Icahn Enterprises L.P. (Nasdaq: IEP) Today Announced Its Fourth Quarter and Full Year 2023 Financial Results
- Significant improvement in net loss and Adjusted EBITDA for Icahn Enterprises in the fourth quarter.
- Decline in Indicative Net Asset Value primarily due to shorts in investment funds and distributions to unitholders.
- Successful activist strategy highlighted by Chairman Carl C. Icahn with a substantial increase in depositary unit prices since 2000.
- Continued focus on activism, spin-offs, and asset sales to create shareholder value.
- Net losses and decrease in Indicative Net Asset Value compared to the previous year.
- Shorts in investment funds impacting financial performance.
- Lower Adjusted EBITDA for the twelve months ended December 31, 2023, compared to the previous year.
Insights
The reported net loss of $139 million, despite being an improvement over the previous year's quarter, indicates a challenging period for Icahn Enterprises. The decrease in net asset value by $411 million is significant, reflecting volatility in the investment portfolio, particularly the impact of short positions utilized for hedging. This volatility is noteworthy for stakeholders as it may signal potential risks in the investment strategy that could affect future profitability and distributions.
The declared distribution of $1.00 per depositary unit, amidst the net losses, suggests a strategy to maintain investor confidence and deliver shareholder value. However, it's important to observe the sustainability of such distributions if losses continue. The cash position of $2.7 billion provides a cushion and indicates liquidity, which is a positive sign for the company's ability to manage short-term obligations and invest in new opportunities.
The long-term perspective offered by Icahn Enterprises, citing a 1,066% increase in the value of their depositary units since 2000, outperforming major indices, showcases the potential benefits of an activist investment approach. For investors, this long-term outlook may be attractive, especially when considering the historical volatility and underperformance during certain periods.
However, the recent underperformance relative to the company's historical levels and the general market could raise concerns. The mention of new activist opportunities in companies like American Electric Power Company and JetBlue Airways indicates a continued focus on seeking undervalued companies or those with potential for operational improvements, which could be a key driver for future growth and recovery in performance.
The strategic moves by Icahn Enterprises, such as the defeasance of their 2024 notes and no immediate note maturities until December 2025, provide financial flexibility and reduce short-term debt pressure. This financial maneuvering is crucial for maintaining a stable capital structure, especially when facing a decrease in net asset value and net losses.
The emphasis on activism as a core investment strategy is a double-edged sword; it can lead to significant gains when successful but also exposes the portfolio to higher volatility and potential losses. Investors should consider the balance between the potential for high returns and the associated risks of such an investment approach. The ability of Icahn Enterprises to influence corporate governance and operations through its activist positions is a unique asset that could lead to value creation over time.
- Fourth quarter net loss attributable to IEP of
$139 million $116 million - Fourth quarter Adjusted EBITDA attributable to IEP of
$9 million $84 million - Indicative Net Asset Value was
$4.76 billion $411 million - IEP declares fourth quarter distribution of
$1.00 - In December 2023 we defeased our 2024 notes and the next note maturity of
$750 million - Our cash position was
$2.7 billion
As Chairman Carl C. Icahn has previously stated: "I have come to believe that activism, on a risk reward basis, is the best investment paradigm that exists. While this method of investing certainly is somewhat volatile, over the long term the returns cannot be matched."
"In 2000, IEP began to expand its business beyond its traditional real estate activities to fully embrace the activist strategy. On January 1, 2000, the closing sale price of our depositary units was
"The reason activism works so well is that, somewhat unfortunately, many public companies are not well run. It is very difficult and expensive to remove a poorly-performing CEO and board. And that is why so few investors today employ true activism. Fortunately for IEP and its unitholders, we are in a unique position to be activists. Given our track record, our stable capital base, and our willingness to launch proxy contests (which are extremely arduous and expensive to conduct and even more so to win), we are frequently invited into the tent without ever having to take aggressive actions. To that end, we currently have 25 board seats in our disclosed public company investments."
"We encourage all of our companies to pursue spin-offs and asset sales when they create value, improve leadership in key positions and help manage and settle complex litigation. We often find ourselves investing in companies that are temporarily out of favor and/or contain hidden jewels. We have continued to pick our spots and find new, exciting activist opportunities, including the recently announced positions in American Electric Power Company, Inc. (ticker: AEP) and JetBlue Airways Corp. (ticker: JBLU) within our Investment segment."
"Over the long term, our activist returns have been outstanding. Given our hedge portfolio and the frequent long time horizon of our complex activist investments, our returns can often be lumpy. There are also times when our hedge book can go against us and overwhelm the performance of our long positions. This underperformance has occurred several times in IEP's history. While there are never guarantees, we expect our returns to improve back to historical levels where our long positions far outperform our hedges. If successful, this should result in greatly enhanced NAV."
Financial Summary
(Net loss and Adjusted EBITDA figures in commentary below are attributable to Icahn Enterprises, unless otherwise specified)
For the three months ended December 31, 2023, revenues were
For the twelve months ended December 31, 2023, revenues were
As of December 31, 2023, indicative net asset value decreased
On February 26, 2024, the Board of Directors of the general partner of Icahn Enterprises declared a quarterly distribution in the amount of
(1) | Our cash position of |
Icahn Enterprises L.P., a master limited partnership, is 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.
Caution Concerning Forward-Looking Statements
This release may contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, many of which are beyond our ability to control or predict. Forward-looking statements may be identified by words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "will" or words of similar meaning and include, but are not limited to, statements about the expected future business and financial performance of Icahn Enterprises and its subsidiaries. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors, including risks related to economic downturns, substantial competition and rising operating costs; the impacts from the
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||
(UNAUDITED) | ||||||||||||
Three Months Ended | Year Ended | |||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||
(in millions, except per unit amounts) | ||||||||||||
Revenues: | ||||||||||||
Net sales | $ | 2,644 | $ | 3,280 | $ | 11,077 | $ | 13,378 | ||||
Other revenues from operations | 182 | 186 | 770 | 748 | ||||||||
Net loss from investment activities | (300) | (478) | (1,575) | (168) | ||||||||
Interest and dividend income | 155 | 148 | 636 | 328 | ||||||||
Gain (loss) on disposition of assets, net | 3 | (11) | 8 | (8) | ||||||||
Other loss, net | (7) | (24) | (69) | (177) | ||||||||
2,677 | 3,101 | 10,847 | 14,101 | |||||||||
Expenses: | ||||||||||||
Cost of goods sold | 2,380 | 2,951 | 9,327 | 11,689 | ||||||||
Other expenses from operations | 160 | 142 | 643 | 583 | ||||||||
Selling, general and administrative | 199 | 329 | 852 | 1,250 | ||||||||
Restructuring, net | — | 2 | 1 | 2 | ||||||||
Impairment | 7 | — | 7 | — | ||||||||
Credit loss on related party note receivable | — | — | 139 | — | ||||||||
Loss on deconsolidation of subsidiary | — | — | 246 | — | ||||||||
Interest expense | 128 | 144 | 554 | 568 | ||||||||
2,874 | 3,568 | 11,769 | 14,092 | |||||||||
(Loss) income before income tax benefit (expense) | (197) | (467) | (922) | 9 | ||||||||
Income tax (expense) benefit | (8) | 59 | (90) | (34) | ||||||||
Net loss | (205) | (408) | (1,012) | (25) | ||||||||
Less: net loss attributable to non-controlling interests | (66) | (153) | (328) | 158 | ||||||||
Net loss attributable to Icahn Enterprises | $ | (139) | $ | (255) | $ | (684) | $ | (183) | ||||
Net loss attributable to Icahn Enterprises allocated to: | ||||||||||||
Limited partners | $ | (136) | $ | (250) | $ | (670) | $ | (179) | ||||
General partner | (3) | (5) | (14) | (4) | ||||||||
$ | (139) | $ | (255) | $ | (684) | $ | (183) | |||||
Basic and Diluted loss per LP unit | $ | (0.33) | $ | (0.74) | $ | (1.75) | $ | (0.57) | ||||
Basic and diluted weighted average LP units outstanding | 412 | 340 | 382 | 316 | ||||||||
Distributions declared per LP unit | $ | 1.00 | $ | 2.00 | $ | 6.00 | $ | 8.00 | ||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
(UNAUDITED) | ||||||
December 31, | ||||||
2023 | 2022 | |||||
(in millions, except unit amounts) | ||||||
ASSETS | ||||||
Cash and cash equivalents | $ | 2,951 | $ | 2,337 | ||
Cash held at consolidated affiliated partnerships and restricted cash | 2,995 | 2,549 | ||||
Investments | 3,012 | 6,809 | ||||
Due from brokers | 4,367 | 7,051 | ||||
Accounts receivable, net | 485 | 606 | ||||
Related party notes receivable, net | 11 | — | ||||
Inventories | 1,047 | 1,531 | ||||
Property, plant and equipment, net | 3,969 | 4,038 | ||||
Deferred tax asset | 184 | 127 | ||||
Derivative assets, net | 64 | 805 | ||||
Goodwill | 288 | 288 | ||||
Intangible assets, net | 466 | 533 | ||||
Other assets | 1,019 | 1,240 | ||||
Total Assets | $ | 20,858 | $ | 27,914 | ||
LIABILITIES AND EQUITY | ||||||
Accounts payable | $ | 830 | $ | 870 | ||
Accrued expenses and other liabilities | 1,596 | 1,981 | ||||
Deferred tax liabilities | 399 | 338 | ||||
Derivative liabilities, net | 979 | 691 | ||||
Securities sold, not yet purchased, at fair value | 3,473 | 6,495 | ||||
Due to brokers | 301 | 885 | ||||
Debt | 7,207 | 7,096 | ||||
Total liabilities | 14,785 | 18,356 | ||||
Commitments and contingencies (Note 19) | ||||||
Equity: | ||||||
Limited partners: Depositary units: 429,033,241 units issued and outstanding at December 31, 2023 and 353,572,182 units issued and outstanding at December 31, 2022 | 3,969 | 4,647 | ||||
General partner | (761) | (747) | ||||
Equity attributable to Icahn Enterprises | 3,208 | 3,900 | ||||
Equity attributable to non-controlling interests | 2,865 | 5,658 | ||||
Total equity | 6,073 | 9,558 | ||||
Total Liabilities and Equity | $ | 20,858 | $ | 27,914 | ||
Use of Non-GAAP Financial Measures
The Company uses certain non-GAAP financial measures in evaluating its performance. These include non-GAAP EBITDA and Adjusted EBITDA. EBITDA represents earnings from continuing operations before net interest expense (excluding our Investment segment), income tax (benefit) expense and depreciation and amortization. We define Adjusted EBITDA as EBITDA excluding certain effects of impairment, restructuring costs, transformation costs, certain pension plan expenses, gains/losses on disposition of assets, gains/losses on extinguishment of debt and certain other non-operational charges. We present EBITDA and Adjusted EBITDA on a consolidated basis and on a basis attributable to Icahn Enterprises net of the effects of non-controlling interests. We conduct substantially all of our operations through subsidiaries. The operating results of our subsidiaries may not be sufficient to make distributions to us. In addition, our subsidiaries are not obligated to make funds available to us for payment of our indebtedness, payment of distributions on our depositary units or otherwise, 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 to which these subsidiaries currently may be subject or into which they may enter into in the future. The terms of any borrowings of our subsidiaries or other entities in which we own equity may restrict dividends, distributions or loans to us.
We believe that providing EBITDA and Adjusted EBITDA to investors has economic substance as these measures provide important supplemental information of our performance to investors and permits investors and management to evaluate the core operating performance of our business without regard to interest (except with respect to our Investment segment), taxes and depreciation and amortization and certain effects of impairment, restructuring costs, certain pension plan expenses, gains/losses on disposition of assets, gains/losses on extinguishment of debt and certain other non-operational charges. Additionally, we believe this information is frequently used by securities analysts, investors and other interested parties in the evaluation of companies that have issued debt. Management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing our operating results, as well as in planning, forecasting and analyzing future periods. Adjusting earnings for these charges allows investors to evaluate our performance from period to period, as well as our peers, without the effects of certain items that may vary depending on accounting methods and the book value of assets. Additionally, EBITDA and Adjusted EBITDA present meaningful measures of performance exclusive of our capital structure and the method by which assets were acquired and financed. Effective December 31, 2023, we modified our calculation of EBITDA to exclude the impact of net interest expense from the Investment segment. This change has been applied to all periods presented. We believe that this revised presentation improves the supplemental information provided to our investors because interest expense within the Investment segment is associated with its core operations of investment activity rather than representative of its capital structure.
EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of our results as reported under generally accepted accounting principles in
- do not reflect our cash expenditures, or future requirements for capital expenditures, or contractual commitments;
- do not reflect changes in, or cash requirements for, our working capital needs; and
- do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments on our debt.
Although depreciation and amortization are non-cash charges, the assets being depreciated or amortized often will have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements. Other companies in the industries in which we operate may calculate EBITDA and Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures. In addition, EBITDA and Adjusted EBITDA do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations.
EBITDA and Adjusted EBITDA are not measurements of our financial performance under
Use of Indicative Net Asset Value Data
The Company uses indicative net asset value as an additional method for considering the value of the Company's assets, and we believe that this information can be helpful to investors. Please note, however, that the indicative net asset value does not represent the market price at which the depositary units trade. Accordingly, data regarding indicative net asset value is of limited use and should not be considered in isolation.
The Company's depositary units are not redeemable, which means that investors have no right or ability to obtain from the Company the indicative net asset value of units that they own. Units may be bought and sold on The Nasdaq Global Select Market at prevailing market prices. Those prices may be higher or lower than the indicative net asset value of the depositary units as calculated by management.
See below for more information on how we calculate the Company's indicative net asset value.
December 31, | September 30, | December 31, | |||
2023 | 2023 | 2022 | |||
(in millions)(unaudited) | |||||
Market-valued Subsidiaries and Investments: | |||||
Holding Company interest in Investment Funds(1) | |||||
CVR Energy(2) | 2,021 | 2,270 | 2,231 | ||
Total market-valued subsidiaries and investments | |||||
Other Subsidiaries: | |||||
Viskase(3) | |||||
Real Estate Holdings(1) | 439 | 440 | 455 | ||
WestPoint Home(1) | 153 | 158 | 156 | ||
Vivus(1) | 227 | 227 | 241 | ||
Automotive Services(4) | 660 | 601 | 490 | ||
Automotive Parts(1)(5)(6) | 15 | 8 | 381 | ||
Automotive Owned Real Estate Assets(7) | 763 | 831 | 831 | ||
Icahn Automotive Group | 1,438 | 1,440 | 1,702 | ||
Total other subsidiaries | |||||
Add: Other Net Assets(8) | 114 | 117 | 20 | ||
Indicative Gross Asset Value | |||||
Add: Holding Company cash and cash equivalents(9) | 1,584 | 1,813 | 1,720 | ||
Less: Holding Company debt(9) | (4,847) | (5,308) | (5,309) | ||
Indicative Net Asset Value | |||||
Indicative net asset value does not purport to reflect a valuation of IEP. The calculated indicative net asset value does not include any value for our Investment Segment other than the fair market value of our investment in the Investment Funds. A valuation is a subjective exercise and indicative net asset value does not necessarily consider all elements or consider in the adequate proportion the elements that could affect the valuation of IEP. Investors may reasonably differ on what such elements are and their impact on IEP. No representation or assurance, express or implied, is made as to the accuracy and correctness of indicative net asset value as of these dates or with respect to any future indicative or prospective results which may vary.
(1) | Represents GAAP equity attributable to us as of each respective date. |
(2) | Based on closing share price on each date (or if such date was not a trading day, the immediately preceding trading day) and the number of shares owned by the Holding Company as of each respective date. |
(3) | Amounts based on market comparables due to lack of material trading volume, valued at 9.0x Adjusted EBITDA for the trailing twelve months ended as of each respective date |
(4) | Amounts based on market comparables, valued at 10.0x Adjusted EBITDA for the trailing twelve months ended December 31, 2023 and September 30, 2023, valued at 14.0x Adjusted EBITDA for the trailing twelve months ended December 31, 2022, respectively. |
(5) | On January 31, 2023, a subsidiary of Icahn Automotive, IEH Auto Parts Holding LLC and its subsidiaries ("Auto Plus"), an aftermarket parts distributor held within our Automotive segment, filed voluntary petitions in |
(6) | Beginning in Q2 2023, a wholly owned subsidiary of IEP within the Automotive segment acquired assets from the Auto Plus bankruptcy auction, which are reflected in Automotive Parts. |
(7) | Management performed a valuation on the owned real-estate with the assistance of third-party consultants to estimate fair-market-value. This analysis utilized property-level market rents, location level profitability, and utilized prevailing cap rates ranging from |
(8) | Represents GAAP equity of the Holding Company Segment, excluding cash and cash equivalents, debt and non-cash deferred tax assets or liabilities. As of December 31, 2023 and September 30, 2023, Other Net Assets includes |
(9) | Holding Company's balance as of each respective date. |
Three Months Ended December 31, | Year Ended December 31, | ||||||
2023 | 2022 | 2023 | 2022 | ||||
(in millions)(unaudited) | |||||||
Adjusted EBITDA | |||||||
Net (loss) income | ( | ( | ( | ( | |||
Interest expense, net | 54 | 75 | 253 | 355 | |||
Income tax expense (benefit) | 8 | (59) | 90 | 34 | |||
Depreciation and amortization | 134 | 129 | 518 | 509 | |||
EBITDA before non-controlling interests | (9) | (263) | (151) | 873 | |||
Impairment | 7 | - | 7 | - | |||
Credit loss on related party note receivable | - | - | 139 | - | |||
Loss on deconsolidation of subsidiary | - | - | 246 | - | |||
Restructuring costs | 1 | 2 | 1 | 2 | |||
(Gain) loss on disposition of assets | (4) | 1 | (10) | (3) | |||
Transformation costs | 11 | 12 | 41 | 53 | |||
Net (gain) loss on extinguishment of debt | (13) | - | (13) | 1 | |||
Out of period adjustments | 2 | 52 | 10 | 52 | |||
Call option lawsuits settlement | - | - | - | 79 | |||
Other | 2 | 29 | 11 | 40 | |||
Adjusted EBITDA before non-controlling interests | ( | ( | |||||
Adjusted EBITDA attributable to IEP | |||||||
Net (loss) income | ( | ( | ( | ( | |||
Interest expense, net | 49 | 66 | 224 | 314 | |||
Income tax expense (benefit) | 4 | (72) | 36 | (4) | |||
Depreciation and amortization | 89 | 90 | 354 | 352 | |||
EBITDA attributable to IEP | 3 | (171) | (70) | 479 | |||
Impairment | 7 | - | 7 | - | |||
Credit loss on related party note receivable | - | - | 139 | - | |||
Loss on deconsolidation of subsidiary | - | - | 246 | - | |||
Restructuring costs | 1 | 2 | 1 | 2 | |||
(Gain) loss on disposition of assets | (4) | 1 | (10) | (3) | |||
Transformation costs | 11 | 12 | 41 | 53 | |||
Net (gain) loss on extinguishment of debt | (13) | - | (13) | 1 | |||
Out of period adjustments | 2 | 52 | 10 | 52 | |||
Call option lawsuits settlement | - | - | - | 56 | |||
Other | 2 | 29 | 10 | 39 | |||
Adjusted EBITDA attributable to IEP | ( | ||||||
Investor Contact:
Ted Papapostolou, Chief Financial Officer
IR@ielp.com
(800) 255-2737
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SOURCE Icahn Enterprises L.P.
FAQ
What was Icahn Enterprises' net loss for the fourth quarter?
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