Wdesk | Document
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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 March 31, 2019
|
| | | |
(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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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 or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth 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 |
Emerging Growth Company o | | Emerging Growth Company o |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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 May 1, 2019, there were 196,236,214 of Icahn Enterprises' depositary units outstanding.
ICAHN ENTERPRISES L.P.
ICAHN ENTERPRISES HOLDINGS L.P.
TABLE OF CONTENTS
|
| | |
| | Page No. |
| | |
| | |
| PART I. FINANCIAL INFORMATION | |
| | |
| | |
| | |
| | |
| | |
| PART II. OTHER INFORMATION | |
| | |
| | |
| | |
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.
FORWARD-LOOKING STATEMENTS
This Report contains certain statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended ("the Exchange Act"), or by Public Law 104-67. All statements included in this Report, other than statements that relate solely to historical fact, are “forward-looking statements.” Such statements include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events, or any statement that may relate to strategies, plans or objectives for, or potential results of, future operations, financial results, financial condition, business prospects, growth strategy or liquidity, and are based upon management’s current plans and beliefs or current estimates of future results or trends. Forward-looking statements can generally be identified by phrases such as “believes,” “expects,” “potential,” “continues,” “may,” “should,” “seeks,” “predicts,” “anticipates,” “intends,” “projects,” “estimates,” “plans,” “could,” “designed,” “should be” and other similar expressions that denote expectations of future or conditional events rather than statements of fact.
Forward-looking statements include certain statements made under the caption, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under Part I, Item 2 of this Report, but also forward-looking statements that appear in other parts of this Report. Forward-looking statements reflect our current views with respect to future events and are based on certain assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from trends, plans, or expectations set forth in the forward-looking statements. These risks and uncertainties may include the risks and uncertainties described in our Annual Report on Form 10-K for the year ended December 31, 2018 and those set forth in this Report, including under the caption "Risk Factors," under Part II, Item 1A of this Report. Additionally, there may be other factors not presently known to us or which we currently consider to be immaterial that may cause our actual results to differ materially from the forward-looking statements.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except unit amounts)
|
| | | | | | | |
| March 31, 2019 | | December 31, 2018 |
ASSETS | (Unaudited) |
Cash and cash equivalents | $ | 2,764 |
| | $ | 2,656 |
|
Cash held at consolidated affiliated partnerships and restricted cash | 2,299 |
| | 2,682 |
|
Investments | 8,103 |
| | 8,337 |
|
Due from brokers | 1,224 |
| | 664 |
|
Accounts receivable, net | 517 |
| | 474 |
|
Inventories, net | 1,852 |
| | 1,779 |
|
Property, plant and equipment, net | 4,682 |
| | 4,688 |
|
Goodwill | 255 |
| | 247 |
|
Intangible assets, net | 464 |
| | 501 |
|
Assets held for sale | 364 |
| | 333 |
|
Other assets | 1,300 |
| | 1,128 |
|
Total Assets | $ | 23,824 |
| | $ | 23,489 |
|
LIABILITIES AND EQUITY | | | |
Accounts payable | $ | 894 |
| | $ | 832 |
|
Accrued expenses and other liabilities | 1,896 |
| | 900 |
|
Deferred tax liability | 685 |
| | 694 |
|
Unrealized loss on derivative contracts | 722 |
| | 36 |
|
Securities sold, not yet purchased, at fair value | 447 |
| | 468 |
|
Due to brokers | — |
| | 141 |
|
Liabilities held for sale | 136 |
| | 112 |
|
Debt | 7,392 |
| | 7,326 |
|
Total liabilities | 12,172 |
| | 10,509 |
|
| | | |
Commitments and contingencies (Note 17) |
| |
|
| | | |
Equity: | | | |
Limited partners: Depositary units: 191,376,753 units issued and outstanding at March 31, 2019 and 191,366,097 units issued and outstanding at December 31, 2018 | 6,643 |
| | 7,350 |
|
General partner | (804 | ) | | (790 | ) |
Equity attributable to Icahn Enterprises | 5,839 |
| | 6,560 |
|
Equity attributable to non-controlling interests | 5,813 |
| | 6,420 |
|
Total equity | 11,652 |
| | 12,980 |
|
Total Liabilities and Equity | $ | 23,824 |
| | $ | 23,489 |
|
See notes to condensed consolidated financial statements.
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per unit amounts)
|
| | | | | | | |
| Three Months Ended March 31, |
| 2019 | | 2018 |
Revenues: | (Unaudited) |
Net sales | $ | 2,300 |
| | $ | 2,364 |
|
Other revenues from operations | 162 |
| | 158 |
|
Net (loss) gain from investment activities | (674 | ) | | 432 |
|
Interest and dividend income | 64 |
| | 26 |
|
Other income, net | 3 |
| | 3 |
|
| 1,855 |
| | 2,983 |
|
Expenses: | | | |
Cost of goods sold | 1,900 |
| | 1,987 |
|
Other expenses from operations | 131 |
| | 125 |
|
Selling, general and administrative | 336 |
| | 338 |
|
Restructuring, net | 7 |
| | 2 |
|
Interest expense | 139 |
| | 147 |
|
| 2,513 |
| | 2,599 |
|
(Loss) income from continuing operations before income tax expense | (658 | ) | | 384 |
|
Income tax expense | (6 | ) | | (17 | ) |
(Loss) income from continuing operations | (664 | ) | | 367 |
|
Income from discontinued operations | — |
| | 45 |
|
Net (loss) income | (664 | ) | | 412 |
|
Less: net (loss) income attributable to non-controlling interests | (270 | ) | | 280 |
|
Net (loss) income attributable to Icahn Enterprises | $ | (394 | ) | | $ | 132 |
|
| | | |
Net (loss) income attributable to Icahn Enterprises from: | | | |
Continuing operations | $ | (394 | ) | | $ | 98 |
|
Discontinued operations | — |
| | 34 |
|
| $ | (394 | ) | | $ | 132 |
|
Net (loss) income attributable to Icahn Enterprises allocated to: | | | |
Limited partners | $ | (386 | ) | | $ | 129 |
|
General partner | (8 | ) | | 3 |
|
| $ | (394 | ) | | $ | 132 |
|
Basic (loss) income per LP unit: | | | |
Continuing operations | $ | (2.02 | ) | | $ | 0.55 |
|
Discontinued operations | 0.00 |
| | 0.19 |
|
| $ | (2.02 | ) | | $ | 0.74 |
|
Basic weighted average LP units outstanding | 191 |
| | 174 |
|
Diluted (loss) income per LP unit: | | | |
Continuing operations | $ | (2.02 | ) | | $ | 0.55 |
|
Discontinued operations | 0.00 |
| | 0.19 |
|
| $ | (2.02 | ) | | $ | 0.74 |
|
Diluted weighted average LP units outstanding | 191 |
| | 175 |
|
Cash distributions declared per LP unit | $ | 2.00 |
| | $ | 1.75 |
|
See notes to condensed consolidated financial statements.
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
|
| | | | | | | |
| Three Months Ended March 31, |
| 2019 | | 2018 |
| (Unaudited) |
Net (loss) income | $ | (664 | ) | | $ | 412 |
|
Other comprehensive income (loss), net of tax: | | | |
Post-retirement benefits | 1 |
| | 11 |
|
Hedge instruments | — |
| | (1 | ) |
Translation adjustments and other | (1 | ) | | 33 |
|
Other comprehensive income, net of tax | — |
| | 43 |
|
Comprehensive (loss) income | (664 | ) | | 455 |
|
Less: Comprehensive (loss) income attributable to non-controlling interests | (270 | ) | | 283 |
|
Comprehensive (loss) income attributable to Icahn Enterprises | $ | (394 | ) | | $ | 172 |
|
| | | |
Comprehensive (loss) income attributable to Icahn Enterprises allocated to: | | | |
Limited partners | $ | (386 | ) | | $ | 169 |
|
General partner | (8 | ) | | 3 |
|
| $ | (394 | ) | | $ | 172 |
|
See notes to condensed consolidated financial statements.
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
CONDENSED 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, 2018 | $ | (790 | ) | | $ | 7,350 |
| | $ | 6,560 |
| | $ | 6,420 |
| | $ | 12,980 |
|
Net loss | (8 | ) | | (386 | ) | | (394 | ) | | (270 | ) | | (664 | ) |
Partnership distributions | (8 | ) | | (383 | ) | | (391 | ) | | — |
| | (391 | ) |
Dividends and distributions to non-controlling interests in subsidiaries | — |
| | — |
| | — |
| | (30 | ) | | (30 | ) |
Changes in subsidiary equity and other | 2 |
| | 62 |
| | 64 |
| | (307 | ) | | (243 | ) |
Balance, March 31, 2019 | $ | (804 | ) | | $ | 6,643 |
| | $ | 5,839 |
| | $ | 5,813 |
| | $ | 11,652 |
|
|
| | | | | | | | | | | | | | | | | | | |
| Equity Attributable to Icahn Enterprises | | | | |
| General Partner's (Deficit) Equity | | Limited Partners' Equity | | Total Partners' Equity | | Non-controlling Interests | | Total Equity |
Balance, December 31, 2017 | $ | (234 | ) | | $ | 5,402 |
| | $ | 5,168 |
| | $ | 6,318 |
| | $ | 11,486 |
|
Net income | 3 |
| | 129 |
| | 132 |
| | 280 |
| | 412 |
|
Other comprehensive income | — |
| | 40 |
| | 40 |
| | 3 |
| | 43 |
|
Partnership distributions | (6 | ) | | (304 | ) | | (310 | ) | | — |
| | (310 | ) |
Investment segment contributions | — |
| | — |
| | — |
| | 280 |
| | 280 |
|
Dividends and distributions to non-controlling interests in subsidiaries | — |
| | — |
| | — |
| | (31 | ) | | (31 | ) |
Cumulative effect adjustment from adoption of accounting principle | — |
| | (20 | ) | | (20 | ) | | — |
| | (20 | ) |
Changes in subsidiary equity and other | — |
| | (8 | ) | | (8 | ) | | 10 |
| | 2 |
|
Balance, March 31, 2018 | $ | (237 | ) | | $ | 5,239 |
| | $ | 5,002 |
| | $ | 6,860 |
| | $ | 11,862 |
|
See notes to condensed consolidated financial statements.
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
|
| | | | | | | |
| Three Months Ended March 31, |
| 2019 | | 2018 |
| (Unaudited) |
Cash flows from operating activities: | | | |
Net (loss) income | $ | (664 | ) | | $ | 412 |
|
Adjustments to reconcile net (loss) income to net cash used in operating activities: | | | |
Income from discontinued operations | — |
| | (45 | ) |
Net gain from securities transactions | (505 | ) | | (285 | ) |
Purchases of securities | (584 | ) | | (886 | ) |
Proceeds from sales of securities | 966 |
| | 3,130 |
|
Purchases to cover securities sold, not yet purchased | (113 | ) | | (690 | ) |
Proceeds from securities sold, not yet purchased | 17 |
| | — |
|
Changes in receivables and payables relating to securities transactions | (663 | ) | | (1,824 | ) |
Depreciation and amortization | 123 |
| | 128 |
|
Deferred taxes | (8 | ) | | 20 |
|
Other, net | 5 |
| | 6 |
|
Changes in operating assets and liabilities | 1,138 |
| | (673 | ) |
Net cash used in operating activities from continuing operations | (288 | ) | | (707 | ) |
Net cash provided by operating activities from discontinued operations | — |
| | 112 |
|
Net cash used in operating activities | (288 | ) | | (595 | ) |
Cash flows from investing activities: | | | |
Capital expenditures | (65 | ) | | (62 | ) |
Acquisition of businesses, net of cash acquired | (10 | ) | | (1 | ) |
Purchases of investments | (25 | ) | | (5 | ) |
Proceeds from sale of investments | 424 |
| | — |
|
Other, net | (10 | ) | | 15 |
|
Net cash provided by (used in) investing activities from continuing operations | 314 |
| | (53 | ) |
Net cash used in investing activities from discontinued operations | — |
| | (154 | ) |
Net cash provided by (used in) investing activities | 314 |
| | (207 | ) |
Cash flows from financing activities: | | | |
Investment segment contributions from non-controlling interests | — |
| | 280 |
|
Proceeds from offering of subsidiary equity | — |
| | 6 |
|
Purchase of additional interests in consolidated subsidiaries | (241 | ) | | — |
|
Dividends and distributions to non-controlling interests in subsidiaries | (30 | ) | | (28 | ) |
Proceeds from subsidiary borrowings | 269 |
| | 331 |
|
Repayments of subsidiary borrowings | (271 | ) | | (349 | ) |
Other, net | 1 |
| | (2 | ) |
Net cash (used in) provided by financing activities from continuing operations | (272 | ) | | 238 |
|
Net cash used in financing activities from discontinued operations | — |
| | (13 | ) |
Net cash (used in) provided by financing activities | (272 | ) | | 225 |
|
Effect of exchange rate changes on cash and cash equivalents and restricted cash and restricted cash equivalents | (1 | ) | | (3 | ) |
Add back change in cash and restricted cash of assets held for sale | (28 | ) | | 60 |
|
Net (decrease) increase in cash and cash equivalents and restricted cash and restricted cash equivalents | (275 | ) | | (520 | ) |
Cash and cash equivalents and restricted cash and restricted cash equivalents, beginning of period | 5,338 |
| | 1,911 |
|
Cash and cash equivalents and restricted cash and restricted cash equivalents, end of period | $ | 5,063 |
| | $ | 1,391 |
|
See notes to condensed consolidated financial statements.
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
|
| | | | | | | |
| March 31, 2019 | | December 31, 2018 |
ASSETS | (Unaudited) |
Cash and cash equivalents | $ | 2,764 |
| | $ | 2,656 |
|
Cash held at consolidated affiliated partnerships and restricted cash | 2,299 |
| | 2,682 |
|
Investments | 8,103 |
| | 8,337 |
|
Due from brokers | 1,224 |
| | 664 |
|
Accounts receivable, net | 517 |
| | 474 |
|
Inventories, net | 1,852 |
| | 1,779 |
|
Property, plant and equipment, net | 4,682 |
| | 4,688 |
|
Goodwill | 255 |
| | 247 |
|
Intangible assets, net | 464 |
| | 501 |
|
Assets held for sale | 364 |
| | 333 |
|
Other assets | 1,332 |
| | 1,160 |
|
Total Assets | $ | 23,856 |
| | $ | 23,521 |
|
LIABILITIES AND EQUITY | | | |
Accounts payable | $ | 894 |
| | $ | 832 |
|
Accrued expenses and other liabilities | 1,896 |
| | 900 |
|
Deferred tax liability | 685 |
| | 694 |
|
Unrealized loss on derivative contracts | 722 |
| | 36 |
|
Securities sold, not yet purchased, at fair value | 447 |
| | 468 |
|
Due to brokers | — |
| | 141 |
|
Liabilities held for sale | 136 |
| | 112 |
|
Debt | 7,396 |
| | 7,330 |
|
Total liabilities | 12,176 |
| | 10,513 |
|
| | | |
Commitments and contingencies (Note 17) |
| |
|
| | | |
Equity: | | | |
Limited partner | 6,738 |
| | 7,452 |
|
General partner | (871 | ) | | (864 | ) |
Equity attributable to Icahn Enterprises Holdings | 5,867 |
| | 6,588 |
|
Equity attributable to non-controlling interests | 5,813 |
| | 6,420 |
|
Total equity | 11,680 |
| | 13,008 |
|
Total Liabilities and Equity | $ | 23,856 |
| | $ | 23,521 |
|
See notes to condensed consolidated financial statements.
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions)
|
| | | | | | | |
| Three Months Ended March 31, |
| 2019 | | 2018 |
Revenues: | (Unaudited) |
Net sales | $ | 2,300 |
| | $ | 2,364 |
|
Other revenues from operations | 162 |
| | 158 |
|
Net (loss) gain from investment activities | (674 | ) | | 432 |
|
Interest and dividend income | 64 |
| | 26 |
|
Other income, net | 3 |
| | 3 |
|
| 1,855 |
| | 2,983 |
|
Expenses: | | | |
Cost of goods sold | 1,900 |
| | 1,987 |
|
Other expenses from operations | 131 |
| | 125 |
|
Selling, general and administrative | 336 |
| | 338 |
|
Restructuring, net | 7 |
| | 2 |
|
Interest expense | 139 |
| | 147 |
|
| 2,513 |
| | 2,599 |
|
(Loss) income from continuing operations before income tax expense | (658 | ) | | 384 |
|
Income tax expense | (6 | ) | | (17 | ) |
(Loss) income from continuing operations | (664 | ) | | 367 |
|
Income from discontinued operations | — |
| | 45 |
|
Net (loss) income | (664 | ) | | 412 |
|
Less: net (loss) income attributable to non-controlling interests | (270 | ) | | 280 |
|
Net (loss) income attributable to Icahn Enterprises Holdings | $ | (394 | ) | | $ | 132 |
|
| | | |
Net (loss) income attributable to Icahn Enterprises from: | | | |
Continuing operations | $ | (394 | ) | | $ | 98 |
|
Discontinued operations | — |
| | 34 |
|
| $ | (394 | ) | | $ | 132 |
|
Net (loss) income attributable to Icahn Enterprises Holdings allocated to: | | | |
Limited partner | $ | (390 | ) | | $ | 131 |
|
General partner | (4 | ) | | 1 |
|
| $ | (394 | ) | | $ | 132 |
|
See notes to condensed consolidated financial statements.
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
|
| | | | | | | |
| Three Months Ended March 31, |
| 2019 | | 2018 |
| (Unaudited) |
Net (loss) income | $ | (664 | ) | | $ | 412 |
|
Other comprehensive income (loss), net of tax: | | | |
Post-retirement benefits | 1 |
| | 11 |
|
Hedge instruments | — |
| | (1 | ) |
Translation adjustments and other | (1 | ) | | 33 |
|
Other comprehensive income, net of tax | — |
| | 43 |
|
Comprehensive (loss) income | (664 | ) | | 455 |
|
Less: Comprehensive (loss) income attributable to non-controlling interests | (270 | ) | | 283 |
|
Comprehensive income attributable to Icahn Enterprises Holdings | $ | (394 | ) | | $ | 172 |
|
| | | |
Comprehensive (loss) income attributable to Icahn Enterprises Holdings allocated to: | | | |
Limited partner | $ | (390 | ) | | $ | 170 |
|
General partner | (4 | ) | | 2 |
|
| $ | (394 | ) | | $ | 172 |
|
See notes to condensed consolidated financial statements.
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
CONDENSED 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, 2018 | $ | (864 | ) | | $ | 7,452 |
| | $ | 6,588 |
| | $ | 6,420 |
| | $ | 13,008 |
|
Net loss | (4 | ) | | (390 | ) | | (394 | ) | | (270 | ) | | (664 | ) |
Partnership distributions | (4 | ) | | (387 | ) | | (391 | ) | | — |
| | (391 | ) |
Dividends and distributions to non-controlling interests in subsidiaries | — |
| | — |
| | — |
| | (30 | ) | | (30 | ) |
Changes in subsidiary equity and other | 1 |
| | 63 |
| | 64 |
| | (307 | ) | | (243 | ) |
Balance, March 31, 2019 | $ | (871 | ) | | $ | 6,738 |
| | $ | 5,867 |
| | $ | 5,813 |
| | $ | 11,680 |
|
|
| | | | | | | | | | | | | | | | | | | |
| 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, 2017 | $ | (286 | ) | | $ | 5,481 |
| | $ | 5,195 |
| | $ | 6,318 |
| | $ | 11,513 |
|
Net income | 1 |
| | 131 |
| | 132 |
| | 280 |
| | 412 |
|
Other comprehensive income | 1 |
| | 39 |
| | 40 |
| | 3 |
| | 43 |
|
Partnership distributions | (3 | ) | | (307 | ) | | (310 | ) | | — |
| | (310 | ) |
Investment segment contributions | — |
| | — |
| | — |
| | 280 |
| | 280 |
|
Dividends and distributions to non-controlling interests in subsidiaries | — |
| | — |
| | — |
| | (31 | ) | | (31 | ) |
Cumulative effect adjustment from adoption of accounting principle | — |
| | (20 | ) | | (20 | ) | | — |
| | (20 | ) |
Changes in subsidiary equity and other | — |
| | (8 | ) | | (8 | ) | | 10 |
| | 2 |
|
Balance, March 31, 2018 | $ | (287 | ) | | $ | 5,316 |
| | $ | 5,029 |
| | $ | 6,860 |
| | $ | 11,889 |
|
See notes to condensed consolidated financial statements.
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
|
| | | | | | | |
| Three Months Ended March 31, |
| 2019 | | 2018 |
| (Unaudited) |
Cash flows from operating activities: | | | |
Net (loss) income | $ | (664 | ) | | $ | 412 |
|
Adjustments to reconcile net (loss) income to net cash used in operating activities: | | | |
Income from discontinued operations | — |
| | (45 | ) |
Net gain from securities transactions | (505 | ) | | (285 | ) |
Purchases of securities | (584 | ) | | (886 | ) |
Proceeds from sales of securities | 966 |
| | 3,130 |
|
Purchases to cover securities sold, not yet purchased | (113 | ) | | (690 | ) |
Proceeds from securities sold, not yet purchased | 17 |
| | — |
|
Changes in receivables and payables relating to securities transactions | (663 | ) | | (1,824 | ) |
Depreciation and amortization | 123 |
| | 128 |
|
Deferred taxes | (8 | ) | | 20 |
|
Other, net | 5 |
| | 6 |
|
Changes in operating assets and liabilities | 1,138 |
| | (673 | ) |
Net cash used in operating activities from continuing operations | (288 | ) | | (707 | ) |
Net cash provided by operating activities from discontinued operations | — |
| | 112 |
|
Net cash used in operating activities | (288 | ) | | (595 | ) |
Cash flows from investing activities: | | | |
Capital expenditures | (65 | ) | | (62 | ) |
Acquisition of businesses, net of cash acquired | (10 | ) | | (1 | ) |
Purchases of investments | (25 | ) | | (5 | ) |
Proceeds from sale of investments | 424 |
| | — |
|
Other, net | (10 | ) | | 15 |
|
Net cash provided by (used in) investing activities from continuing operations | 314 |
| | (53 | ) |
Net cash used in investing activities from discontinued operations | — |
| | (154 | ) |
Net cash provided by (used in) investing activities | 314 |
| | (207 | ) |
Cash flows from financing activities: | | | |
Investment segment contributions from non-controlling interests | — |
| | 280 |
|
Proceeds from offering of subsidiary equity | — |
| | 6 |
|
Purchase of additional interests in consolidated subsidiaries | (241 | ) | | — |
|
Dividends and distributions to non-controlling interests in subsidiaries | (30 | ) | | (28 | ) |
Proceeds from subsidiary borrowings | 269 |
| | 331 |
|
Repayments of subsidiary borrowings | (271 | ) | | (349 | ) |
Other, net | 1 |
| | (2 | ) |
Net cash (used in) provided by financing activities from continuing operations | (272 | ) | | 238 |
|
Net cash used in financing activities from discontinued operations | — |
| | (13 | ) |
Net cash (used in) provided by financing activities | (272 | ) | | 225 |
|
Effect of exchange rate changes on cash and cash equivalents and restricted cash and restricted cash equivalents | (1 | ) | | (3 | ) |
Add back change in cash and restricted cash of assets held for sale | (28 | ) | | 60 |
|
Net (decrease) increase in cash and cash equivalents and restricted cash and restricted cash equivalents | (275 | ) | | (520 | ) |
Cash and cash equivalents and restricted cash and restricted cash equivalents, beginning of period | 5,338 |
| | 1,911 |
|
Cash and cash equivalents and restricted cash and restricted cash equivalents, end of period | $ | 5,063 |
| | $ | 1,391 |
|
See notes to condensed consolidated financial statements.
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
| |
1. | Description of Business. |
Overview
Icahn Enterprises L.P. (“Icahn Enterprises”) is a master limited partnership formed in Delaware on February 17, 1987. 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 March 31, 2019. 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 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 approximately 91.7% of Icahn Enterprises' outstanding depositary units as of March 31, 2019.
Description of Continuing Operating Businesses
We are a diversified holding company owning subsidiaries currently engaged in the following continuing operating businesses: Investment, Energy, Automotive, Food Packaging, Metals, Real Estate, Home Fashion and Mining. 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 our Holding Company. Our historical results also report the results of our Railcar segment through the date we sold our last remaining railcars on lease, which occurred in the third quarter of 2018. See Note 12, "Segment Reporting," for a reconciliation of each of our reporting segment's results of operations to our consolidated results. Certain additional information with respect to our segments is discussed below.
Investment
Our Investment segment is comprised of various private investment funds ("Investment Funds") in which we have general partner interests and through which we invest our proprietary capital. As general partner, we provide investment advisory and certain administrative and back office services to the Investment Funds but do not provide such services to any other entities, individuals or accounts. We and certain of Mr. Icahn's wholly-owned affiliates are the only investors in the Investment Funds. Interests in the Investment Funds are not offered to outside investors. We had interests in the Investment Funds with a fair value of approximately $4.8 billion and $5.1 billion as of March 31, 2019 and December 31, 2018, respectively.
Energy
We conduct our Energy segment through our majority owned subsidiary, CVR Energy, Inc. ("CVR Energy"). CVR Energy is a diversified holding company primarily engaged in the petroleum refining and nitrogen fertilizer manufacturing businesses through its holdings in CVR Refining, LP ("CVR Refining") and CVR Partners, LP ("CVR Partners"), respectively. CVR Refining is an independent petroleum refiner and marketer of high value transportation fuels. CVR Partners produces and markets nitrogen fertilizers in the form of urea ammonium nitrate and ammonia. As of March 31, 2019, we owned approximately 70.8% of the total outstanding common stock of CVR Energy.
On January 29, 2019, CVR Energy, pursuant to the exercise of its right to purchase all of the issued and outstanding common units in CVR Refining, purchased the remaining common units of CVR Refining not already owned by CVR Energy, including the purchase of CVR Refining common units owned directly by us. Prior to this, CVR Energy owned approximately 80.6% of the common units of CVR Refining and we directly owned approximately 3.9% of the common units of CVR Refining. As a result of exercising its purchase right, as of January 29, 2019, CVR Energy owns all of the common units of CVR Refining and we no longer have any direct ownership in CVR Refining. In addition, the common units of CVR Refining have subsequently ceased to be publicly traded or listed on the New York Stock Exchange any other national securities exchange. The remaining common units of CVR Refining acquired in this transaction were purchased for $241 million, excluding the amount paid by CVR Energy to us for the common units of CVR Refining directly owned by us.
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Automotive
We conduct our Automotive segment through our wholly-owned subsidiary, Icahn Automotive Group LLC ("Icahn Automotive"). Icahn Automotive is engaged in the retail and wholesale distribution of automotive parts in the aftermarket as well as providing automotive repair and maintenance services to its customers. Our Automotive segment also includes our investment in 767 Auto Leasing LLC ("767 Leasing"), a joint venture created to purchase vehicles for lease, as described further in Note 3, "Related Party Transactions."
Food Packaging
We conduct our Food Packaging segment through our majority owned subsidiary, Viskase Companies, Inc. ("Viskase"). During January 2018, Viskase received $50 million in connection with its common stock rights offering. In connection with this rights offering, we fully exercised our subscription rights under our basic and over subscription privileges to purchase additional shares of Viskase common stock, thereby increasing our ownership of Viskase from 74.6% to 78.6%, for an aggregate additional investment of $44 million.
Viskase is a producer of cellulosic, fibrous and plastic casings used to prepare and package processed meat products.
Metals
We conduct our Metals segment through our wholly-owned subsidiary, PSC Metals LLC (“PSC Metals”). PSC Metals is principally engaged in the business of collecting, processing and selling ferrous and non-ferrous metals, as well as the processing and distribution of steel pipe and plate products. PSC Metals collects industrial and obsolete scrap metal, processes it into reusable forms and supplies the recycled metals to its customers.
Real Estate
Our Real Estate operations consist primarily of rental real estate, property development and associated club activities. Our rental real estate operations consist primarily of office and industrial properties leased to single corporate tenants. Our property development operations are run primarily through 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 property development locations also operate golf and club operations. In addition, our Real Estate operations also includes a hotel, timeshare and casino resort property in Aruba as well as a casino property in Atlantic City, New Jersey, which ceased operations in 2014 prior to our obtaining control of the property.
Home Fashion
We conduct our Home Fashion segment through our wholly-owned subsidiary, WestPoint Home LLC (“WPH”). WPH's business consists of manufacturing, sourcing, marketing, distributing and selling home fashion consumer products.
Mining
We conduct our Mining segment through our majority owned subsidiary, Ferrous Resources Ltd. ("Ferrous Resources"). As of March 31, 2019, we owned approximately 77.2% of the total outstanding common stock of Ferrous Resources. Ferrous Resources acquired certain rights to iron ore mineral resources in Brazil and develops mining operations and related infrastructure to produce and sell iron ore products to the global steel industry.
On December 5, 2018, we announced a definitive agreement to sell Ferrous Resources for total consideration of $550 million. The transaction is expected to close in the second half of 2019. This transaction met all the criteria to be classified as held for sale on December 5, 2018 upon execution of the definitive agreement.
Railcar
We conducted our Railcar segment through our wholly-owned subsidiary, American Railcar Leasing, LLC ("ARL"). ARL operated a leasing business consisting of purchased railcars leased to third parties under operating leases. During 2018, we sold all remaining railcars of ARL not previously sold and as a result, our business no longer includes an active Railcar segment. For the three months ended March 31, 2018, we had proceeds of $15 million in connection with the sale of railcars and we recorded a pretax gain on disposition of assets of $4 million.
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Description of Discontinued Operating Businesses
We also report discontinued operations previously reported in our Automotive and Railcar segments and former Gaming segment.
Our discontinued Automotive operations consists of our previously wholly-owned subsidiary, Federal-Mogul LLC ("Federal-Mogul").
Our discontinued Gaming operations consists of our previous majority ownership in Tropicana Entertainment Inc. ("Tropicana").
Our discontinued Railcar operations consists of our previous majority ownership in American Railcar Industries, Inc. ("ARI").
Each of these businesses were sold in the fourth quarter of 2018 and are reflected in discontinued operations for the three months ended March 31, 2018. See Note 13, "Discontinued Operations," for additional information with respect to our discontinued operating businesses.
| |
2. | Basis of Presentation and Summary of Significant Accounting Policies. |
We conduct and plan to continue to conduct our activities in such a manner as not to be deemed an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). Therefore, no more than 40% of our total assets can be invested in investment securities, as such term is defined in the Investment Company Act. In addition, we do not invest or intend to invest in securities as our primary business. We 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.
Events beyond our control, including significant appreciation or depreciation in the market value of certain of our publicly traded holdings or adverse developments with respect to our ownership of certain of our subsidiaries, could result in our inadvertently becoming an investment company that is required to register under the Investment Company Act. Our recent sales of Federal-Mogul, Tropicana and ARI did not result in our being considered an investment company. However, additional transactions involving the sale of certain assets could result in our being considered an investment company. Following such events or transactions, an exemption under the Investment Company Act would provide us up to one year to take steps to avoid becoming classified as an investment company. We expect to take steps to avoid becoming classified as an investment company, but no assurance can be made that we will successfully be able to take the steps necessary to avoid becoming classified as an investment company.
The accompanying condensed consolidated financial statements and related notes should be read in conjunction with our consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the year ended December 31, 2018. The condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) related to interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. The financial information contained herein is unaudited; however, management believes all adjustments have been made that are necessary to present fairly the results for the interim periods. All such adjustments are of a normal and recurring nature.
Principles of Consolidation
As of March 31, 2019, our condensed 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 variable interest entities ("VIEs") in which we are the primary beneficiary. In evaluating whether we have a controlling financial interest in entities that we consolidate, we consider the following: (1) for voting interest entities, including limited partnerships and similar entities that are not VIEs, we consolidate these entities in which we own a majority of the voting interests; and (2) for VIEs, we consolidate these entities in which we are the primary beneficiary. See below for a discussion of our VIEs. Kick-out rights, which are the rights underlying the limited partners' ability to dissolve the limited partnership or otherwise remove the general partners, held through voting interests of partnerships and similar entities that are not VIEs are considered the equivalent of the equity interests of corporations that are not VIEs.
Except for our Investment segment, for equity investments in which we own 50% or less but greater than 20%, we generally account for such investments using the equity method. All other equity investments are accounted for at fair value.
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Change in Accounting Principle
Effective January 1, 2019, CVR Energy revised its accounting policy method for the costs of planned major maintenance activities ("turnarounds") specific to its petroleum business from being expensed as incurred (the direct expensing method) to the deferral method. Turnarounds are planned shutdowns of refinery processing units for significant overhaul and refurbishment. Under the deferral method, the costs of turnarounds are deferred and amortized on a straight-line basis over a four-year period, which represents the estimated time until the next turnaround occurs. The new method of accounting for turnarounds is considered preferable as it is more consistent with the accounting policy of CVR Energy's peer companies and better reflects the economic substance of the benefits earned from turnaround expenditures. The comparative condensed consolidated balance sheet as of December 31, 2018 and condensed consolidated statement of operations and cash flows for the three months ended March 31, 2018 have been retrospectively adjusted to apply the new accounting method. These turnaround costs, and related accumulated amortization, are included within other assets in the condensed consolidated balance sheets. The amortization expense related to turnaround costs is included in cost of goods sold in the condensed consolidated statement of operations. CVR Partners will continue to follow the direct expensing method therefore this change had no impact on its current or comparative condensed consolidated financial statements.
As a result of this accounting change, our Energy segment increased other assets by $108 million and decreased property, plant and equipment, net by $15 million as of December 31, 2018. In addition, our Energy segment increased deferred tax liability by $18 million and total equity by $75 million, including $31 million attributable to Icahn Enterprises and Icahn Enterprises Holdings as of December 31, 2018. As of December 31, 2017, our Energy segment increased total equity by $118 million, including $62 million attributable to Icahn Enterprises and Icahn Enterprises Holdings. For the three months ended March 31, 2018, the effect on net income for our Energy segment as a result of this accounting change was a reduction to net income of $11 million, including a $5 million reduction attributable to Icahn Enterprises and Icahn Enterprises Holdings. The impact on net income was comprised of a $14 million increase to cost of goods sold and a $3 million decrease to income tax expense for the three months ended March 31, 2018.
Reclassifications
Certain other reclassifications have been made within the condensed consolidated statements of operations to include gain (loss) on derivatives within cost of goods sold for our Energy segment. Prior year balances have been reclassified to conform to the current year presentation. The reclassification of gain on derivatives from other income, net to costs of goods sold was $59 million for the three months ended March 31, 2018. These reclassifications did not have an impact on previously reported net income.
We have also recast certain historical results for discontinued operations, which we disclose in Note 13, "Discontinued Operations." In addition, certain other reclassifications from the prior year presentation have been made to conform to the current year presentation, which did not have an impact on previously reported net income and equity and are not deemed material.
Consolidated Variable Interest Entities
The following is a discussion of variable interest entities in which we are deemed to be the primary beneficiary and in which we therefore consolidate. In addition, as discussed in Note 3, "Related Party Transactions," we have a variable interest in an entity in which we are not the primary beneficiary and therefore we do not consolidate.
Icahn Enterprises Holdings
We determined that Icahn Enterprises Holdings is a VIE because it is a limited partnership that lacks both substantive kick-out and participating rights. Although Icahn Enterprises is not the general partner of Icahn Enterprises Holdings, Icahn Enterprises is deemed to be the primary beneficiary of Icahn Enterprises Holdings principally based on its 99% limited partner interest in Icahn Enterprises Holdings, as well as our related party relationship with the general partner, and therefore continues to consolidate Icahn Enterprises Holdings. The condensed consolidated financial statements of Icahn Enterprises Holdings are included in this Report. The balances with respect to Icahn Enterprises Holdings' consolidated VIEs are discussed below, comprising the Investment Funds, CVR Refining (prior to January 2019), CVR Partners and Viskase.
Investment
We determined that each of the Investment Funds are considered VIEs because these limited partnerships lack both substantive kick-out and participating rights. Because we have a general partner interest in each of the Investment Funds and have significant limited partner interests in each of the Investment Funds, coupled with our significant exposure to losses and
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
benefits in each of the Investment Funds, we are the primary beneficiary of each of the Investment Funds and therefore continue to consolidate each of the Investment Funds.
Energy
CVR Refining (prior to January 2019) and CVR Partners are each considered VIEs because each of these limited partnerships lack both substantive kick-out and participating rights. In addition, CVR Energy also concluded that, based upon its general partner's roles and rights in CVR Refining and CVR Partners as afforded by their respective partnership agreements, coupled with its exposure to losses and benefits in each of CVR Refining and CVR Partners through its significant limited partner interests, intercompany credit facilities and services agreements, it is the primary beneficiary of both CVR Refining (prior to January 2019) and CVR Partners. Based upon this evaluation, CVR Energy continues to consolidate both CVR Refining (prior to January 2019) and CVR Partners.
Food Packaging
Viskase holds a variable interest in a joint venture for which Viskase is the primary beneficiary. Viskase's interest in the joint venture includes a 50% equity interest and also relates to the sales, operations, administrative and financial support to the joint venture through providing many of the assets used in its business.
The following table includes balances of assets and liabilities of VIE's included in Icahn Enterprises Holdings' condensed consolidated balance sheets.
|
| | | | | | | |
| March 31, 2019 | | December 31, 2018 |
| (in millions) |
Cash and cash equivalents | $ | 97 |
| | $ | 415 |
|
Cash held at consolidated affiliated partnerships and restricted cash | 2,286 |
| | 2,648 |
|
Investments | 7,130 |
| | 6,951 |
|
Due from brokers | 1,224 |
| |
|