ICAHN ENTERPRISES L.P. The following discussion is intended to assist you in understanding our present business and the results of operations together with our present financial condition. This section should be read in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes contained in this Quarterly Report on Form 10-Q for the period endedMarch 31, 2022 (this "Report"), as well as our Annual Report on Form 10-K for the year endedDecember 31, 2021 filed with theSecurities and Exchange Commission onFebruary 25, 2022 . Executive Overview IntroductionIcahn Enterprises L.P. ("Icahn Enterprises ") is a master limited partnership formed inDelaware onFebruary 17, 1987 and headquartered inSunny Isles Beach, Florida . We are a diversified holding company owning subsidiaries currently engaged in the following continuing operating businesses: Investment, Energy, Automotive,Food Packaging , Real Estate, Home Fashion and Pharma. In addition, we operated our Metals segment until sold inDecember 2021 . We also report the results of our Holding Company, which includes the results of certain subsidiaries ofIcahn Enterprises (unless otherwise noted), and investment activity and expenses associated with our Holding Company. References to "we," "our" or "us" herein includeIcahn Enterprises and its subsidiaries, unless the context otherwise requires.Icahn Enterprises owns a 99% limited partner interest inIcahn Enterprises Holdings L.P. ("Icahn Enterprises Holdings ").Icahn Enterprises Holdings and its subsidiaries own substantially all of our assets and liabilities and conduct substantially all of our operations.Icahn Enterprises G.P. Inc. ("Icahn Enterprises GP"), which is indirectly owned and controlled by Mr.Carl C. Icahn , owns a 1% general partner interest in each ofIcahn Enterprises andIcahn Enterprises Holdings as ofMarch 31, 2022 , representing an aggregate 1.99% general partner interest inIcahn Enterprises Holdings and us.Mr. Icahn and his affiliates owned approximately 87% ofIcahn Enterprises' outstanding depositary units as ofMarch 31, 2022 .
Significant Transactions and Developments
Tender Offer
OnOctober 27, 2021 ,IEP Utility Holdings LLC ("IEP Utility"), a wholly owned subsidiary ofIcahn Enterprises Holdings , commenced a cash offer (the "SWX Tender Offer") to acquire, subject to certain terms and conditions, all of the issued and outstanding shares of common stock of Southwest Gas Holdings, Inc. ("Southwest Gas ") not held by affiliates ofIcahn Enterprises Holdings at a price of$75.00 per share. OnMarch 14, 2022 , IEP Utility amended its SWX Tender Offer purchase price to$82.50 per share. Southwest Gas, through its wholly owned subsidiaries, is engaged in the business of purchasing, distributing, and transporting natural gas for customers in portions ofArizona ,Nevada , andCalifornia . Southwest Gas' shares of common stock are listed on theNew York Stock Exchange under the symbol "SWX." The SWX Tender Offer has been extended and is scheduled to expire at 12:00 midnight, New York City Time, onMay 9, 2022 , unless the offer is further extended.
Debt Repayments
In
Results of Operations.
Consolidated Financial Results
Our operating businesses comprise consolidated subsidiaries which operate in
various industries and are managed on a decentralized basis. In addition to our
Investment segment's revenues from investment transactions, revenues for our
operating businesses primarily consist of net sales of various products,
services revenue, franchisor operations and
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leasing of real estate. Due to the structure and nature of our business, we
primarily discuss the results of operations by individual reporting segment in
order to better understand our consolidated operating performance. In addition
to the summarized financial results below, refer to Note 12, "Segment
Reporting," to the condensed consolidated financial statements for a
reconciliation of each of our reporting segment's results of continuing
operations to our consolidated results.
The comparability of our summarized consolidated financial results presented
below is affected primarily by the performance of the Investment Funds (as
defined below), and the results of operations of our Energy segment, impacted by
the demand and pricing for its products. Refer to our respective segment
discussions and "Other Consolidated Results of Operations," below for further
discussion.
Net Income (Loss)
Revenues Net Income (Loss) Attributable to Icahn Enterprises
Three Months Ended March 31, Three Months Ended March 31, Three Months Ended March 31,
2022 2021 2022 2021 2022 2021
(in millions)
Investment $ 931 $ 943 $ 895 $ 862 $ 414 $ 391
Holding Company 32 8 (126) (157) (126) (157)
Other Operating Segments:
Energy 2,363 1,532 141 (67) 61 (33)
Automotive 556 597 (28) (46) (28) (46)
Food Packaging 102 95 6 (1) 5 (1)
Real Estate 28 17 3 (1) 3 (1)
Home Fashion 55 41 (1) (4) (1) (4)
Pharma 17 30 (5) 8 (5) 8
Metals - 121 - 5 - 5
Other operating segments 3,121 2,433 116 (106) 35 (72)
Consolidated $ 4,084 $ 3,384 $ 885 $ 599 $ 323 $ 162
Investment
We invest our proprietary capital through various private investment funds
("Investment Funds"). As of March 31, 2022 and December 31, 2021 , we had
investments with a fair market value of approximately $4.7 billion and $4.2
billion , respectively, in the Investment Funds. As of March 31, 2022 and
December 31, 2021 , the total fair market value of investments in the Investment
Funds made by Mr. Icahn and his affiliates (excluding us and Brett Icahn ) was
approximately $5.5 billion and $5.0 billion , respectively.
Our Investment segment's results of operations are reflected in net income in
the condensed consolidated statements of operations. Our Investment segment's
net income (loss) is driven by the amount of funds allocated to the Investment
Funds and the performance of the underlying investments in the Investment Funds.
Future funds allocated to the Investment Funds may increase or decrease based on
the contributions and redemptions by our Holding Company, Mr. Icahn and his
affiliates and by Brett Icahn , Mr. Icahn's son. Additionally, historical
performance results of the Investment Funds are not indicative of future results
as past market conditions, investment opportunities and investment decisions may
not occur in the future. Changes in general market conditions coupled with
changes in exposure to short and long positions have significant impact on our
Investment segment's results of operations and the comparability of results of
operations year over year and as such, future results of operations will be
impacted by our future exposures and future market conditions, which may not be
consistent with prior trends. Refer to the "Investment Segment Liquidity"
section of our "Liquidity and Capital Resources" discussion for additional
information regarding our Investment segment's exposure as of March 31, 2022 .
For the three months ended
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The following table sets forth the performance attribution for the Investment
Funds' returns.
Three Months Ended March 31,
2022 2021
Long positions 15.1 % 18.5 %
Short positions (5.4) % (9.2) %
Other (0.1) % (0.1) %
9.6 % 9.2 %
The following table presents net income (loss) for our Investment segment for
the three months ended
Three Months Ended March 31,
2022 2021
(in millions)
Long positions $ 1,494 $ 1,914
Short positions (586) (1,041)
Other (13) (11)
$ 895 $ 862
Three Months Ended
For the three months endedMarch 31, 2022 , the Investment Funds' positive performance was primarily driven by net gains in long positions, offset in part by net losses in short positions. The positive performance of our Investment segment's long positions was driven primarily by gains in two energy sector investments aggregating approximately$1.8 billion . The positive performance of our Investment segment's long positions was offset in part by losses from two healthcare sector investments aggregating$267 million and a consumer, cyclical sector investment of$109 million . The negative performance of our Investment segment's short positions was driven primarily by the negative performance of an energy sector hedge of$416 million and the negative performance of certain credit default swaps positions of$314 million . These decreases were offset in part by the positive performance of a broad market hedge totaling$269 million . For the three months endedMarch 31, 2021 , the Investment Funds' positive performance was driven by net gains in their long positions, offset in part by net losses in their short positions. The positive performance of our Investment segment's long positions was driven primarily by gains in two energy sector investments aggregating approximately$1.1 billion and a consumer, cyclical sector investment of$253 million . The aggregate performance of investments with net gains across various sectors accounted for an additional positive performance of our Investment segment's long positions. The negative performance of our Investment segment's short positions was driven primarily by the negative performance of an energy sector investment of$494 million and broad market hedges of$329 million . The aggregate performance of investments with net losses across various sectors accounted for an additional negative performance of our Investment segment's short positions. The negative performance of our Investment segment's short positions was offset in part by gains from a consumer, cyclical sector investment of$196 million .
Energy
Our Energy segment is primarily engaged in the petroleum refining and nitrogen fertilizer manufacturing businesses. The petroleum business accounted for approximately 91% and 96% of our Energy segment's net sales for the three months endedMarch 31, 2022 and 2021, respectively. The results of operations of the petroleum business are primarily affected by the relationship between refined product prices and the prices for crude oil and other feedstocks that are processed and blended into petroleum products, such as gasoline, diesel fuel and jet fuel, that are produced by a refinery ("refined products"). The cost to acquire crude oil and other feedstocks and the price for which refined products are ultimately sold depend on factors beyond our Energy segment's control, including the supply of and demand for crude oil, as well as gasoline and other refined 33 Table of Contents
products. This supply and demand depend on, among other factors, changes in domestic and foreign economies, weather conditions, domestic and foreign political affairs, production levels, the availability of imports, the marketing of competitive fuels and the extent of government regulation. Because the petroleum business applies first-in, first-out accounting to value its inventory, crude oil price movements may impact gross margin in the short-term fluctuations in the market price of inventory. The effect of changes in crude oil prices on the petroleum business' results of operations is influenced by the rate at which the prices of refined products adjust to reflect these changes. In addition to recent market conditions, including the impact of theRussia /Ukraine conflict, there are long-term factors that may impact the demand for refined products. These factors include mandated renewable fuels standards, proposed climate change laws and regulations, and increased mileage standards for vehicles. The petroleum business is also subject to the Renewable Fuel Standard of theUnited States Environmental Protection Agency , which requires the operating companies in our Energy segment to either blend "renewable fuels" with their transportation fuels or purchase renewable identification numbers ("RINs"), to the extent available, in lieu of blending, or to seek other exemptions. The price of RINs has been extremely volatile and the future cost of RINs for the petroleum business is difficult to estimate. Additionally, the cost of RINs is dependent upon a variety of factors, which include the availability of RINs for purchase, the price at which RINs can be purchased, transportation fuel production levels, the mix of the petroleum business' petroleum products, as well as the fuel blending performed at its refineries and downstream terminals, all of which can vary significantly from period to period. Refer to Note 16, "Commitments and Contingencies," to the condensed consolidated financial statements for further discussion of RINs. InDecember 2020 , our Energy segment approved a renewable diesel project at one of its refineries, which would convert the refinery's hydrocracker to a renewable diesel unit ("RDU") capable of producing 100 million gallons of renewable diesel per year and approximately 170 to 180 million RINs annually. As a result of conversion, the crude oil capacity of the refinery will be reduced. Further, the conversion enables our Energy segment to capture additional benefits associated with the existing blenders' tax credit that expires at the end of 2022 and low carbon fuel standard programs in states such asCalifornia . Our Energy segment has additional plans to add pretreating capabilities for the RDU and construction of a similar facility at its other refinery. These collective renewable diesel efforts could reduce our Energy segment's Renewable Fuels Standard ("RFS") exposure. However, any actions taken by theSupreme Court , resulting administration efforts under the RFS, such as denial of existing or previous waiver applications, and market conditions could significantly impact the amount by which our Energy segment's renewable diesel business mitigates our costs to comply with the RFS, if at all. Three Months Ended March 31, 2022 2021 (in millions) Net sales $ 2,373 $ 1,463 Cost of goods sold 2,123 1,579 Gross margin $ 250 $ (116)
Three Months
Net sales for our Energy segment increased by$910 million (62%) for the three months endedMarch 31, 2022 as compared to the comparable prior year period due to an increase in our petroleum business' net sales, which increased$748 million , as well as an increase in our nitrogen fertilizer business' net sales, which increased$162 million over the comparable periods. The increase in the petroleum business' net sales was primarily due to an increase in prices of gasoline and distillates mainly attributable to the ongoing conflict inUkraine resulting in a global increase in commodity prices. Volumes were lower in the comparable prior year period due to the reduced utilization of the refineries resulting from the impact of a weather event. Our nitrogen fertilizer business' net sales increased primarily due to an increase in urea ammonium nitrate ("UAN") sales primarily due to favorable pricing conditions. Cost of goods sold for our Energy segment increased by$544 million (34%) for the three months endedMarch 31, 2022 as compared to the comparable prior year period. The increase was primarily due to our petroleum business as a result of higher cost of consumed crude oil. The higher cost of consumed crude oil was due to an increase in volumes, as discussed above, offset in part by lower net cost of RINs of$71 million and higher derivative performance of$34 34
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million. Gross margin for our Energy segment improved by$366 million for the three months endedMarch 31, 2022 as compared to the comparable prior year period. Gross margin as a percentage of net sales was 11% and (8)% for the three months endedMarch 31, 2022 and 2021, respectively. The improvement in the gross margin as a percentage of net sales was primarily attributable to the petroleum business, which was primarily due to higher crack spreads and a decrease in the net cost of RINs, in addition to higher net sales and pricing in the nitrogen fertilizer business. These improvements were offset in part by increased RFS compliance costs.
Automotive
Our Automotive segment's results of operations are generally driven by the distribution and installation of automotive aftermarket parts and the demand for automotive service and maintenance, and is affected by the relative strength of automotive part replacement trends, among other factors. Our Automotive segment has been in the process of implementing a multi-year transformation plan, which includes the restructuring of its businesses. The transformation plan includes operating the automotive services and aftermarket parts businesses as separate businesses, streamliningIcahn Automotive's corporate and field support teams, facility closures, consolidations and conversions, inventory optimization actions, and the re-focusing of its automotive parts business on certain core markets. As part of this plan, in 2021Icahn Automotive entered into an agreement to sell certain inventory assets relating to its aftermarket parts business at 109 locations and a distribution center inCalifornia and certain other inventory and fixed assets inCalifornia . Costs to implement the transformation plan include restructuring charges, which are recorded when specific plans are approved, and which may be significant.
Our Automotive segment's priorities include:
? Positioning the service business to take advantage of opportunities in the
do-it-for-me market and vehicle fleets;
? Optimizing the value of the commercial parts distribution business in certain
high-volume core markets;
? Exiting the automotive parts distribution business in certain low volume,
non-core markets;
? Improving inventory management across
distribution network;
? Investment in customer experience initiatives and selective upgrades in
facilities;
? Investment in employees with focus on training and career development
investments; and
? Business process improvements, including investments in our supply chain and
information technology capabilities.
The following table presents our Automotive segment's operating revenue, cost of
revenue and gross margin. Our Automotive segment's results of operations also
include automotive services labor. Automotive services labor revenues are
included in other revenues from operations in our condensed consolidated
statements of operations, however, the sale of any installed parts or materials
related to automotive services are included in net sales. Therefore, we discuss
the combined results of our automotive net sales and automotive services labor
revenues below.
Three Months Ended March 31,
2022 2021
(in millions)Net sales and other revenues from operations $ 554 $ 598 Cost of goods sold and other expenses from operations 384
425
Gross margin $ 170 $ 173
Three Months Ended
Net sales and other revenues from operations for our Automotive segment for the three months endedMarch 31, 2022 decreased by$44 million (7%) as compared to the comparable prior year period. The decrease was attributable to a decrease in aftermarket parts sales of$70 million (26%), offset in part by an increase in automotive services revenue of$26 million (8%). On an organic basis, aftermarket parts sales increased$7 million over the comparable periods including an increase in ecommerce of$3 million (30%) and an increase in commercial sales of$2 million (3%). Store 35
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closures related to the transformation plan accounted for a$77 million decrease in aftermarket parts sales. The increase in automotive services revenues represents an increase on a primarily organic basis as prices have increased 2% over the comparable prior year. Cost of goods sold and other expenses from operations for the three months endedMarch 31, 2022 decreased by$41 million (10%) as compared to the comparable prior year period. The decrease was primarily due to lower costs attributable to lower aftermarket parts sales which exceeded higher costs associated with higher services revenues. Gross margin on net sales and other revenue from operations for the three months endedMarch 31, 2022 decreased by$3 million (2%) as compared to the comparable prior year period. Gross margin as a percentage of net sales and other revenue from operations was 31% and 29% for the three months endedMarch 31, 2022 and 2021, respectively.
Our Food packaging segment's results of operations are primarily driven by the production and sale of cellulosic, fibrous and plastic casings for the processed meat and poultry industry and derives a majority of its total net sales from customers located outsidethe United States .
Three Months Ended
Net sales for the three months endedMarch 31, 2022 were flat as compared to the comparable prior year period. Impacts to sales were due to an increase of$10 million in price and product mix, offset by a decrease of$2 million due to unfavorable effects of foreign exchange and a decrease of$8 million due to lower volumes. Cost of goods sold for the three months endedMarch 31, 2022 increased by$1 million (1%) as compared to the comparable prior year period due to the effects of raw material price inflation, manufacturing variances and distribution costs, offset in part by lower volumes. Gross margin as a percentage of net sales was 20% and 21% for the three months endedMarch 31, 2022 and 2021, respectively.
Real Estate
Our Real Estate segment consists primarily of investment properties, the development and sale of single-family homes, and the management of a country club. Sales of single-family homes are included in net sales in our consolidated statements of operations. Results from investment properties and country club operations are included in other revenues from operations in our consolidated statements of operations. Revenue from our real estate operations for each of the three months endedMarch 31, 2022 and 2021 were primarily derived from the sale of residential units and rental operations.
Home Fashion
Our Home Fashion segment is significantly influenced by the overall economic environment, including consumer spending, at the retail level, for home textile products.
Three Months Ended
Net sales for the three months endedMarch 31, 2022 increased by$14 million (34%) compared to the comparable prior year period primarily due to an increase in demand as leisure and business travel have increased due to the reduced impact of the COVID-19 pandemic on our Home Fashion segment's hospitality business. Cost of goods sold for the three months endedMarch 31, 2022 increased$11 million (32%) compared to the comparable prior year period due to higher material and freight costs. Gross margin as a percentage of net sales was 18% and 17% for the three months endedMarch 31, 2022 and 2021, respectively. The increase is primarily due to customer price increases and improved production capacity. 36 Table of Contents Pharma
Our Pharma segment derives revenues primarily from the sale of its products directly to customers, wholesalers and pharmacies.
Three Months Ended
Net sales for the three months endedMarch 31, 2022 decreased by$14 million (48%) compared to the comparable prior year period primarily due to the absence of a$13 million one-time sale of product to a single customer in the first quarter of 2021. Cost of goods sold for the three months endedMarch 31, 2022 decreased$2 million (14%) compared to the prior year period due to lower volumes. Gross margin as a percentage of net sales was 20% and 52% for the three months endingMarch 31, 2022 and 2021, respectively. The decrease is due to the absence of the one-time sale in the first quarter of 2021 mentioned above.
Holding Company
Our Holding Company's results of operations primarily reflect the interest
expense on its senior unsecured notes and investment gains and losses from
equity investments for each of the three months ended
Other Consolidated Results of Operations
Selling, General and Administrative
Three Months Ended
Our consolidated selling, general and administrative during the three months endedMarch 31, 2022 decreased by$15 million (5%) as compared to the comparable prior year period primarily due to lower expenses of our Automotive segment mainly related to its transformation plan.
Interest Expense
Three Months Ended
Our consolidated interest expense during the three months endedMarch 31, 2022 decreased by$61 million (31%) as compared to the comparable prior year period. The decrease was primarily due to lower interest expense from our Investment segment due to lower balances on margin accounts.
Income Tax Expense
Certain of our subsidiaries are partnerships not subject to taxation in our condensed consolidated financial statements and certain other subsidiaries are corporations, or subsidiaries of corporations, subject to taxation in our condensed consolidated financial statements. Therefore, our consolidated effective tax rate generally differs from the statutory federal tax rate. Refer to Note 13, "Income Taxes," to the condensed consolidated financial statements for a discussion of income taxes.
Liquidity and Capital Resources
Holding Company Liquidity
We are a holding company. Our cash flow and our ability to meet our debt service
obligations and make distributions with respect to depositary units depends on
the cash flow resulting from divestitures, equity offerings and debt financings,
interest income, returns on our interests in the Investment Funds and the
payment of funds to us by our subsidiaries in the form of loans, dividends and
distributions. We may pursue various means to raise cash from our subsidiaries.
To date, such means include receipt of dividends and distributions from
subsidiaries, obtaining loans or
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other financings based on the asset values of subsidiaries or selling debt or equity securities of subsidiaries through capital market transactions. To the degree any distributions and transfers are impaired or prohibited, our ability to make payments on our debt or distributions on our depositary units could be limited. The operating results of our subsidiaries may not be sufficient for them to make distributions to us. In addition, our subsidiaries are not obligated to make funds available to us and distributions and intercompany transfers from our subsidiaries to us may be restricted by applicable law or covenants contained in debt agreements and other agreements. As ofMarch 31, 2022 , our Holding Company had cash and cash equivalents of approximately$1.4 billion and total debt of approximately$5.3 billion . As ofMarch 31, 2022 , our Holding Company had investments in the Investment Funds with a total fair market value of approximately$4.7 billion . We may redeem our direct investment in the Investment Funds upon notice. See "Investment Segment Liquidity" below for additional information with respect to our Investment segment liquidity. See "Consolidated Cash Flows" below for additional information with respect to our Holding Company liquidity.
Holding Company Borrowings and Availability
March 31, December 31,
2022 2021
(in millions)
6.750% senior unsecured notes due 2024 $ - $ 499
4.750% senior unsecured notes due 2024 1,105 1,105
6.375% senior unsecured notes due 2025 749 748
6.250% senior unsecured notes due 2026 1,250 1,250
5.250% senior unsecured notes due 2027 1,460 1,461
4.375% senior unsecured notes due 2029 747 747
$ 5,311 $ 5,810
Holding Company debt consists of various issues of fixed-rate senior unsecured
notes issued by Icahn Enterprises and Icahn Enterprises Finance Corp. (together
the "Issuers") and guaranteed by Icahn Enterprises Holdings (the "Guarantor").
Interest on each tranche of senior unsecured notes is payable semi-annually.
In February 2022 , we redeemed all of our $500 million in aggregate principal
amount of 6.750% senior unsecured notes due 2024 at par. This transaction is
expected to result in annual savings of approximately $34 million in future
interest expense.
Each of our senior unsecured notes and the related guarantees are the senior
unsecured obligations of the Issuers and rank equally with all of the Issuers'
and the Guarantor's existing and future senior unsecured indebtedness and senior
to all of the Issuers' and the Guarantor's existing and future subordinated
indebtedness. Each of our senior unsecured notes and the related guarantees are
effectively subordinated to the Issuers' and the Guarantor's existing and future
secured indebtedness to the extent of the collateral securing such
indebtedness. Each of our senior unsecured notes and the related guarantees are
also effectively subordinated to all indebtedness and other liabilities of the
Issuers' subsidiaries other than the Guarantor.
The indentures governing our senior unsecured notes described above restrict the
payment of cash distributions, the purchase of equity interests or the purchase,
redemption, defeasance or acquisition of debt subordinated to the senior
unsecured notes. The indentures also restrict the incurrence of debt or the
issuance of disqualified stock, as defined in the indentures, with certain
exceptions. In addition, the indentures require that on each quarterly
determination date, Icahn Enterprises and the guarantor of the notes (currently
only Icahn Enterprises Holdings ) maintain certain minimum financial ratios, as
defined therein. The indentures also restrict the creation of liens, mergers,
consolidations and sales of substantially all of our assets, and transactions
with affiliates. Additionally, each of the senior unsecured notes outstanding as
of March 31, 2022 , except for the 4.750% senior unsecured notes due 2024, the
5.250% senior unsecured notes due 2027 and 4.375% senior unsecured notes due
2029, are subject to optional redemption premiums in the event we redeem any of
the notes prior to certain dates as described in the indentures.
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As ofMarch 31, 2022 andDecember 31, 2021 , we were in compliance with all covenants, including maintaining certain minimum financial ratios, as defined in the indentures. Additionally, as ofMarch 31, 2022 , based on covenants in the indentures governing our senior unsecured notes, we are not permitted to incur additional indebtedness; however, we are permitted to issue new notes in connection with debt refinancings of existing notes.
At-The-Market Offerings
During the three months endedMarch 31, 2022 ,Icahn Enterprises sold 3,436,553 depositary units pursuant to its Open Market Sale Agreement entered into onDecember 3, 2021 , resulting in gross proceeds of$182 million . As ofMarch 31, 2022 , we continue to have an activeOpen Market Sale Agreement andIcahn Enterprises may sell its depositary units for up to an additional$145 million in aggregate gross sale proceeds pursuant to this agreement. No assurance can be made that any or all amounts will be sold during the term of the agreement, and we have no obligation to sell additional depositary units under the Open Market Sale Agreement. Depending on market conditions, we may continue to sell depositary units under the Open Market Sale Agreement, and, if appropriate, enter into a new Open Market Sale Agreement to continue our "at-the-market" sales program once we have sold the full amount of our existing Open Market Sale Agreement. Our ability to access remaining capital under our "at-the-market" program may be limited by market conditions at the time of any future potential sale. While we were able to sell shares during the three months endedMarch 31, 2022 , there can be no assurance that any future capital will be available on acceptable terms or at all under this program.
LP Unit Distributions
OnFebruary 23, 2022 ,Icahn Enterprises declared a quarterly distribution in the amount of$2.00 per depositary unit in which each depositary unitholder had the option to make an election to receive either cash or additional depositary units. In connection with this distribution, aggregate cash distributions to all depositary unitholders that made a timely election to receive cash was$48 million inApril 2022 . OnMay 4, 2022 , the Board of Directors of the general partner ofIcahn Enterprises declared a quarterly distribution in the amount of$2.00 per depositary unit, which will be paid on or aboutJune 29, 2022 to depositary unitholders of record at the close of business onMay 20, 2022 . Depositary unitholders will have untilJune 16, 2022 to make a timely election to receive either cash or additional depositary units. If a unitholder does not make a timely election, it will automatically be deemed to have elected to receive the distribution in additional depositary units. Depositary unitholders who elect to receive (or who are deemed to have elected to receive) additional depositary units will receive units valued at the volume weighted average trading price of the units during the five consecutive trading days endingJune 24, 2022 .Icahn Enterprises will make a cash payment in lieu of issuing fractional depositary units to any unitholders electing to receive (or who are deemed to have elected to receive) depositary units.
Sale of Investments
During the three months ended
Investment Segment Liquidity
In addition to investments by us and
Additionally, our Investment segment liquidity is driven by the investment activities and performance of the Investment Funds. As ofMarch 31, 2022 , the Investment Funds' had a net short notional exposure of 21%. The Investment Funds' long exposure was 85% (84% long equity and 1% long credit) and its short exposure was 106% (89% short equity and 17% short credit). The notional exposure represents the ratio of the notional exposure of the Investment Funds' invested capital to the net asset value of the Investment Funds atMarch 31, 2022 . 39
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Of the Investment Funds' 85% long exposure, 71% was comprised of the fair value of its long positions (with certain adjustments) and 14% was comprised of single name equity forward contracts and credit contracts. Of the Investment Funds' 106% short exposure, 46% was comprised of the fair value of its short positions and 60% was comprised of short broad market index swap derivative contracts and short credit default swap contracts. With respect to both our long positions that are not notionalized (71% long exposure) and our short positions that are not notionalized (46% short exposure), each 1% change in exposure as a result of purchases or sales (assuming no change in value) would have a 1% impact on our cash and cash equivalents (as a percentage of net asset value). Changes in exposure as a result of purchases and sales as well as adverse changes in market value would also have an effect on funds available to us pursuant to prime brokerage lines of credit. With respect to the notional value of our other short positions (60% short exposure), our liquidity would decrease by the balance sheet unrealized loss if we were to close the positions at quarter end prices. This would be offset by a release of restricted cash balances collateralizing these positions as well as an increase in funds available to us pursuant to certain prime brokerage lines of credit. If we were to increase our short exposure by adding to these short positions, we would be required to provide cash collateral equal to a small percentage of the initial notional value at counterparties that require cash as collateral and then post additional collateral equal to 100% of the mark to market on adverse changes in fair value. For our counterparties who do not require cash collateral, funds available from lines of credit would decrease.
Other Segment Liquidity
Segment Cash and Cash Equivalents
Segment cash and cash equivalents (excluding our Investment segment) consists of
the following:
March 31, December 31,
2022 2021
(in millions)
Energy $ 676 $ 510
Automotive 36 28
Food Packaging 10 10
Real Estate 28 30
Home Fashion 3 3
Pharma 18 14
$ 771 $ 595
Segment Borrowings and Availability
Segment debt consists of the following:
March 31, December 31,
2022 2021
(in millions)
Energy $ 1,595 $ 1,660
Automotive 20 26
Food Packaging 158 155
Real Estate 1 1
Home Fashion 41 40
$ 1,815 $ 1,882
Refer to our Annual Report on Form 10-K for the year ended
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Our segments have additional borrowing availability under certain revolving credit facilities as summarized below:
March 31,
2022
(in millions)
Energy $ 406
Food Packaging 19
Home Fashion 18
$ 443
The above outstanding debt and borrowing availability with respect to each of our continuing operating segments reflects third-party obligations.
InFebruary 2022 , CVR Partners redeemed the remaining$65 million aggregate principal amount of its 9.25% senior secured notes dueJune 2023 at par. This transaction is expected to result in annual savings of approximately$6 million in future interest expense.
Subsidiary Stock Repurchase Program
OnMay 6, 2020 , the Board of Directors of CVR Partners' general partner approved a unit repurchase program which would enable it to repurchase up to$10 million of its common units from time to time through open market transactions, block trades, privately negotiated transactions or otherwise in accordance with applicable securities laws. OnFebruary 22, 2021 , the Board of Directors of CVR Partners authorized an additional$10 million under the unit repurchase program. During the three months endedMarch 31, 2022 and 2021, CVR Partners repurchased 111,695 and 24,378 common units, respectively, on the open market at a cost of$12 million and$1 million , respectively. As ofMarch 31, 2022 , CVR Partners has a nominal amount remaining under its unit repurchase program.
Subsidiary Dividend
In the first quarter of 2022, our Energy segment, declared a cash dividend of$0.40 per share, which is payableMay 23, 2022 to shareholders of record as ofMay 13, 2022 . Our portion of the dividend will include approximately$28 million in cash. Consolidated Cash Flows Our Holding Company's cash flows are generally driven by payments and proceeds associated with our senior unsecured debt obligations and payments and proceeds associated with issuances of equity byIcahn Enterprises . Additionally, our Holding Company's cash flows include transactions with our Investment and other operating segments. Our Investment segment's cash flows are primarily driven by investment transactions, which are included in net cash flows from operating activities due to the nature of its business, as well as contributions to and distributions fromMr. Icahn and his affiliates (includingIcahn Enterprises andIcahn Enterprises Holdings ) andBrett Icahn , which are included in net cash flows from financing activities. Our other operating segments' cash flows are driven by the activities and performance of each business as well as transactions with our Holding Company, as discussed below. 41
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The following table summarizes cash flow information for
Three Months Ended March 31, 2022 Three Months Ended March 31, 2021
Net Cash Provided By (Used In) Net Cash Provided By (Used In)
Operating Investing Financing Operating Investing Financing
Activities Activities Activities Activities Activities Activities
(in millions)
Holding Company $ (72) $ 52 $ (323) $ (81) $ 116 $ 179
Investment 1,689 - 2 (519) - 40
Other Operating Segments:
Energy 322 (41) (115) 96 (54) (2)
Automotive (31) (19) 58 (21) 3 33
Food Packaging - (4) 3 (12) (2) 4
Metals - - - (9) (1) 9
Real Estate 18 (5) (14) 4 (1) 5
Home Fashion (10) - 9 (3) - 1
Pharma 4 - - (6) - -
Other operating segments 303 (69) (59) 49 (55) 50
Total before eliminations 1,920 (17) (380) (551) 61 269
Eliminations - 55 (55) - 55 (55)
Consolidated $ 1,920 $ 38 $ (435) $ (551) $ 116 $ 214
Eliminations
Eliminations in the table above relate to certain of our Holding Company's transactions with our Investment and other operating segments. Our Holding Company's net (investments in) distributions from the Investments Funds, when applicable, are included in cash flows from investing activities for our Holding Company and cash flows from financing activities for our Investment segment. Similarly, our Holding Company's net distributions from (investments in) our other operating segments are included in cash flows from investing activities for our Holding Company and cash flows from financing activities for our other operating segments. Holding Company Our Holding Company's cash flows from operating activities for each of three months endedMarch 31, 2022 and 2021 were primarily attributable to our semi-annual interest payments on our senior unsecured notes. The decrease in interest payments over the comparable period is primarily due to the redemption of$500 million of senior unsecured notes inFebruary 2022 . Our Holding Company's cash flows from investing activities for the three months endedMarch 31, 2022 were primarily attributable to proceeds from the sale of equity investments aggregating$107 million offset in part by investments in/contributions to our operating subsidiaries aggregating$55 million , including an investment in our Automotive segment of$60 million . Our Holding Company's cash flows from investing activities for the three months endedMarch 31, 2021 were primarily attributable to proceeds from the sale of equity investments of$171 million offset in part by investments in/contributions to our operating subsidiaries aggregating$55 million , including an investment in our Automotive segment of$50 million . Our Holding Company's cash flows from financing activities for the three months endedMarch 31, 2022 were due to the redemption of$500 million of senior unsecured notes offset by proceeds from our "at-the-market" offering. Our Holding Company's cash flows from financing activities for the three months endedMarch 31, 2021 were due to proceeds from our "at-the-market" offering, offset in part by the net effect of a debt refinancing transaction. 42 Table of Contents Investment Segment
Our Investment segment's cash flows from operating activities for the comparable periods were attributable to its net investment transactions.
Our Investment segment's cash flows from financing activities for the three
months ended
Other Operating Segments
Our other operating segments' cash flows from operating activities included net cash flows from operating activities before changes in operating assets and liabilities of$233 million and$(82) million for the three months endedMarch 31, 2022 and 2021, respectively, primarily due the results of our Energy segment during both periods. The change in cash flows from operating activities for the three months endedMarch 31, 2022 as compared to the comparable prior year was primarily due to an increase in the operating results of our Energy segment offset in part by a decrease in working capital within our Energy segment primarily associated with the increases in our open RFS position and a gain in derivatives compared to a loss in 2021. Our other operating segments' cash flows from investing activities were primarily due to capital expenditures and turnaround expenditures of$41 million in 2022 compared to$35 million in 2021 in our Energy segment and capital expenditures of$21 million in 2022 compared to$8 million in 2021 within our Automotive segment. In addition, our Energy segment acquired a pipeline for cash consideration of$20 million in the first quarter of 2021. Our other operating segments' cash flows from financing activities were primarily due to our Energy segment. In 2022, our Energy segment redeemed senior notes of$65 million , paid a distribution to noncontrolling interests of$36 million , and had$12 million in unit repurchases. In addition, our other operating segments had net contributions from our Holding Company aggregating$55 million for the three months endedMarch 31, 2022 compared to net contributions aggregating$55 million for the three months endedMarch 31, 2021 .
Consolidated Capital Expenditures
There have been no material changes to our planned capital expenditures as
compared to the estimated capital expenditures for 2021 reported in our Annual
Report on Form 10-K for the year ended
Critical Accounting Estimates
The critical accounting estimates used in the preparation of our condensed consolidated financial statements that we believe affect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements presented in this Report are described in Management's Discussion and Analysis of Financial Condition and Results of Operations and in the Notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
There have been no material changes to our critical accounting policies and
estimates during the three months ended
Recently Issued Accounting Standards
Refer to Note 2, "Basis of Presentation and Summary of Significant Accounting
Policies," to the condensed consolidated financial statements for a discussion
of recent accounting pronouncements applicable to us.
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