Icahn Enterprises Q1 2023 Earnings Call Transcript

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May 10, 2023

There are 4 speakers on the call.

Operator

Good morning, and welcome to the Icahn Enterprises LP Q1 2023 Earnings Call with Jesse Lynn, General Counsel David Willett, President and CEO and Ted Papopostolo, Chief Financial Officer. I would now like to hand the call over to Jesse Lynn, who will read the opening statement.

Speaker 1

Thank you, operator. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward looking statements we make in this presentation, including statements regarding our future performance and plans for our businesses and potential acquisitions. 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, LP 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 that are discussed in our filings with the Securities and Exchange Commission, including economic, competitive, legal and other factors, including the severity, magnitude and duration of the COVID-nineteen pandemic. Accordingly, there is no assurance that our expectations will be realized.

Speaker 1

We assume no obligation to update or revise any forward looking statements should circumstances change, except as otherwise required by law. This presentation also includes certain non GAAP financial measures. A reconciliation of such non GAAP financial measures to the most directly comparable GAAP financial measures can be found in the back of this

Speaker 2

Thank you, Jesse. Good morning, and welcome to the Q1 2023 Icahn Enterprises earnings conference call. Joining me on today's call is Ted Papapostolou, our Chief Financial Officer. Together, we'll provide an overview of Q1 results and then be available for questions. Before we get into the results of the quarter, I need to address the short seller report released last week.

Speaker 2

After this call, we'll issue a response which addresses the mischaracterizations and concerns raised in this report. There are a few high level points I'd like to address now, however. IEP has $1,900,000,000 of cash on hand and $4,000,000,000 of additional liquidity in the investment funds and we're well positioned for future success. We have full confidence in the integrity of our presented 90% of our NAV valuations are comprised primarily of either mark to market securities or audited GAAP book values Our dividend policy is based on our assessment of IEP's ability to return capital to unitholders over a long term basis. We generate liquidity through operations, selling investments and selling companies.

Speaker 2

Since 2017, the firm has generated over $5,000,000,000 of cash of successful sales of controlled companies. Our operating companies have been the subject of intense improvement efforts over the last year. Although not complete, We're pleased with the trajectory of the companies. We've upgraded and augmented many of our company's management teams and we're starting to see tangible improvements in the results and overall performance of the companies. We have great confidence in their potential.

Speaker 2

On to first quarter results. Our results for Q1 2023 were down versus prior year, but they include a large one time non cash charge for the Auto Plus bankruptcy of $226,000,000 For quarter 1, we had a loss of $270,000,000 and adjusted EBITDA of 116,000,000 compared to net income of $323,000,000 and adjusted EBITDA of $616,000,000 for the 3 months ended March 31, 2022. For quarter 1, 2023, our investment funds had a negative return of 4.1%, reflecting the volatility we're seeing in certain markets. CBI ended the quarter with continued strong performance largely due to an $11.96 increase in quarter 1 crack spreads 2023 versus 2022 with flat volumes. CVI declared a dividend of $0.50 per share for Q1 2023.

Speaker 2

CVR Partners, also called UAM, performed relatively flat in quarter 1 2023 compared to prior year largely due to decrease pricing for ammonia and UAN. For Automotive Services, revenue growth remains strong at over 5% for the Q1 compared to prior year. The team is aggressively working with our vendors to simplify our supply chain, reduce materials costs and greatly reduce working capital. Contracts are in the process of being finalized and we forecast continued improvements in the back half of twenty twenty three. Our indicative net asset value as of quarter end remained relatively flat at $5,600,000,000 as compared to December 31, 2022.

Speaker 2

Indicative net asset value includes, among other things, changes in the fair value of certain subsidiaries, which are not included in our GAAP earnings reported above. The IEP Board declared a $2 quarterly distribution payable in cash for additional units. With that, let me turn it over to Ted for a detailed discussion of all of our segments.

Speaker 3

Thank you, David. I will begin by reviewing our consolidated results and then highlight the performance of our operating segments and comment on the strength of our balance sheet. For Q1 'twenty three, we had net loss of $270,000,000 and adjusted EBIT of $116,000,000 I will provide more detail regarding the performance of our individual segments. The investment funds had a negative return of 4.1% for the For the quarter, long positions and other had positive performance attribution of 1.3% and 0.8% respectively, while short positions had a negative performance attribution of 6.2%. The investment funds had a net short notional exposure of 38% at the end of Q1 compared to a net short notional exposure of 47% at year end.

Speaker 3

Our investment in the funds was approximately $4,000,000,000 as of quarter end. And now to our Energy segment. In Q1 'twenty three, our Energy segment reported net sales of $2,300,000,000 compared to $2,400,000,000 in the prior year Q1 2023 refining margin per throughput barrel was $23.24 compared to $16.75 in the prior year quarter. This increase was primarily due to widening frac spreads. The cost of RINs continue to have a negative impact on our refining business with $39,000,000 of related expense in the quarter.

Speaker 3

Q1 'twenty three average realized gate prices for UAN decreased by 8% to $4.57 per ton and ammonia decreased by 16% to $8.88 per ton when compared to the prior year quarter. And now to our Automotive segment. Q1 2023 adjusted EBITDA was 21,000,000 a $23,000,000 improvement as compared to Q1 2022. The service business contributed $6,000,000 of the improvement, while the deconsolidation of Auto Plus $17,000,000 Q1 'twenty three net sales and other revenues for the auto segment were $457,000,000 a decrease of $106,000,000 from prior year quarter. The decrease in revenue is primarily due to the deconsolidation of Auto Plus.

Speaker 3

Automotive service revenues were up $16,000,000 and automotive part revenues were down $129,000,000 During the quarter, Auto Plus' carrying value was removed due to the bankruptcy. This resulted in a non cash charge of $226,000,000 which was recorded within the holding company segment. Now to our real estate segment. Q1 'twenty three net sales and other revenues decreased by $5,000,000 compared to the prior year quarter. Adjusted EBITDA was $3,000,000 for Q1 'twenty three compared to $6,000,000 for Q1 'twenty two.

Speaker 3

The decrease was primarily attributable to the sale of finished slots within the development business during 2022, which was offset in part by an increase in leasing revenues during 2023. The resort business was flat year over year. Subsequent to quarter end, we terminated a lease with a tenant for non payment at a commercial high rise property. We consider the termination along with other facts and circumstances a triggering event for potential impairment and we will assess the impact during the Q2. The property had a net book value of $218,000,000 of which $85,000,000 of that was land value.

Speaker 3

Any potential impairment cannot be estimated at this time. Now turning to our other segments. Q1 'twenty three net sales and other revenues for all other operating segments were relatively flat as compared to the prior year quarter. This case's adjusted EBITDA improved by $4,000,000 or 31 percent for Q1 'twenty three as compared to the prior year quarter. The company improved manufacturing efficiencies compared to prior periods and the team has done a great job managing costs.

Speaker 3

Home Fashion's adjusted EBITDA decreased by $1,000,000 as compared to the prior year quarter. They continue to be negatively impacted by the retail business and particularly in of E Commerce. The Pharma segment's adjusted EBITDA for Q1 'twenty three improved by $1,000,000 as compared to the prior year quarter. The management team is focused on the expansion of Qsymia in various territories. Now to our liquidity.

Speaker 3

We maintain ample liquidity at the holding company and at each of our operating subsidiaries to take advantage of attractive opportunities. We ended the quarter with cash, cash equivalents, our investment in the funds and revolver availability totaling approximately $6,900,000,000 Our subsidiaries have approximately $740,000,000 of cash $305,000,000 of undrawn credit facilities to enable them to take advantage of attractive opportunities. In summary, we continue to focus on building asset value and maintaining liquidity to enable us to capitalize on opportunities within and outside our existing

Operator

if you have a question.

Speaker 2

Okay. Apparently, there are no questions. We thank you for your time. I do encourage you all to look for the report we're issuing in response to the short seller report. It should be issued approximately around 11 o'clock today.

Speaker 2

Look forward to talking to you on the next quarterly call. Take care.

Operator

And thank you for your participation and you may now disconnect.

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