaden its product offering, provide operational synergies and better service customers globally. The purchase price was $150 million, subject to certain customary post-closing adjustments, net of acquired cash. Federal-Mogul paid $140 million of the purchase price in the second quarter of 2014 with the remaining balance of $10 million recorded as a contingent consideration and is expected to be paid in the third quarter of 2014.
With respect to the Affinia Acquisition, in accordance with FASB ASC Topic 805, Business Combinations, Federal-Mogul allocated $70 million to tangible net assets, $27 million to goodwill and $53 million to other intangible assets based on the fair values of the net assets acquired as of the acquisition date with the assistance of third-party valuation specialists. The preliminary allocation of the fair value of the net assets acquired is subject to additional adjustment to provide Federal-Mogul with adequate time to complete the valuation of its Affinia Acquisition.
On July 11, 2014, Federal-Mogul completed the purchase of certain business assets of Honeywell International Inc.'s ("Honeywell") automotive and industrial brake friction business, including two recently established manufacturing facilities in China and Romania. The business was acquired through a combination of asset and stock purchases for a base purchase price of $169 million, subject to certain customary closing and post-closing adjustments. The assets acquired and liabilities assumed will be recorded at fair value as of the acquisition date in accordance with FASB ASC Topic 805. The preliminary purchase price allocation will be made in the third quarter of 2014. The purchase of Honeywell's friction business substantially strengthens the manufacturing and engineering component of Federal-Mogul's current global braking portfolio.
Accounts Receivable, net
Federal-Mogul's subsidiaries in Brazil, France, Germany, Italy and the United States are party to accounts receivable factoring and securitization facilities. Gross accounts receivable transferred under these facilities were $336 million and $271 million as of June 30, 2014 and December 31, 2013, respectively. Of those gross amounts, $318 million and $258 million, respectively, qualify as sales as defined in FASB ASC Topic 860, Transfers and Servicing. The remaining transferred receivables were pledged as collateral and accounted for as secured borrowings and recorded in the consolidated balance sheets within accounts receivable, net and debt. Under the terms of these facilities, Federal-Mogul is not obligated to draw cash immediately upon the transfer of accounts receivable. As of June 30, 2014, Federal-Mogul had $1 million of undrawn cash related to such transferred receivables. As of December 31, 2013, Federal-Mogul had withdrawn all cash related to such transferred receivables. Proceeds from the transfers of accounts receivable qualifying as sales were $445 million and $364 million for the three months ended June 30, 2014 and 2013, respectively, and $855 million and $697 million for the six months ended June 30, 2014 and 2013, respectively.
For each of three months ended June 30, 2014 and 2013, expenses associated with transfers of receivables were $2 million, and $3 million for each of the six months ended June 30, 2014 and 2013. Such expenses were recorded in the consolidated statements of operations within other income, net. Where Federal-Mogul receives a fee to service and monitor these transferred receivables, such fees are sufficient to offset the costs and as such, a servicing asset or liability is not incurred as a result of such activities.
Certain of the facilities contain terms that require Federal-Mogul to share in the credit risk of the sold receivables. The maximum exposure to Federal-Mogul associated with certain of these facilities' terms was $26 million and $21 million as June 30, 2014 and December 31, 2013, respectively. Based on Federal-Mogul's analysis of the creditworthiness of its customers to whom such receivables were sold and outstanding as of both June 30, 2014 and December 31, 2013, Federal-Mogul estimated the loss to be immaterial.
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2014 (Unaudited)
Restructuring
In February 2013, Federal-Mogul's Board of Directors approved the evaluation of restructuring opportunities in order to improve operating performance. As such, Federal-Mogul has initiated several programs (collectively, the "Restructuring Programs") and will continue to evaluate alternatives to align its business with executive management's strategy. The Restructuring Programs are intended to take place between 2013 and 2015 with an expected total cost of $126 million, of which $121 million and $5 million pertains to employee costs and facility costs, respectively. Federal-Mogul expects to incur an additional $49 million with respect to the Restructuring Programs. In connection with the Restructuring Programs, Federal-Mogul recorded $30 million and $8 million in restructuring charges for the three months ended June 30, 2014 and 2013, respectively, and $38 million and $16 million for the six months ended June 30, 2014 and 2013, respectively, substantially all of which pertain to employee costs.
During the second quarter of 2014, Federal-Mogul continued consultation with works council for one of its French facilities to potentially cease operations and has recorded a restructuring charge in connection with this matter.
Federal-Mogul continues to evaluate restructuring opportunities throughout its operations and will continue to record restructuring charges based on information available at the time such charges are recorded pursuant to FASB ASC Topics 712 and 420.
Energy
We conduct our Energy segment through our majority ownership in CVR. CVR is a diversified holding company primarily engaged in the petroleum refining and nitrogen fertilizer manufacturing industries 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 nitrogen fertilizers in the form of urea ammonium nitrate ("UAN") and ammonia. As of June 30, 2014, CVR owned 100% of the general partners of CVR Refining and CVR Partners and approximately 67% of the common units of CVR Refining and approximately 53% of the common units of CVR Partners.
As of June 30, 2014, we owned approximately 82.0% of the total outstanding common stock of CVR. In addition, as of June 30, 2014, we owned approximately 4.0% of the total outstanding common units of CVR Refining directly.
Equity Offerings
On January 23, 2013, CVR Refining completed its initial public offering (the "CVR Refining IPO") of its common units representing limited partner interests, resulting in gross proceeds of $600 million, before giving effect to underwriting discounts and other offering expenses. Included in these proceeds is $100 million paid by Icahn Enterprises and Icahn Enterprises Holdings for the purchase of common units of CVR Refining in connection with the CVR Refining IPO. On January 30, 2013, additional common units of CVR Refining were issued pursuant to the underwriters' exercise of their overallotment option, resulting in gross proceeds of $90 million, before giving effect to underwriting discounts and other offering costs.
On May 20, 2013, CVR Refining completed an underwritten offering of its common units representing limited partner interests, and on June 10, 2013 issued additional common units pursuant to the underwriters' exercise of their overallotment option, resulting in gross proceeds of $406 million before giving effect to underwriting discounts and offering expenses. In addition, Icahn Enterprises and Icahn Enterprises Holdings purchased approximately $62 million of common units of CVR Refining in a privately negotiated transaction with CVR. CVR Refining did not receive any of the proceeds from the sale of common units of CVR Refining to us.
On May 28, 2013, Coffeyville Resources, LLC (“CRLLC”), a wholly owned subsidiary of CVR, completed a secondary offering of common units of CVR Partners. The underwriters were granted an option to purchase additional units at the public offering price, which expired unexercised at the end of the option period. The gross proceeds to CRLLC from this secondary offering were $302 million before giving effect to underwriting discounts and offering expenses. CVR Partners did not receive any of the proceeds from the sale of common units by CRLLC.
As a result of various equity offerings during the six months ended June 30, 2013, our consolidated equity increased by an aggregate of $990 million, of which $902 million was attributable to non-affiliated non-controlling interests and $88 million was attributable to both Icahn Enterprises and Icahn Enterprises Holdings. These offerings are reflected in the caption entitled "Subsidiary equity offerings," within the consolidated statement of equity changes.
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2014 (Unaudited)
On June 30, 2014, CVR Refining completed an underwritten offering (the “Follow-on Offering”), resulting in gross proceeds of $170 million before giving effect to underwriting discounts and other offering expenses. On July 24, 2014, the underwriters exercised their option to purchase additional common units of CVR Refining, resulting in gross proceeds of $15 million. CVR Refining used this $15 million in gross proceeds to redeem an equal amount of common units from CVR Refining Holdings. Additionally, on July 24, 2014, CVR Refining Holdings sold common units to the public in connection with the underwriters' exercise of their remaining option to purchase additional common units, resulting in net proceeds of $10 million. As of July 24, 2014, public security holders held approximately 34% of CVR Refining's common units (including units owned by Icahn Enterprises and Icahn Enterprises Holdings, which represents 4% of CVR Refining's common units), and CVR Refining Holdings held approximately 66% of CVR Refining common units.
As a result of the Follow-on Offering during the six months ended June 30, 2014, our consolidated equity increased by an aggregate of $140 million, of which $131 million was attributable to non-affiliated non-controlling interests and $9 million was attributable to both Icahn Enterprises and Icahn Enterprises Holdings. These offerings are reflected in the caption entitled "Subsidiary equity offering," within the consolidated statement of equity changes.
Petroleum Business
CVR Refining's petroleum business includes a 115,000 barrels per calendar day ("bpcd") rated capacity complex full coking medium-sour crude oil refinery in Coffeyville, Kansas and a 70,000 bpcd rated capacity medium complexity crude oil unit refinery in Wynnewood, Oklahoma. The combined production capacity of these refineries represents approximately 22% of the region's refining capacity. The Coffeyville refinery is situated on approximately 440 acres in southeast Kansas, approximately 100 miles from Cushing, Oklahoma, a major crude oil trading and storage hub. The Wynnewood refinery is situated on approximately 400 acres located approximately 65 miles south of Oklahoma City, Oklahoma and approximately 130 miles from Cushing, Oklahoma.
In addition to the refineries, CVR's petroleum business owns and operates the following: (1) a crude oil gathering system with a gathering capacity of approximately 55,000 bpd serving Kansas, Oklahoma, Missouri, Nebraska and Texas, (2) a rack marketing division supplying product through tanker trucks directly to customers located in close geographic proximity to Coffeyville, Kansas and Wynnewood, Oklahoma and at throughput terminals on Magellan and NuStar Energy, LP's ("NuStar") refined products distribution systems, (3) a 145,000 bpd pipeline system (supported by approximately 336 miles of CVR's owned and leased pipeline) that transports crude oil to its Coffeyville refinery from its Broome Station tank farm and associated crude oil storage tanks with a capacity of 1.2 million barrels, (4) crude oil storage tanks with a capacity of 0.5 million barrels in Wynnewood, Oklahoma, (5) an additional 3.3 million barrels of leased storage capacity located in Cushing, Oklahoma and other locations, (6) 1.0 million barrels of company owned crude oil storage in Cushing, Oklahoma and (7) approximately 4.5 million barrels of combined refinery related storage capacity.
Nitrogen Fertilizer Business
CVR Partners' nitrogen fertilizer business consists of a nitrogen fertilizer manufacturing facility that utilizes a petroleum coke, or pet coke, gasification process to produce nitrogen fertilizer. The facility includes a 1,225 ton-per-day ammonia unit, a 3,000 ton-per-day UAN unit and a gasifier complex having a capacity of 84 million standard cubic feet per day of hydrogen. The gasifier is a dual-train facility, with each gasifier able to function independently of the other, thereby providing redundancy and improving reliability.
Metals
We conduct our Metals segment through our indirect wholly owned subsidiary, PSC Metals, Inc. (“PSC Metals”). PSC Metals collects industrial and obsolete scrap metal, processes it into reusable forms and supplies the recycled metals to its customers, including electric-arc furnace mills, integrated steel mills, foundries, secondary smelters and metals brokers. PSC Metals' ferrous products include busheling, plate and structural, shredded, sheared and bundled scrap metal and other purchased scrap metal such as turnings (steel machining fragments), cast furnace iron and broken furnace iron. PSC Metals processes the scrap into a size, density and purity required by customers to meet their production needs. PSC Metals also processes non-ferrous metals, including aluminum, copper, brass, stainless steel and nickel-bearing metals. Non-ferrous products are a significant raw material in the production of aluminum and copper alloys used in manufacturing. PSC Metals also operates a steel products business that includes the supply of secondary plate and structural grade pipe that is sold into niche markets for counterweights, piling and foundations, construction materials and infrastructure end-markets.
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2014 (Unaudited)
Railcar
We conduct our Railcar segment through our majority ownership interests in ARI and American Railcar Leasing, LLC ("ARL"). Pursuant to a contribution agreement dated September 20, 2013 (the "ARL Contribution Agreement"), we acquired a 75% economic interest in ARL in October 2013. Pursuant to the ARL Contribution Agreement, on January 1, 2014, we contributed AEP Leasing, LLC, a wholly owned indirect subsidiary of ours, to ARL.
ARI manufactures railcars that are offered for sale or lease, custom designed railcar parts and other industrial products, primarily aluminum and special alloy steel castings. These products are sold to various types of companies including leasing companies, industrial companies, shippers and Class I railroads. ARI leases railcars that it manufactures to certain markets. ARI provides railcar repair services provided through its various repair facilities, including mini-shops and mobile units, offering a range of services from full to light repair.
ARL is engaged in the business of leasing railcars to customers with specific requirements whose products require specialized railcars dedicated to transporting, storing, and preserving the integrity of their products. These products are primarily in the energy, food and agriculture, chemical, minerals and petrochemical industries.
Transactions between ARI and ARL have been eliminated in consolidation.
As of June 30, 2014, we owned approximately 55.6% of the total outstanding common stock of ARI.
Gaming
We conduct our Gaming segment through our majority ownership in Tropicana. Tropicana currently owns and operates a diversified, multi-jurisdictional collection of casino gaming properties. The nine casino facilities it operates feature approximately 447,000 square feet of gaming space with 8,500 slot machines, 275 table games and 6,500 hotel rooms with three casino facilities located in Nevada and one in each of Missouri, Mississippi, Indiana, Louisiana, New Jersey and Aruba.
On July 1, 2014, Tropicana sold its River Palms Hotel and Casino ("River Palms") to Nevada Restaurant Services, Inc. and its affiliate, Laughlin Hotel, LLC. Pursuant to the terms of the asset purchase agreement, substantially all of the assets associated with the operation of River Palms were sold for $7 million in cash. Concurrently with the sale, Tropicana leased back River Palms for a period of up to 90 days, subject to an additional 30-day extension, and further subject to earlier termination rights. Tropicana intends to terminate the lease and discontinue its operation of River Palms in September 2014.
As of June 30, 2014, we owned approximately 67.9% of the total outstanding common stock of Tropicana.
Acquisition
On April 1, 2014, a wholly owned subsidiary of Tropicana acquired the Lumière Place Casino, HoteLumière, the Four Seasons Hotel St. Louis and related excess land parcels in St. Louis, Missouri (collectively, "Lumière") for a preliminary cash purchase price of $263 million, which is subject to change for the finalization of certain net working capital adjustments as of the acquisition date.
A preliminary valuation of the assets of Lumière resulted in $252 million allocated to tangible net assets and $11 million allocated to other intangible assets based on estimated fair values as of the acquisition date with the assistance of a third-party valuation specialist. The preliminary allocation of the fair value of the assets acquired is subject to additional adjustment to provide Tropicana with adequate time to complete the valuation of its Lumière acquisition.
Food Packaging
We conduct our Food Packaging segment through our majority ownership in Viskase Companies, Inc. ("Viskase"). Viskase is a worldwide leader in the production and sale of cellulosic, fibrous and plastic casings for the processed meat and poultry industry. Viskase currently operates nine manufacturing facilities and nine distribution and service centers throughout North America, Europe, South America and Asia and derives approximately 72% of its total net sales from customers located outside the United States.
As of June 30, 2014, we owned approximately 73.5% of the total outstanding common stock of Viskase.
Real Estate
Our Real Estate segment consists of rental real estate, property development and resort activities.
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2014 (Unaudited)
As of June 30, 2014, we owned 29 commercial rental real estate properties. Our property development operations are run primarily through Bayswater Development LLC, a real estate investment, management and development subsidiary that focuses primarily on the construction and sale of single-family and multi-family homes, lots in subdivisions and planned communities and raw land for residential development. Our New Seabury development property in Cape Cod, Massachusetts and our Grand Harbor and Oak Harbor development property in Vero Beach, Florida include land for future residential development of approximately 271 and 1,325 units of residential housing, respectively. Both developments include golf and resort operations in addition to residences. In addition, our Real Estate segment owns an unfinished development property which is located on approximately 23 acres in Las Vegas, Nevada.
As of June 30, 2014 and December 31, 2013, $55 million and $56 million, respectively, of the net investment in financing leases and net real estate leased to others which is included in property, plant and equipment, net, were pledged to collateralize the payment of nonrecourse mortgages payable.
Home Fashion
We conduct our Home Fashion segment through our indirect wholly owned subsidiary, WestPoint Home LLC (“WPH”), a manufacturer and distributor of home fashion consumer products. WPH is engaged in the business of designing, marketing, manufacturing, sourcing, distributing and selling home fashion consumer products. WPH markets a broad range of manufactured and sourced bed, bath, basic bedding, and other textile products, including sheets, pillowcases, bedspreads, quilts, comforters and duvet covers, bath and beach towels, bath accessories, bed skirts, bed pillows, flocked blankets, woven blankets, throws and mattress pads. WPH recognizes revenue primarily through the sale of home fashion products to a variety of retail and institutional customers. In addition, WPH receives a small portion of its revenues through the licensing of its trademarks.
| |
3. | Related Party Transactions. |
Our amended and restated agreement of limited partnership expressly permits us to enter into transactions with our general partner or any of its affiliates, including, without limitation, 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
Mr. Icahn, along with his affiliates (excluding Icahn Enterprises and Icahn Enterprises Holdings), makes investments in the Investment Funds. During the second quarter of 2014, an affiliate of Mr. Icahn invested $500 million in the Investment Funds. As of June 30, 2014 and December 31, 2013, the total fair market value of investments in the Investment Funds made by Mr. Icahn and his affiliates (excluding Icahn Enterprises and Icahn Enterprises Holdings) was approximately $5.7 billion and $4.7 billion, respectively, representing approximately 53% and 56%, respectively, of the Investment Funds' asset under management.
Icahn Capital LP ("Icahn Capital") is a wholly owned indirect subsidiary of ours that owns the general partners of the Investment Funds. Effective April 1, 2011, based on an expense-sharing arrangement, certain expenses borne by Icahn Capital are reimbursed by the Investment Funds, generally at the time such expenses are paid. Such expenses relate to the operation, administration and investment activities of Icahn Capital for the benefit of the Investment Funds (including salaries, benefits and rent) and are allocated pro rata in accordance with each investor's capital accounts in the Investment Funds. For the three months ended June 30, 2014 and 2013, $86 million and $13 million, respectively, and $102 million and $40 million, for the six months ended June 30, 2014 and 2013, respectively, was allocated to the Investment Funds based on this expense-sharing arrangement.
Automotive
On December 6, 2013, Federal-Mogul entered into a backstop commitment letter ("Backstop Commitment") with High River Limited Partnership ("High River"), an affiliate of Mr. Icahn, in favor of Federal-Mogul with respect to its existing Tranche B term loan. The Backstop Commitment provided that if Federal-Mogul was unable to refinance its Tranche B term loan on or prior to September 27, 2014, High River, or an affiliate thereof with at least the same net worth, would provide loan financing of up to $1.6 billion to Federal-Mogul and its subsidiaries on arms-length terms to provide the funding necessary to
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2014 (Unaudited)
repay the Tranche B term loan. As described in Note 10, "Debt - Automotive," the Backstop Commitment was terminated in connection with an amendment to Federal-Mogul's credit agreement on April 15, 2014.
Railcar
Agreements with ACF Industries LLC
In January 2013, ARI entered into a purchasing and engineering services agreement and license with ACF Industries LLC ("ACF"), an affiliate of Mr. Icahn. The agreement was unanimously approved by the independent directors of ARI’s and Icahn Enterprises' audit committees on the basis that the terms of the agreement were not materially less favorable to ARI than those that could have been obtained in a comparable transaction with an unrelated person. Under this agreement, ARI provides purchasing support and engineering services to ACF in connection with ACF’s manufacture and sale of certain tank railcars at its facility in Milton, Pennsylvania. Additionally, ARI has granted ACF a nonexclusive, non-assignable license to certain of ARI’s intellectual property, including certain designs, specifications, processes and manufacturing know-how required to manufacture and sell such tank railcars during the term of the agreement. Subject to certain early termination events, the agreement will terminate on December 31, 2014.
In consideration for the services and license provided by ARI to ACF in conjunction with the agreement, ACF pays ARI a royalty and, if any, a share of the net profits ("ACF Profits") earned on each railcar manufactured and sold by ACF under the agreement, in an aggregate amount equal to 30 percent of such ACF Profits, as calculated under the agreement. ACF Profits are net of certain of ACF’s start-up and shutdown expenses and certain maintenance capital expenditures. If no ACF Profits are realized on a railcar manufactured and sold by ACF pursuant to the agreement, ARI will still be entitled to the royalty for such railcar and will not share in any losses incurred by ACF in connection therewith. In addition, any railcar components supplied by ARI to ACF for the manufacture of these railcars shall be provided at fair market value.
Under the agreement, ACF had the exclusive right to manufacture and sell subject tank railcars for any new orders scheduled for delivery to customers on or before January 31, 2014. ARI has the exclusive right to any sales opportunities for such tank railcars for any new orders scheduled for delivery after that date and through December 31, 2014. ARI also has the right to assign any sales opportunity to ACF, and ACF has the right, but not the obligation, to accept such sales opportunity. Any sales opportunity accepted by ACF will not be reflected in ARI’s orders or backlog.
ARI's revenues under this agreement were $6 million and $3 million for the three months ended June 30, 2014 and 2013, respectively, and $12 million and $3 million for the six months ended June 30, 2014 and 2013, respectively, and were recorded for sales of railcar components to ACF and for royalties and profits on railcars sold by ACF.
In April 2013, AEP Leasing entered into an agreement (the "ACF Agreement") with ACF whereby AEP Leasing will purchase a total of 1,050 railcars from ACF in 2013 and 2014 for an aggregate purchase price of approximately $150 million. Additionally, AEP Leasing has an option that can be exercised any time prior to September 1, 2014 to purchase an additional 500 railcars for an aggregate purchase price of approximately $70 million. During the second quarter of 2014, AEP Leasing exercised its option to purchase an additional 296 railcars for aggregate purchase price of $43 million.
The ACF Agreement was assumed by ARL in connection with our purchase of a 75% economic interest in ARL. The ACF Agreement was unanimously approved by Icahn Enterprises' audit committee consisting of independent directors, who were advised by independent counsel and an independent financial advisor on the basis that the terms were not less favorable than those terms that could have been obtained in a comparable transaction with an unaffiliated third party. Under this agreement, purchases of railcars from ACF were $36 million and $3 million for the three months ended June 30, 2014 and 2013, respectively, and $63 million and $3 million for the six months ended June 30, 2014 and 2013, respectively.
Insight Portfolio Group LLC (formerly known as Icahn Sourcing, LLC)
Icahn Sourcing, LLC ("Icahn Sourcing") is an entity formed and controlled by Mr. Icahn in order to maximize the potential buying power of a group of entities with which Mr. Icahn has a relationship in negotiating with a wide range of suppliers of goods, services and tangible and intangible property at negotiated rates. Icahn Enterprises was a member of the buying group in 2012. Prior to December 31, 2012 Icahn Enterprises did not pay Icahn Sourcing any fees or other amounts with respect to the buying group arrangement.
In December 2012, Icahn Sourcing advised Icahn Enterprises that effective January 1, 2013 it would restructure its ownership and change its name to Insight Portfolio Group LLC (“Insight Portfolio Group”). In connection with the restructuring, Icahn Enterprises Holdings acquired a minority equity interest in Insight Portfolio Group and agreed to pay a
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2014 (Unaudited)
portion of Insight Portfolio Group's operating expenses. In addition to the minority equity interest held by Icahn Enterprises Holdings, certain subsidiaries of Icahn Enterprises Holdings, including Federal-Mogul, CVR, Tropicana, ARI, ARL, Viskase, PSC Metals and WPH also acquired minority equity interests in Insight Portfolio Group and agreed to pay a portion of Insight Portfolio Group's operating expenses. In addition, a number of other entities with which Mr. Icahn has a relationship, other than our subsidiaries listed above, also acquired equity interests in Insight Portfolio Group and agreed to pay certain of Insight Portfolio Group's operating expenses, which amounts are immaterial for each of the three and six months ended June 30, 2014 and 2013.
| |
4. | Investments and Related Matters. |
Investment
Investments, and securities sold, not yet purchased consist of equities, bonds, bank debt and other corporate obligations, and derivatives, all of which are reported at fair value in our consolidated balance sheets. See Note 5, "Fair Value Measurements - Investment," for details of the investments for our Investment segment.
Our Investment segment assesses the applicability of equity method accounting with respect to their investments based on a combination of qualitative and quantitative factors, including overall stock ownership of the Investment Funds combined with those of our affiliates along with board of directors representation.
Our Investment segment applied the fair value option to certain of its investments that would have otherwise been subject to the equity method of accounting. As of both June 30, 2014 and December 31, 2013, the fair value of these investments was less than $1 million. During the three months ended June 30, 2014 and 2013, our Investment segment recorded losses of less than $1 million and gains of $22 million, respectively, associated with these investments. During the six months ended June 30, 2014 and 2013, our Investment segment recorded gains of less than $1 million and $62 million, respectively, associated with these investments. Such amounts are included in net (loss) gain from investment activities in our consolidated statements of operations.
We believe that these investments to which we applied the fair value option are not material, individually or in the aggregate, to our consolidated financial statements.
Other Segments
The carrying value of investments held by our Automotive, Energy, Railcar, Gaming and Home Fashion segments and our Holding Company consist of the following:
|
| | | | | | | |
| June 30, 2014 | | December 31, 2013 |
| (in millions) |
Equity method investments | $ | 318 |
| | $ | 284 |
|
Other investments | 324 |
| | 151 |
|
| $ | 642 |
| | $ | 435 |
|
Our Holding Company applies the fair value option to its investments that would otherwise be subject to the equity method of accounting. We record unrealized gains and losses for the change in fair value of such investments as a component of net (loss) gain from investment activities in the consolidated statements of operations.
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2014 (Unaudited)
| |
5. | Fair Value Measurements. |
U.S. GAAP requires enhanced disclosures about investments and non-recurring non-financial assets and non-financial 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 as of the reporting date. The types of investments included in Level 1 include listed equities and listed derivatives. We do not adjust the quoted price for these investments, even in situations where we hold a large position.
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. Investments that are generally included in this category include corporate bonds and loans, less liquid and restricted equity securities and certain over-the-counter derivatives. 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, an investment's 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.
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2014 (Unaudited)
Investment
The following table summarizes the valuation of the Investment Funds' investments and derivative contracts by the above fair value hierarchy levels as of June 30, 2014 and December 31, 2013:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2014 | | December 31, 2013 |
| Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total |
Assets | (in millions) |
Investments: | | | | | | | | | | | | | | | |
Equity securities: | | | | | | | | | | | | | | | |
Communications | $ | 1,924 |
| | $ | 22 |
| | $ | — |
| | $ | 1,946 |
| | $ | 820 |
| | $ | — |
| | $ | — |
| | $ | 820 |
|
Consumer, non-cyclical | 4,147 |
| | 93 |
| | — |
| | 4,240 |
| | 3,344 |
| | 178 |
| | — |
| | 3,522 |
|
Consumer, cyclical | 1,150 |
| | 212 |
| | — |
| | 1,362 |
| | 414 |
| | — |
| | — |
| | 414 |
|
Diversified | 26 |
| | — |
| | — |
| | 26 |
| | 29 |
| | — |
| | — |
| | 29 |
|
Energy | 3,071 |
| | — |
| | — |
| | 3,071 |
| | 3,050 |
| | — |
| | — |
| | 3,050 |
|
Financial | 485 |
| | — |
| | — |
| | 485 |
| | 300 |
| | — |
| | — |
| | 300 |
|
Funds | — |
| | — |
| | — |
| | — |
| | — |
| | 6 |
| | — |
| | 6 |
|
Technology | 5,115 |
| | — |
| | — |
| | 5,115 |
| | 3,173 |
| | — |
| | — |
| | 3,173 |
|
| 15,918 |
| | 327 |
| | — |
| | 16,245 |
| | 11,130 |
| | 184 |
| | — |
| | 11,314 |
|
Corporate debt: | | | | | | | | | | | | | | | |
Consumer, cyclical | — |
| | — |
| | 110 |
| | 110 |
| | — |
| | — |
| | 287 |
| | 287 |
|
Financial | — |
| | 11 |
| | — |
| | 11 |
| | — |
| | 11 |
| | — |
| | 11 |
|
Sovereign debt | — |
| | 5 |
| | — |
| | 5 |
| | — |
| | 5 |
| | — |
| | 5 |
|
Utilities | — |
| | 36 |
| | — |
| | 36 |
| | — |
| | 29 |
| | — |
| | 29 |
|
| — |
| | 52 |
| | 110 |
| | 162 |
| | — |
| | 45 |
| | 287 |
| | 332 |
|
Mortgage-backed securities: | | | | | | | | | | | | | | | |
Financial | — |
| | 178 |
| | — |
| | 178 |
| | — |
| | 180 |
| | — |
| | 180 |
|
| 15,918 |
| | 557 |
| | 110 |
| | 16,585 |
| | 11,130 |
| | 409 |
| | 287 |
| | 11,826 |
|
Derivative contracts, at fair value(1) | — |
| | 2 |
| | — |
| | 2 |
| | — |
| | — |
| | — |
| | — |
|
| $ | 15,918 |
| | $ | 559 |
| | $ | 110 |
| | $ | 16,587 |
| | $ | 11,130 |
| | $ | 409 |
| | $ | 287 |
| | $ | 11,826 |
|
Liabilities | | | | | | | | | | | | | | | |
Securities sold, not yet purchased, at fair value: | | | | | | | | | | | | | | | |
Equity securities: | | | | | | | | | | | | | | | |
Communications | $ | 9 |
| | $ | — |
| | $ | — |
| | $ | 9 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Consumer, non-cyclical | — |
| | — |
| | — |
| | — |
| | 44 |
| | — |
| | — |
| | 44 |
|
Consumer, cyclical | 891 |
| | — |
| | — |
| | 891 |
| | 787 |
| | — |
| | — |
| | 787 |
|
Financial | — |
| | — |
| | — |
| | — |
| | 45 |
| | — |
| | — |
| | 45 |
|
Funds(2) | — |
| | 29 |
| | — |
| | 29 |
| | — |
| | 8 |
| | — |
| | 8 |
|
| 900 |
| | 29 |
| | — |
| | 929 |
| | 876 |
| | 8 |
| | — |
| | 884 |
|
Derivative contracts, at fair value(3) | — |
| | 1,420 |
| | — |
| | 1,420 |
| | — |
| | 639 |
| | — |
| | 639 |
|
| $ | 900 |
| | $ | 1,449 |
| | $ | — |
| | $ | 2,349 |
| | $ | 876 |
| | $ | 647 |
| | $ | — |
| | $ | 1,523 |
|
| |
(1) | Included in other assets in our consolidated balance sheets. |
| |
(2) | Includes $1 million of debt related securities as of June 30, 2014. |
| |
(3) | Included in accrued expenses and other liabilities in our consolidated balance sheets. |
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2014 (Unaudited)
The changes in investments measured at fair value for which our Investment segment has used Level 3 input to determine fair value are as follows:
|
| | | | | | | |
| Six Months Ended June 30, |
| 2014 | | 2013 |
| (in millions) |
Balance at January 1 | $ | 287 |
|
| $ | 288 |
|
Gross realized and unrealized losses | (65 | ) | | 4 |
|
Gross proceeds | (2 | ) | | (3 | ) |
Distribution-in-kind | (110 | ) | | — |
|
Balance at June 30 | $ | 110 |
|
| $ | 289 |
|
Unrealized losses of $33 million are included in earnings related to Level 3 investments still held at June 30, 2014 by our Investment segment. Total realized and unrealized gains and losses recorded for Level 3 investments, if any, are reported in net (loss) gain from investment activities in our consolidated statements of operations.
The Investment Funds held one Level 3 corporate debt investment at June 30, 2014. In prior periods, in determining the fair value of this investment, we performed a yield analysis of comparable loans to which we applied a risk premium. As a result of the underlying company’s performance in the second quarter of 2014, however, we determined that it was more appropriate to measure the fair value of our debt investment through an enterprise value analysis. This resulted in a lower valuation at the end of the second quarter of 2014. In addition, on June 30, 2014, the Investment Funds made a distribution-in-kind of of this corporate debt investment in the amount of $110 million to the Holding Company.
Other Segments and Holding Company
The following table summarizes the valuation of our Automotive and Energy segments and our Holding Company investments, derivative contracts and other liabilities by the above fair value hierarchy levels as of June 30, 2014 and December 31, 2013:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2014 | | December 31, 2013 |
| Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total |
Assets | (in millions) |
Marketable equity and debt securities | $ | 78 |
| | $ | |