10-K: Icahn Enterprises L.P. Files 10-K Report for Fiscal Year 2023

Icahn Enterprises L.P. reports its financial results for the year ended December 31, 2023, detailing performance across its diversified holdings and addressing key risk factors.

Summary

• Icahn Enterprises L.P., a diversified holding company, filed its Form 10-K for the fiscal year ended December 31, 2023.
• The company owns subsidiaries engaged in Investment, Energy, Automotive, Food Packaging, Real Estate, Home Fashion, and Pharma.
• A significant portion of the company's assets may consist of investments in companies in which it owns less than a 50% interest, which could lead to inadvertently becoming an investment company.
• The company's general partner and its control person have significant influence, and sales by the controlling unitholder could negatively impact the unit price.
• The company depends on its subsidiaries to satisfy its obligations, and its ability to generate cash depends on factors beyond its control.
• As of December 31, 2023, the company had investments in Investment Funds with a fair market value of approximately $3.2 billion.
• The Energy segment's net sales represented approximately 83% of the consolidated net sales in 2023.
• CVR Energy's refineries have a combined capacity of approximately 206,500 barrels per day.
• The Automotive segment experienced a decrease in net sales, partly due to the bankruptcy filing of Auto Plus.
• The company is subject to risks related to short selling strategies, regulatory investigations, and litigation.
• The company is exposed to cybersecurity and other technological risks that could disrupt its information technology systems.
• The company has established a captive insurance program to supplement the insurance coverage of the officers, directors, employees and agents of the Company, its subsidiaries and our general partner.
• The company has a repurchase program authorizing the repurchase of up to $500 million worth of senior notes and $500 million worth of depositary units.
• The company declared four quarterly distributions aggregating $6.00 per depositary unit in 2023.
• The company is subject to the pension liabilities of its affiliates.
• The company is subject to various environmental laws and regulations.
• The company is subject to the U.S. Environmental Protection Agency Renewable Fuel Standard.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While there are positive aspects such as the diversified business portfolio and ongoing efforts to enhance shareholder value, the negative performance in the Investment Funds, the bankruptcy of Auto Plus, and various risk factors contribute to a cautious sentiment.

Positives

• The company has a diversified portfolio of businesses across multiple sectors.
• The company has a repurchase program authorizing the repurchase of up to $500 million worth of senior notes and $500 million worth of depositary units.
• The company declared four quarterly distributions aggregating $6.00 per depositary unit in 2023.
• The company has a strong compliance program.
• The company has a captive insurance program to supplement the insurance coverage of the officers, directors, employees and agents of the Company, its subsidiaries and our general partner.

Negatives

• The company may inadvertently become an investment company, which would subject it to extensive regulations.
• The company's general partner and its control person have significant influence, and sales by the controlling unitholder could negatively impact the unit price.
• The company depends on its subsidiaries to satisfy its obligations, and its ability to generate cash depends on factors beyond its control.
• A subsidiary of Icahn Automotive, IEH Auto Parts Holding LLC (Auto Plus), filed for bankruptcy on January 31, 2023, leading to its deconsolidation.
• The company is subject to risks related to short selling strategies, regulatory investigations, and litigation.
• The company is exposed to cybersecurity and other technological risks that could disrupt its information technology systems.
• The company is subject to the pension liabilities of its affiliates.
• The company is subject to various environmental laws and regulations.
• The company is subject to the U.S. Environmental Protection Agency Renewable Fuel Standard.

Risks

• Economic downturns, substantial competition, and rising operating costs could negatively impact the company.
• The Russia/Ukraine conflict and conflict in the Middle East could cause economic volatility and impact export controls and economic sanctions.
• Declines in the fair value of investments, losses in private funds, and loss of key employees could negatively impact the company.
• The company's ability to continue to conduct its activities in a manner so as not to be deemed an investment company under the Investment Company Act of 1940 is a risk.
• Short sellers and associated litigation and regulatory inquiries pose a risk to the company.
• Volatility and availability of crude oil, declines in global demand for crude oil, and unfavorable refining margins could negatively impact the energy business.
• Adverse conditions in the automotive industry, including as a result of the Chapter 11 filing of our automotive parts subsidiary, pose a risk to the company.
• Changes in the availability and price of raw materials, manufacturing disruptions, and changes in transportation costs and delivery times could negatively impact the home fashion operations.
• Increased costs of raw materials and shipping, interest rate increases, and labor shortages and workforce availability could negatively impact the company.
• Tenant bankruptcies and insolvencies could negatively impact the real estate activities.
• Climate change laws and regulations could result in increased capital, operating and compliance costs.

Future Outlook

The company sees a favorable opportunity to follow an activist strategy that centers on the purchase of target stock and the subsequent removal of any barriers that might interfere with a friendly purchase offer from a strong buyer.

Management Comments

• The Chairman of the Board of Directors of our general partner, Carl C. Icahn, has been an activist investor since 1980.
• Mr. Icahn believes that the current environment continues to be conducive to activism.
• We often find investment opportunities when companies execute value destructive acquisitions or fail to unlock their own hidden jewels through separation transactions.
• Management teams often fail to improve their operations and profitability, relying on lax oversight from an overly friendly board of directors.
• It is our belief that our strategy will continue to produce strong results into the future.
• We believe that the strong cash flow and asset coverage from our operating subsidiaries will allow us to maintain a strong balance sheet and ample liquidity.

Industry Context

The automotive aftermarket industry is in the mature stage of its life cycle, with consumers moving towards 'do-it-for-me' services due to increasing vehicle complexity.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards or benchmarks.
• However, it mentions competitors in the Food Packaging segment may be better capitalized.
• The document does not provide specific comparisons to industry standards or benchmarks for the Energy segment.
• The document does not provide specific comparisons to industry standards or benchmarks for the Automotive segment.
• The document does not provide specific comparisons to industry standards or benchmarks for the Real Estate segment.
• The document does not provide specific comparisons to industry standards or benchmarks for the Home Fashion segment.
• The document does not provide specific comparisons to industry standards or benchmarks for the Pharma segment.

Management Changes

Corporate Governance

Legal Proceedings

• The company is subject to litigation from time to time in the ordinary course of its business.
• The company has received requests for information from the staff of the Division of Enforcement of the SEC and the U.S. Attorneys office for the Southern District of New York, relating to, among other things, our corporate governance, capitalization, securities offerings, the sufficiency of our disclosure, including with respect to Mr. Icahns loans and pledges of depositary units and other assets, dividends, the valuation of our assets, marketing materials, due diligence and other materials.
• Since the publication of the short seller report in May of 2023, we have received two, and may receive additional, putative securities class action lawsuits.
• A derivative complaint has also been filed in the U.S. District Court for the Southern District of Florida, naming the Companys general partner, its directors, and certain current and former officers as defendants, and the Company as a nominal defendant, Patrick Pickney v. Icahn Enterprises G.P. Inc. Case No. 1:23-cv-22932-KMW (S.D. Fl.).
• In addition, we have received demands for inspection of our books and records from plaintiffs purporting to be record holders of our depositary units.
• One of these purposed unitholders filed an action to compel inspection of our books and records on November 22, 2023 in the Court of Chancery of the State of Delaware, Bruno v. Icahn Enterprises, L.P. et al., Case No. 2023-1170-SEM.

Related Party Transactions

• The company's second amended and restated agreement of limited partnership expressly permits it to enter into transactions with its general partner or any of its affiliates.
• Mr. Icahn and his affiliates (excluding us and Brett Icahn) redeemed $2.0 billion from the Investment Funds for the years ended December 31, 2023.
• In December 2023, the Investment Funds issued a pro-rata distribution, including $158 million to Mr. Icahn and his affiliates (excluding us and Brett Icahn).
• On October 1, 2020, we entered into a manager agreement with Brett Icahn, the son of Carl C. Icahn, and affiliates of Brett Icahn.
• Brett Icahn had net redemptions of $17 million in the year ended December 31, 2023.
• As of December 31, 2023, Brett Icahn had investments in the Investment Funds with a total fair market value of $28 million.

Stakeholder Impact

• The company's performance and decisions can impact key stakeholders such as shareholders, employees, customers, suppliers, and creditors.
• The company's ability to pay distributions to unitholders is dependent on various factors, including cash flow, capital requirements, and financing arrangements.
• The company's operations are subject to various environmental laws and regulations, which can impact the environment and surrounding communities.
• The company's operations are subject to labor disputes, which can impact employees and suppliers.

Next Steps

• The company intends to continue to make investments in businesses that it believes are undervalued and have potential for growth.
• The company intends to continue to use activism to unlock value.
• The company will continue to monitor and manage cybersecurity risks.
• The company will continue to evaluate and respond to regulatory changes.
• The company will continue to monitor and manage environmental risks.
• The company will continue to monitor and manage risks related to the Russia/Ukraine conflict and conflict in the Middle East.
• The company will continue to monitor and manage risks related to the COVID-19 pandemic.

Key Dates

Keywords

Icahn Enterprises, Investment, Energy, Automotive, Food Packaging, Real Estate, Home Fashion, Pharma, Risk Factors, Financial Results, 10-K Report